GLOBAL AGRICULTURAL DEVELOPMENT INITIATIVE

POLICY PAPER SERIES

Leveraging Private Sector Investment in Developing Country Agrifood Systems
by Charlotte Hebebrand

P O L I C Y PA P E R S E R I E S

Leveraging Private Sector Investment in Developing Country Agrifood Systems
By Charlotte Hebebrand Chief Executive, International Food & Agricultural Trade Policy Council (IPC)

May 2011 Study commissioned by the Global Agricultural Development Initiative Catherine Bertini and Dan Glickman, Cochairs

SPONSORED BY

The Chicago Council on Global Affairs is a leading independent, nonpartisan organization committed to influencing the discourse on global issues through contributions to opinion and policy formation, leadership dialogue, and public learning. The Chicago Council provides members, specialized groups, and the general public with a forum for the consideration of significant international issues and their bearing on American foreign policy. In addition to remaining the premier platform in the Midwest for international leaders in foreign policy, The Chicago Council strives to take the lead in gaining recognition for Chicago as an international business center for the corporate community and to broaden and deepen The Chicago Council’s role in the community. THE CHICAGO COUNCIL TAKES NO INSTITUTIONAL POSITION ON POLICY ISSUES AND HAS NO AFFILIATION WITH THE U.S. GOVERNMENT. ALL STATEMENTS OF FACT AND EXPRESSIONS OF OPINION CONTAINED IN THIS REPORT ARE THE SOLE RESPONSIBILITY OF THE AUTHOR AND MAY NOT REFLECT THE VIEWS OF HIS OR HER RESPECTIVE ORGANIZATION, THE PROJECT FUNDERS, THE CHICAGO COUNCIL’S BOARD AND STAFF, OR THE GLOBAL AGRICULTURAL DEVELOPMENT INITIATIVE. The Global Agricultural Development Initiative will sponsor the publication of a Policy Paper when an issue arises that is critical to the global agricultural development community. Authors are expected to “benchmark” their findings against current policy to allow for the tracking of policy changes over time. For further information about The Chicago Council or the Global Agricultural Development Initiative, please write to The Chicago Council on Global Affairs, 332 South Michigan Avenue, Suite 1100, Chicago, IL, 60604, or visit thechicagocouncil.org/globalagdevelopment. Copyright © 2011 by The Chicago Council on Global Affairs. Cover Photo: © 2011 The Chicago Council on Global Affairs—The photo, taken by Riccardo Gangale, captures a woman working at a Condor Group cashew processing plant in Nampula, Mozambique. Global Agricultural Development Initiative cochairs, Catherine Bertini and Dan Glickman, visited the processing plant and other agricultural sites March 12-20, 2011. All rights reserved. Printed in the United States of America. This report may not be reproduced in whole or in part, in any form (beyond that copying permitted by sections 107 and 108 of the U.S. Copyright Law and excerpts by reviewers for the public press), without written permission from the publisher. For information, write The Chicago Council on Global Affairs, 332 South Michigan Avenue, Suite 1100, Chicago, IL, 60604.

About the Policy Paper Series
Policy Papers gather data and provide guidance and technical assistance to policymakers and other relevant parties on how aspects of agricultural development and food security activities might be most effectively shaped and realized. Studies’ background and conclusions are developed through consultations with appropriate subjectmatter experts from the academic, non-governmental organizations (NGOs), government, think-tank, and business sectors.

About the Global Agricultural Development Initiative
Policy Papers are published by The Chicago Council on Global Affairs’ Global Agricultural Development Initiative (GADI). Launched in 2008 and expanded in 2010, GADI purposes to build support and provide policy innovation and accountability for a long-term U.S. commitment to agricultural development as a means to alleviate global poverty. It aims to maintain the policy impetus towards a renewed US focus on agricultural development, provide technical assistance to agricultural development policies’ formulation and implementation, and offer external evaluation and accountability for US progress on food security. The Initiative is led by Catherine Bertini, former executive director, UN World Food Program, and Dan Glickman, former secretary, US Department of Agriculture and overseen by an advisory group comprised of leaders from government, business, civic, academic, and NGO sector circles. For further information, please visit thechicagocouncil.org/globalagdevelopment.

Acknowledgements
The research for this paper involved a myriad of discussions on Transnational Corporations’ involvement in the food and agricultural sectors of developing countries. I feel fortunate to have been able to engage with so many individuals on this topic—the paper was greatly strengthened by these exchanges. The comments and input from members of the International Food & Agricultural Trade Policy Council (IPC) are always greatly appreciated, in particular those of Rob Johnson. Special thanks go to representatives of the transnational corporations whom I consulted: Sean de Cleene of Yara, Mima Nedelcovych of Schaffer Global Group, Paul Schickler of DuPont/Pioneer, Stewart Lindsay of Bunge, JB Penn of John Deere, Hans Joehr of Nestle, Willem-Jan Laan of Unilever, Andrew Pederson of Mars, Jawahar Kanjilal of Nokia, Ylva Stiller of Syngenta, Natalie DiNicola of Monsanto, Devry Boughner of Cargill, Nick Morris of Illovo, Hans Boogard, Frank Nagel and Harry Smit of Rabobank, Beth Sauerhaft of PepsiCo, Chris Policinski of Land O’Lakes, and Daniel Hazman of Wal-Mart. I am grateful for input provided by USAID officials—Tjada McKenna, Kathryn Sell Garcia and Jerry O’Brien; from UNCTAD officials—Masataka Fujita and Kee Hwee Wee; from the World Bank and the International Finance Corporation—Grahame Dixie, Irina Likhachova and Vipul Prakash. Many thanks go also to Ray Goldberg of the Harvard Business School. IPC Fellow Gabor Konig provided useful research assistance and Katie Pearce edited the paper. It was a pleasure to work with Lisa Eakman and Maggie Klousia of The Chicago Council. Charlotte Hebebrand Chief Executive International Food & Agricultural Trade Policy Council (IPC) May 2011

Table of Contents
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Transnational Corporations: Foreign Direct Investment and Other Activities in Developing Country Agrifood Systems Section II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Transnational Corporations’ Efforts to Link Smallholders to Supply Chains Section III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 US Government Agencies: Roles and Initiatives Section IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 Recommendations: Increasing and Improving Transnational Corporations’ Investments About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73

Executive Summary
In July 2008, the United Nations Secretary-General’s High-Level Task Force on the Global Food Security Crisis indicated that foodsecurity-related investment needs in developing countries ranged between $25-$40 billion per year.1 More recent estimates call for an average annual net investment of $83 billion to support expanded agricultural output in developing countries.2 Because funding of this magnitude does not appear feasible through public finance and overseas development assistance, both donor governments and governments in developing countries have focused more on leveraging investments from private companies. The for-profit sector is now a critical player in the shift from subsistence agricultural economies, where poverty and uncertainty perpetuate hunger, toward wellfunctioning commercial systems, where farmers can afford needed inputs and reach cash markets. Private-sector engagement is also essential for “scaling up” government-financed development projects, and for sustaining these projects after government funding is reduced or withdrawn. This policy paper consists of four sections. The first reiterates the benefits of sound private-sector investment in sustainable food security; it also explains the paper’s primary focus on investments from transnational corporations (TNCs) and describes how TNCs approach decisions on investment allocations. The second section highlights examples of TNC investments that have simultaneously benefited smallholders in developing countries while creating profits—or the potential for profits—for the investors. The third section explores how the US government engages with TNCs and incentivizes investments. The final section concludes with recommendations for TNCs, governments, and other players, with a view towards increasing TNC investments that both strengthen agricultural development and offer profits to TNCs.

A Focus on Transnational Corporations
Small and medium enterprises (SMEs) play a fundamental role in job creation, the most crucial factor of economic development. This paper, however, focuses on the TNCs involved in food and agriculture, and their strategic importance to the US government. Given their significant capital, technology bases, and management skills, these large companies are particularly equipped to accelerate agriGLOBAL AGRICULTURAL DEVELOPMENT INITIATIVE - 1

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cultural development in developing countries. TNCs offer a variety of products and services that can increase food security: advanced inputs and the training to use them; improved technologies to reduce waste and increase product quality; and the finance and marketing abilities to enlarge the number of markets they can serve profitably. It has therefore become increasingly valuable for the US government to understand the investment motivations of these big businesses. TNCs have been doing business in developing countries for many years, providing the bulk of foreign direct investment (FDI). Their large investments, however, tend to focus in regions that offer the greatest promise of economic returns. Investment decisions generally weigh whether the environment is sound for private investment, whether it offers a competitive and reasonably welldeveloped agricultural base, and whether its economies of scale are sufficient. When these conditions are absent or lacking, expected returns are “discounted” or adjusted to account for potential risks. In the poor developing countries of Sub-Saharan Africa and South Asia, the lower expected returns discourage investments. Beyond FDI, TNCs can also control assets abroad through nonequity ties like contract farming, certification schemes, management or transfer-of-technology contracts, and production standards. So far, however, there is a void of data on these other types of TNC involvement, compared to the relatively strong data that exists on FDI flows. Factors beyond profits, of course, also guide TNC decisions. The “Corporate Social Responsibility” (CSR) movement, which first took hold among European companies in the 1970s, encouraged large companies to consider the effects of their business choices on a range of stakeholders beyond their shareholders. This interest in the broader public good has motivated many TNCs to monitor their activities more carefully, weighing factors like environmental and development impacts. On issues like rural development and poverty alleviation, TNCs have generally pursued philanthropic work—viewed as separate from their core business activities. Today, though, the focus is shifting from CSR to “Creating Shared Value” (CSV), which recognizes that philanthropy and profit are not mutually exclusive. The movement views societies with pressing needs as viable markets, where TNCs can make profits while their investments contribute to the recipient community’s well-being.

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Executive Summary

Linking Smallholders to Supply Chains
Various types of TNC investments can contribute more broadly to economic development and poverty reduction, but this paper focuses on investments related to smallholders. As the vast majority of the world’s poor live in rural areas and depend on agriculture to support themselves, history has shown that the most effective way to reduce poverty is to increase investment in the agricultural sector. That investment, in turn, can create new opportunities beyond agriculture. Smallholders offer considerable cost advantages in labor-intensive production and produce a number of important commodities on which supply chains depend. TNC investments can increase their competitiveness by providing greater access to inputs, links to larger value chains, and improved agronomic practices. Smallholders also feature a number of disadvantages, however, that can discourage further investment from companies focused on large-scale economies and market efficiencies. Smallholder production tends to be inefficient and highly fragmented, with many farmers averaging production on less than one hectare. Farmers are seriously undercapitalized and advanced seed technology and agronomic practices are not yet well developed. Still, a wide range of TNCs have launched innovative programs to help integrate smallholders into larger supply chains and increase their incomes. Input suppliers facilitate smallholders’ access to appropriate inputs; while manufacturers, processors, retailers, supermarkets, traders, and wholesalers help smallholders improve their productivity and agronomic practices and aggregate their output for more direct sourcing (see Section II for examples across the supply chain). For such investments and actions to be self-sustaining in the long run, they must also be profitable for the investor. Because many of these initiatives are relatively new—and also because companies may not be willing to divulge detailed data on their investments and payoffs—it can be difficult to provide quantitative evidence of “profitability.” Profits or benefits from smallholder investments can also be hard to measure: there are no straightforward ways to weigh the benefits of improved quality control, improved assurance of supply, and intangibles like enhanced reputation. With no expectation of short-term profits, many investments still fall into the category of philanthropy/CSR and are implemented through “public-private

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partnerships” (PPPs) through which the TNC collaborates with governments, foundations, and NGOs.

Scaling Up Investments
These investments and initiatives can bring considerable benefits to perhaps hundreds of thousands of smallholders. Yet with approximately 500 million smallholders around the world, it is clear that the size and pace of such investments must increase.3 A few ambitious initiatives, such as “agricultural growth corridor” projects, offer models for the future. Such projects guide public and private investments toward specific regions that have the potential to be agricultural breadbaskets, boosting productivity in clusters around existing infrastructure while also building new infrastructure. Two blueprints for such investments—the Beira Agricultural Growth Corridor (linking areas of Zambia, Malawi, Zimbabwe and Mozambique) and the Southern Agricultural Growth Corridor of Tanzania—were launched at the World Economic Forum meeting in Davos in 2010 and 2011 respectively. Many TNCs, SMEs, government agencies, international organizations, and foundations have been involved in drawing up these large-scale plans, which call for several billions of dollars of private and public investments. These bold projects, which envision significant increases in agricultural production as a large number of smallholders are linked into commercial markets, have the potential to be game-changers. To be implemented successfully, however, they require ongoing high-level commitment from governments and chief executive officers, along with a great deal of work outside the “spotlight” of a Davos gathering.

Need for Innovative Financing Schemes
The international development community is increasingly looking for innovative financing ideas to encourage private-sector investments, given the acknowledgment that traditional development assistance will not be enough to reduce extreme poverty—and that without added incentive from governments, private investment will likely continue its focus on profitable countries and sectors.4 TNCs have been reluctant to make large-scale investments in certain developing countries, where they must calculate discounted “risk-adjusted” returns on investments and have struggled to secure financing from commercial lenders—in particular for “greenfield” investments, first-time investments that imply high unit costs and
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Executive Summary

low expected returns. Greater effort must go toward developing innovative approaches and understanding appropriate funding divisions for such investments: which types of costs should be met by the private sector, and which types require funding from governments, international organizations, or foundations? Certainly, normal supply-chain extension investments should always come from TNCs and not through concessionary financing. Yet to the extent that companies also make “public good”-type investments with clear positive impacts—such as roads to help inputs reach farmers or products reach consumers, or training and organization for out-growers— new arrangements are possible. Governments and foundations could explore reducing the costs of capital in investments that target domestic food production, in exchange for corporate commitments to reinvest earnings further into the local economy. If such arrangements prove too difficult to work out, given sensitivities that they could be perceived as a form of corporate welfare, it still remains necessary to ensure that concessionary financing can work in better concert to leverage and accompany private-sector investment.5 Innovative financing schemes could also help trigger research and development efforts to help smallholders improve agricultural productivity. Without enough incentives to undertake such research, current private-sector efforts in this area are quite limited. So-called “pull mechanisms,” which the pharmaceutical sector has used, may offer relevant examples for agricultural development. Under such schemes, donors could offer innovation prizes or advanced market commitments to encourage the private sector to develop products useful to smallholders.6 Below are several recommended approaches for facilitating TNC investment in the agricultural sectors of developing countries:

Key Recommendations for Transnational Corporations
• TNCs need to demonstrate impact more transparently. Admittedly, it is difficult for companies to “prove” how their efforts have strengthened the agricultural sectors of developing countries, since doing so could involve disclosing confidential business information. Skeptics might also dismiss such information as “corporate propaganda.” Yet it behooves companies to make thorough measurements of their investments, as they concern both the smallholders and the company’s bottom line, and track them over time using solid baseline studies. Detailed and methodical reporting will facilitate more fruitful partnerships with governments and other players.
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• The transition from “Corporate Social Responsibility” (CSR), in which efforts are pursued “separate from profit maximization,” to “Creating Shared Value” (CSV), where efforts are “integral to profit maximization,” (as laid out in Michael Porter’s vision of reinvented capitalism), is not likely to occur automatically.7 Effective public-private partnerships will be essential for success, but corporate leaders must also shepherd the transition. • Companies should be encouraged to adopt a less risk-averse approach to investments in developing countries. Many major companies are willing to direct a large amount of investment toward research and development efforts, fully aware that only a small portion of those investments will bear fruit. A similar approach to investing in the capacity of smallholders—realizing that some efforts will be successful while others will not—would encourage progress. • TNCs could also usefully adopt a longer-term perspective on investment returns. Although capital markets clearly create pressure for quick and positive financial results, TNCs need to foster, for themselves and their shareholders, a more patient approach on investments in the food and agricultural sectors of developing countries. The focus must be on long-term results, rather than immediate gain. • When TNCs undertake initiatives that focus too exclusively on market differentiation, they lose important opportunities for affecting change on a larger scale. Partnering with other companies, even competitors, on a pre-competitive basis, would allow for greater impact on the ground and greater opportunities for shared market development.

Key Recommendations for Governments in Developing Countries
• Governments in developing countries must closely examine the role that private investment can play in their agricultural development strategies and work to facilitate such investment. That is not to suggest that governments should unequivocally embrace all large-scale investment offers coming from abroad as well as from domestic investors. Recent large-scale land acquisitions have attracted justified concern, and a number of interna6 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

Executive Summary

tional organizations are working with governments to develop an international code of conduct for responsible agricultural investment.8 As noted in those draft principles, “[m]any assume that positive social effects will occur automatically as resources pour in and jobs are created. Technology transfers and improvements in infrastructure are also assumed to happen automatically, as investors bring in new skills and build up regions to make their investments more profitable. In fact, the achievement of such effects even at the project level usually depends on deliberate public-private collaboration and joint planning.”9 • Governments are well advised to keep in mind that private investments are competitive. It is critical for governments to create and strengthen a positive, enabling environment for investors—who can go anywhere, and are not required to invest in their particular country. At the front-end of negotiations of complex public-private partnerships, governments should present a positive collaborative attitude and consider financial concessions to the investor. For example, they should corral supportive grant or quasi-grant funding from donors to facilitate mandatory bureaucratic steps, such as high-cost environmental and social impact assessments. Further concessions—such as tax incentives and cofinancing of critically needed physical infrastructure and training and capacity building programs—could also ease complicated negotiations.

Key Recommendations for the US Government
• The US government can collaborate with TNCs in several ways, and these do not all have to revolve around cofinancing of particular programs. Most importantly, it must strongly emphasize the importance of a sound enabling environment to attract private investment. • With the formation of the Global Development Alliance (GDA) in 2001, the United States Agency for International Development (USAID) took important measures to ramp up its partnership efforts, ultimately leading to significant concrete results. Given the pressing need for food-security-related investment, however, USAID and private-sector companies must engage in a more sustained and intensive dialogue to maximize the fruits of their cooperation. USAID clearly recognized the need for
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such dialogue when announcing a new Feed the Future Private Investment Center in October 2010. USAID partnerships with private companies should be formed only when they clearly add to the potential value of what each side could accomplish on its own. Smooth, efficient negotiation and implementation would encourage more partnerships in the future, as would more timely and predictable financial disbursements from USAID. • As a model for agricultural development efforts, governments and TNCs should look to the large-scale models for publicprivate partnerships to combat HIV/AIDS, which have pursued innovative approaches and garnered significant international financial support. It is worth emphasizing that “[h]unger and malnutrition interventions have attracted only one-tenth of the resources which have been allocated to HIV/AIDS, although research shows it has the greatest ‘multiplier effect.’”10 • The US government, through its own agencies and through its leverage in multilateral development banks (MDBs), should research and explore innovative financing options to catalyze larger amounts of private investment. It would be useful to study how other governments and institutions are providing access to patient capital, social venture capital, and risk loan guarantees— and whether the US government could realistically emulate or support such approaches. Lessons from the pharmaceutical industry might also be relevant for incentivizing TNC research and development investments for smallholder needs. • Because significant levels of private investments, donations, and remittances to developing countries originate in the United States, the US government is well advised to consider how to leverage such investments and maximize their development impact. Though the US government remains the largest provider of development assistance in absolute terms, this should not obscure the government’s continuous failure to meet a target of 0.7 percent of donor countries’ Gross National Income (GNI) provided as overseas development assistance. Since private flows to developing countries tend to reflect the interests of the investors, and private investment flows clearly decrease during times of economic downturn, the need for official development assistance from the United States will remain paramount.

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Introduction
“Governments are looking to the domestic private sector and foreign investors to help meet the [funding] shortfall. It is essential for governments to tap into these additional sources of finance if…they are to succeed in utilizing agriculture as an engine for growth.” —The United Nations Conference on Trade and Development’s World Investment Report 2009.1 In July 2008, the United Nations Secretary-General’s High-Level Task Force on the Global Food Security Crisis indicated that the foodsecurity-related investment needs of developing countries ranged between $25 and $40 billion per year.2 More recent estimates call for an average annual net investment of $83 billion to support expanded agricultural output in developing countries.3 The task force predicted that this investment would come primarily from public finance and overseas development assistance—a projection that now seems questionable in the wake of government budget crises in the United States and elsewhere. The 2009 Chicago Council on Global Affairs’ report, Renewing American Leadership in the Fight Against Global Hunger and Poverty, set forth compelling arguments for why support to international agricultural development is a well-justified use of limited taxpayers’ funds. Its recommendations to increase support for agricultural education, extension, and research—while strengthening institutions that deliver agricultural assistance—continue to merit attention. Meanwhile, pledges from both developing countries and their donors to increase budgets for agricultural development have demonstrated serious attention to the issue. Through the Comprehensive Africa Agriculture Development Programme (CAADP), African countries committed to devoting 10 percent of their budgets to agricultural sectors. On the donor side, at the L’Aquila summit in July 2009, governments pledged to provide $22 billion for agricultural development over three years. It remains unclear, however, whether such goals can translate into concrete action. Unprecedented budget constraints facing the US government, as well as many other governments, have created great uncertainty about the future of support for agricultural development efforts. On the private sector side, current trends in investment flows to the developing world show that nongovernment-related transfers—
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in particular private investment and remittances—are surpassing government development assistance. This pattern has forced greater attention on the private sector’s potential impact on economic development and poverty alleviation; it has also compelled governments to focus on how private investments can complement or support official development assistance. Both donor governments and governments in developing countries are keen to leverage their resources most effectively, in order to engage and support private-sector investment. The for-profit sector is now a critical player in the shift from subsistence agricultural economies, where poverty and uncertainty perpetuate hunger, toward well-functioning commercial systems, where farmers can afford needed inputs and reach cash markets. Private-sector engagement is also essential for “scaling up” government-financed development projects, and for sustaining these projects after government funding is reduced or withdrawn. Several recent statements and initiatives have demonstrated awareness of the increasing importance of the private sector, among them: • One of the objectives of the CAADP is to improve rural infrastructure and trade-related capacities for market access. The program clearly recognizes the need to expand both domestic and foreign investment in agriculture.4 • The July 2009 joint L’Alquila declaration emphasizes support for “public-private partnerships, with adequate emphasis on the development of infrastructure, aimed at increasing resources for agriculture and improving investment effectiveness.”5 • The US Feed the Future Initiative recognizes that “private sector engagement and investment are fundamental for making markets sustainable and accessible to the very poor,”6 and the newly established USAID Bureau for Food Security, charged with leading the government-wide Feed the Future Initiative, includes a strong focus on private-sector issues. • In reviewing its development policy, the European Union is considering new “joint strategies for inclusive growth,”7 which might entail “leveraging aid to support ancillary infrastructure investments to accompany private investment, and supporting

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Introduction

projects that pose a level of risk making it difficult to attract private financing, in the form of risk sharing finance.” • The Chinese government in June 2007 launched a commercial equity fund to facilitate Chinese companies investing in Africa with starting capital of $1 billion. By March 2009, the ChinaAfrica Development Fund had reportedly reached $2 billion.8 Certainly, the US government has long recognized the importance of partnering with the private sector, and has reflected extensively on how best to leverage private investment. While this focus is valuable, a note of caution is also necessary: while the United States proFigure 1: Official, Private Investment, Philanthropic, and Remittance Flows from Organisation for Economic Co-operation and Development Donor Countries to Developing Countries, 1991–2008a
Private Investment Official flows Remittances 350 Private philanthropy flows More complete CGP philanthropy flows

250

Billions $

200 181 150 121 100 121 53

50

0 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08

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vides the highest levels of investment to the developing world (when private investments, donations, and remittances are included), this should not obscure the government’s continuous failure to meet the recommended target of 0.7 percent GNI. Although the United States is the largest provider of official development assistance in absolute terms, it remains among the lowest donors in terms of GNI percentage. Since private flows to developing countries tend to reflect the interests of the investors, and—as demonstrated in Figure 1, private investment flows clearly decrease during times of economic downturn—the role of official development assistance from the United States will remain paramount. This policy paper consists of four sections. Section I reiterates the benefits of sound private sector investment in sustainable food security. It will also explain the paper’s primary focus on investments from TNCs and describe how TNCs approach decisions on investment allocations. Section II highlights a number of examples of TNC investments that have simultaneously benefited smallholders in developing countries while creating profits—or the potential for profits—for the investors. Section III explores how the US government approaches private-sector-related issues in its agricultural development policy, and examines how the US government engages with TNCs and incentivizes TNC investments. Section IV ends with recommendations for TNCs, governments, and other players, with a view toward increasing TNC investments that both strengthen agricultural development and offer profits to TNCs.

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Transnational Corporations: Foreign Direct Investment and Other Activities in Developing Country Agrifood Systems
Why Focus on Transnational Corporations?
The many different types of private sector actors range from single producers and entrepreneurs, to SMEs, to larger corporations. All play different but critical roles for longstanding economic development. SMEs play a fundamental role in job creation—the most crucial factor of economic development—and account for 60-80 percent of employment in some developing countries.1 The bulk of this paper, however, will focus on investments made by large TNCs2 involved in food and agriculture, based in the United States and abroad. There are several reasons for this restricted focus: • In limiting itself to a specific subsector, this policy paper complements a large body of pre-existing work on nurturing privatesector growth at other levels. • Given their significant capital, technology bases, and management skills, these large companies are particularly equipped to accelerate agricultural development in developing countries. TNCs offer a variety of products and services that can improve food security; advanced inputs and the training to use them; improved storage, handling and processing technologies to reduce waste and increase product quality; and the finance and marketing abilities to enlarge the number of markets they can serve profitably. It has therefore become increasingly valuable for the US government to understand the investment motivations of these big businesses. • “[T]he rapid expansion of TNCs through FDI has resulted in their becoming the dominant force in international commerce,” and has made them “the main force in international economic integration.”3

Section I

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• As global actors, TNCs can partner efficiently with governments, foundations, and not-for-profit organizations in efforts to promote agricultural development. • TNCs also have the potential to generate sustainable demand for SMEs; the introduction of FDI can stimulate development of local industries to serve a commercializing agricultural sector. • There are a relatively limited number of large actors in the international food supply chain—it is calculated that some 300-500 companies provide around 70 percent of the choices available to some six billion consumers and engage with more than one billion producers (see Figure 2).4 Although critics might point to an imbalanced power relationship between large global companies and local players (particularly agricultural producers) in a value chain, the limited number of large actors can also mean advantages: these 300-500 companies can affect considerable action on agricultural development and sustainability issues.5

Figure 2: World Wildlife Fund Investment Glassb

Persuade >6B Shoppers?

300-500 Companies Control -70% of Choice

Investors Apply Point of Leverage

Engage > 1B Producers?

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Section I – Transnational Corporations: Foreign Direct Investment and Other Activities in Developing Country Agrifood Systems

Foreign Direct Investment and Other Activities
TNCs provide the bulk of FDI, an increasingly important source of investment in developing countries. 2010 marked the first year that developing and transition economies absorbed more than half of global FDI flows; historically, developed economies have been the largest recipients of FDI.6 A disparate picture emerges, however, when investment flows to developing countries are disaggregated by region. As a whole, developing economies witnessed a 9.7 percent increase in FDI inflows in 2010, but inflows to both Africa and South Asia decreased by 14 percent.7 A look at historic FDI inflows into Africa and South Asia demonstrates that although total FDI inflows have increased over the years, the growth rate of FDI inflows into these two regions has been much smaller than that of developing countries as a whole (see Figure 3). The paper’s focus on TNCs also seeks to highlight this imbalance, with a view toward increasing investment flows into Africa and South Asia. Historically, outward food- and agriculture-related FDI have originated from developed countries, but developing countries are now producing increasing numbers of outward FDI. In 2007, China was the third largest country of outward agricultural FDI, following the United States and Canada. South Korea, Chile, Brazil, Taiwan, and Colombia are also generating more FDI outflows in recent years, as well as the Gulf Cooperation Council countries of the Middle East. Beyond FDI, TNCs can also control assets abroad through nonequity ties, such as management contracts, transfer-of-technology contracts, sub-contracting agreements, franchising, or links to other firms through strategic alliances.8 Some agribusiness TNCs are also involved in agricultural production through nonequity forms, such as contract farming or implementing production standards.
Figure 3: FDI inflows in percentage of world total FDI (United Nations Conference on Trade and Development)c
FDI flows Developed Economies Developing Economies Africa South Asia Transition Economies All FDI 1990 83% 17% 1.3% 0.1% 0.04% All FDI 2000 81% 18% .7% 0.5% 0.5% All FDI 2008 57.5% 35.6% 4% 2.8% 6.7% All FDI 2009 50.7% 43% 5.3% 3.7% 6.2%

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Importantly, TNCs also provide inputs to agricultural producers and undertake the bulk of research on food- and agriculture-related development efforts. In general, though, a research void exists on nonequity forms of involvement, particularly when compared to data available on FDI flows into the food and agricultural sectors of developing countries. Though the World Investment Report of the United Nations Conference of Trade and Development (UNCTAD) notes that contract farming—the most important nonequity form of participation—makes up a high share of total farming and refers to its “wide geographic spread and considerable intensity in developing countries,”9 less reliable data exists on this as well. The lack of available information on these nonequity forms suggests a research gap in need of remedy.

“Good” versus “Bad” Investments
The natural resource riches of many developing countries have long attracted foreign commercial interests, and foreign investment in the agricultural sector of developing economies is certainly not without controversy. Investments during colonial times sought to take advantage of a region’s agricultural resources and provide supplies of those resources primarily to the home countries and third markets, similar to investments by extractive industries. Colonial powers often granted monopolies to such investors, setting up state trading entities (STEs) with the primary objective of extracting raw materials. Many postcolonial governments took measures to block foreign participation in agriculture, but a number of them also essentially took over these monopolies to finance political elites. The recent rise in large-scale investments in agricultural land, following the 2007-2008 food price crises, has raised concerns about neocolonial exploitative agricultural investments and so-called foreign “land grabs.” The World Bank Group found that in 2009, largescale farmland deals amounted to forty-five million hectares—a stark contrast to the pre-2008 average annual expansion of global agricultural land of less than four million hectares. But the World Bank notes that not all of the announced deals will be implemented and that the majority are domestic rather than foreign investments, despite the high visibility of the latter. Still, 75 percent of these deals are reported to pertain to Sub-Saharan Africa, and appear to be worryingly concentrated in countries with weak governance.10 Paul Collier and Stefan Dercon, among others, have commented on the problematic nature of long-term leases of large land areas:
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“While the commercialization of African agriculture is desirable, the superfarms are fundamentally geopolitical rather than commercial and are not an appropriate vehicle for encouraging growth in African societies.”11 It is important to juxtapose these large-scale investments, through which state power can create a monopolized market, to the much more desirable outcome in which TNCs can help create competitive local markets, working alongside the old STEs. Yet it must be stressed that while competitive markets can attract foreign or domestic investments, available evidence suggests that economic growth is a necessary but insufficient condition for alleviating rural poverty. Governments and civil society organizations must also invest in public goods that enable more to share in the benefits of growth, and that ease the burden of adjustment that comes with moving toward greater competition. While there are many kinds of possible TNC activity—from licensing through contract production to full-scale investment—the ideal situation is one in which growth opportunities are so appealing that the TNC keeps reinvesting its profits back into the host country to expand its business. This situation promotes sustainable growth, as opposed to one-time investments that direct dividends and products back to the home country, or TNC activity under tight government control for the benefit of local political elite.

Weighing Investment Decisions
In contrast to the rather stagnant food markets of developed countries—where, in fact, overconsumption is identified as a key problem—the growing and changing appetites of consumers in developing countries are a long way from being satiated. Opportunities are also evident on the supply side: many developing countries offer much greater availability of underutilized agricultural land (Africa alone accounts for some 60 percent of global uncultivated arable land).12 Moreover, due to significant yield gaps, there is much potential to increase agricultural productivity on already cultivated land. Many agricultural experts believe that Africa could be an agricultural producer similar in scope to South America, if the right government policies are pursued (see Box 1). Yet TNC investments in Africa and South Asia remain minor in comparison to those that have benefited countries in South America and other parts of Asia. Certain barriers and disincentives have discouraged TNCs from investing as much in Africa as they do in South America. One Africa
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Box 1: What drove the large TNC investments in Brazil? Given that the comparison of the agricultural potential of Africa to that of South America has become so common, it is instructive to look at factors that led to large-scale private investments in Brazil, relayed here from the perspective of an agricultural TNC, Bunge. “Brazil’s heavy investment in agricultural research and extension via Embrapa, land ownership and development laws that allowed for expansion and consolidation of farms, as well as overall market liberalization created a highly productive agriculture sector. This fundamental productivity has been the basis on which we have invested billions of dollars in origination and processing infrastructure. It has also been a key reason we can invest in areas that the government has been less aggressive in improving. Infrastructure is a good example. We estimate that the agricultural sector in Brazil loses about $5 billion per year due to inefficient infrastructure (including roads, rail and ports). We have invested hundreds of millions in port terminals for fertilizer imports and grain exports in the past ten years to ensure that our commodities can flow efficiently and without relying too heavily on antiquated or undersized public services. These investments have been essential to creating value for Bunge, but also for the farmers who supply us and ultimately for Brazil. In many ways, better infrastructure has been a key factor in ensuring higher farm gate prices for growers in the interior. We could not have made these investments without the foundation of highly productive growers.”d

watcher argues that it is not a lack of finance that keeps investments low in Africa, but rather a “lack of sufficient profitable opportunities in which to invest.”13 Compared to opportunities in developed country markets, TNCs often face high front-end entry or development costs when investing in developing countries, which may lack key infrastructure. Both “hard” infrastructure (such as roads and other transportation networks, power, and irrigation systems) and “soft” infrastructure (such as customs procedures or government cooperation) may be woefully inadequate. A lack of economies of scale also hampers investment. Africa consists of more than fifty mostly very small countries, a fourth of which are landlocked and a half of which have populations of less than ten million. Protectionist barriers from neighboring countries might also threaten production by ensuring smaller—hence less attractive—national markets. Moreover, unstable political environments and weak legal systems can lead to measures that expropriate the business, either directly or by gradually eroding its viability. Uneven tax enforcements can be a disadvantage for otherwise low-margin businesses with high standards for accounting and ethics. Foreign TNCs also often face discriminatory policies that favor local companies or prevent majority ownership and control.
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Given these factors, TNCs typically have to apply discounts to expected returns on investments in such countries, arriving at a “risk-adjusted return” that can make it difficult to attract debt and equity from commercial investors. The risk-adjusted return can also be compared unfavorably to investment options in more stable or predictable settings. For example, a TNC might break its investment options into four brackets—from secure, developed countries at one end to unstable, developing countries at the other end. Low incomes in the latter may create additional hurdles by requiring different products, services, or payment strategies than those in more established markets. This mix of risk-adjusted returns and modified business models has discouraged many TNCs from investing in poor developing countries of Sub-Saharan Africa and South Asia.

From Corporate Social Responsibility to Creating Shared Value
Although TNCs have been doing business for many years in poor countries, their benefits to rural development and poverty alleviation were mainly delivered through philanthropic activities—seen as separate from their core business activities. The CSR movement, which first took hold among European companies in the 1970s, encouraged large companies to consider the impact of their business choices on a range of stakeholders beyond their shareholders. No doubt triggered in part by activist demands—and the increasing focus on “sustainable development” by governments in the 1980s, which called for “integrating environmental and social considerations with traditional economic concerns like profits and growth”14—large TNCs undertook measures to reduce negative environmental or social impacts. For example, some moved toward “triple bottom line accounting,” which “requires companies to manage, account for and report on their performances in terms of their net contributions to economic prosperity, environmental quality and social equity.”15 It became ever-more important for agribusiness companies to demonstrate that they were taking CSR efforts. One set of critics claims that CSR has resulted in the sidelining of such efforts, rather than their successful integration into business decisions. Other critics have charged that “environmental quality and social stability [are] public goods that in some circumstances could not be profitably provided by private firms without some explicit or tacit support from the state.”16

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The concept that corporations can make real money “at the bottom of the pyramid,,”17 which well-known management expert C.K. Prahalad floated in 2004, differs from CSR in that it more proactively links corporate profits to business engagements with the very poor, both as producers and consumers. Prahalad argued persuasively that today’s poor will become tomorrow’s middle class, making up some of the fastest-growing markets in the world. This argument is perhaps nowhere more true than in regard to food consumption: when low-income consumers move beyond a two-dollar-per-day income, their diets change profoundly and they seek to purchase more animal-derived products, fruits and vegetables, and other value-added products. Despite the hurdles to investment laid out above, societies with pressing needs are now increasingly earning reputations as viable markets. Michael Porter has coined the concept of “shared value” for situations that both further development and reward the investor, arguing that “self-interested behavior to create economic value” creates societal value more efficiently than philanthropy.18 Referring to the need to “reinvent” capitalism, Porter presents a vision in which “[s]urvival of the fittest would still prevail, but market competition would benefit society in ways we have lost.”

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Why Focus on Smallholders?
Various types of TNC investments can contribute broadly to economic development and poverty reduction, but this paper focuses on investments related to the poorest farmers—smallholders. As the vast majority of the world’s poor live in rural areas and depend on agriculture to support themselves, history has shown that the most effective way to reduce poverty is to increase investment in the agricultural sector. Such investment can, in turn, lead to new opportunities beyond agriculture. Smallholders offer considerable cost advantages in labor-intensive production and produce a number of important commodities on which supply chains depend. TNC investments can increase smallholder competitiveness by providing greater access to inputs, links to larger value chains, and improved agronomic practices. Smallholders also present a number of disadvantages that can discourage further investment from companies focused on large-scale economies and market efficiencies. Smallholder production tends to be inefficient and highly fragmented, with many farmers averaging production on less than one hectare. Farmers are seriously undercapitalized and advanced seed technology and agronomic practices are not yet well developed. We also caution that an exclusive focus on smallholders as the main vehicle for agricultural growth and poverty reduction risks ignoring a key necessity for growth in labor productivity: “successful migration out of agriculture and rural areas.”1 As Collier and Dercon argue, the defining feature of economic development in now-industrialized and emerging economies is a dramatic decrease of residents engaged in agriculture, alongside a dramatic increase in agricultural productivity of those who do remain in agriculture. They argue that the current policy focus on smallholder agriculture may be “in denial of inherent returns to scale in the organization of markets.” The vast literature on smallholder agriculture has identified many constraints that prevent smallholders from moving out of poverty. Without adequate infrastructure or access to finance, smallholders cannot use the inputs necessary for increasing production; and blocked access to markets means that surplus production canGLOBAL AGRICULTURAL DEVELOPMENT INITIATIVE - 21

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not yield higher incomes. The result is a vicious cycle of disincentives. Small and ever-decreasing farm sizes, as well as logistical difficulties in storage, aggregation, and transport, can compound these difficulties. Robert Thompson, however, has presented a particularly compelling and succinct scheme for “five ways” in which a poor household farm can increase its income.2 Using these five categories, the next section explores examples of how TNC investment can facilitate income growth for smallholders. Thompson suggests that smallholders can attempt to: 1. Increase productivity of crops on their small lots of land by using improved inputs and agricultural practices; 2. Switch to higher-value crops; 3. Gain access to more land;3 4. Obtain nonfarm employment to supplement their farm employment; and 5. Move entirely into nonfarm employment, thereby reducing the number of smallholders trying to eke out a living on small plots.

Limitations to Research on TNC Examples
Before providing specific examples of TNC investments and actions that increase smallholder income in the ways Thompson has suggested, we must point to a number of caveats. The limited scope of this paper does not allow for a comprehensive and systematic analysis of global investments to determine “best-in-class” investments and feature detailed case studies of them. These examples are based on information from existing publications and announcements, as well as discussions with private-sector representatives, and have not been subject to the peer review or verification that would be required of more rigorous case studies. These examples are not intended to provide a detailed “nuts and bolts” manual for companies interested in working with smallholders.4 The aim, rather, is to provide representative examples of different types of investments from across the food and agricultural supply chain that have served to integrate smallholders into larger value chains. When possible, the paper includes figures that show
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the results of particular investments, such as number of shareholders reached or income increases. Further study and tracking of such impacts is recommended. For such investments and actions to be self-sustaining in the long run, they must also be profitable for the investor. Because many of these initiatives are relatively new, and also because companies may not be willing to divulge detailed data on their investments and payoffs, it can be difficult to provide quantitative evidence of “profitability.” Profits or benefits from smallholder investments can also be hard to measure: there are no straightforward ways to weigh the benefits of improved quality control, improved assurance of supply, and intangibles like enhanced reputation. With no expectation of short-term profits, many investments still fall into the category of philanthropy/CSR and are implemented through PPPs in which the TNC collaborates with governments, foundations, and NGOs. Such partnerships create a commercial incentive for the TNC’s investment, while the public sector agencies and NGOs can commit less funding and organizational work to the project than they would on their own. When a TNC is working within the context of a PPP, however, it can be difficult or premature to ascertain whether the TNC is seeing good returns on its investment.

From Input Suppliers to Wholesalers
This compilation follows categories laid out in the UNCTAD World Investment Report 2009,5 which differentiates between: 1) agriculture-based TNCs and 2) TNCs involved with other, related segments of the value chain. Agriculture-based TNCs are companies based or primarily involved in the agricultural production part of the value chain, generally running farms and plantations. This category makes up, by far, the largest share of TNCs headquartered in developing countries: out of the top twenty-five agriculture-based TNCs, some twelve are developing country firms, the majority in Asia.6 The World Investment Report points out that the distinction between agriculture-based TNCs and those active further along the value chain is not always clear-cut; many agriculture-based TNCs, for example, are also engaged in upstream and downstream activities. Given this paper’s interest in smallholders, it makes sense to look more closely at the second category of TNCs. While large-scale agricultural production can create indirect opportunities for smallholders, this paper seeks to examine TNC investments that target smallholders more directly. This focus is also sensible because many
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TNCs—due to government restrictions on investment—are moving away from direct ownership of agricultural production toward more nonequity involvement, for example through direct sourcing or licensing agreements. Many TNCs have also shifted to upstream and downstream activities on the supply chain that are more lucrative than direct involvement. Within this category of nonagriculturalbased TNCs, the segments of the value chain are further divided among the following categories: input suppliers, manufacturers/ processors, retailers/supermarkets, and traders/wholesalers. The final part of this section examines more recent and more ambitious multistakeholder frameworks developed to coordinate public and private investments in key regions—agricultural projects that have the potential to be real game-changers, but whose implementation and success is not yet certain. The paper refers in particular to agricultural growth corridors. Input Suppliers The World Investment Report observes that the top twenty-five TNC suppliers to agriculture are firms from developed countries. It also points out that a number of these large input providers are diversified firms, active in other products besides agricultural inputs; and that some of the TNCs also have close links with trading companies. This section examines providers of several types of inputs, including agricultural research and development, financing, and information access. To increase productivity of crops grown on small plots of land, smallholders require both access to inputs and training on how to use those inputs. Seeds, fertilizer, crop protection products, and machinery are “traditional inputs,” but other inputs such as market information and finance are equally important. Although larger agricultural input providers have generally considered smallholder agriculture “subcommercial,” many are now becoming aware of the business opportunities that await them if smallholders become commercial farmers. Processors and manufacturers, eager to create sustainable supply increases, are also serving as important input providers. The key challenge for all providers is to assist with input adoption at the beginning of the process, which would generate higher incomes for smallholders and, if adequate markets exist, increase their ability to purchase more inputs in subsequent seasons.

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Research and Development The first leg of the value chain arguably begins in the laboratory, where new types of inputs are developed. The private sector has been undertaking an ever-larger share of agricultural research and development, but has largely geared input developments—improved crop varieties, plant protection products, and agricultural machinery— toward wealthier producers. It has proved more difficult to attract privately funded research for innovations and adaptations targeting farmers in developing countries. Today, however, there is more of a push to increase publicly funded research of this variety, and to pursue PPPs to trigger private-sector research in neglected areas, such as “orphan crops.” Pioneer Hi-Bred International, Inc., is involved in the African BioFortified Sorghum initiative, which seeks to develop a nutritionally superior variety of sorghum, a key staple in Africa. Pioneer donated the initial technology and partnered with researchers from the Africa Harvest Biotech Foundation International, while the Bill & Melinda Gates Foundation provided initial financial support. Working with a consortium, Pioneer is developing varieties of sorghum that are easier to digest and fortified with higher levels of vitamin A, iron, and zinc. Early research is focused on improving sorghum varieties grown in Kenya, Burkina Faso, and Nigeria, where soil conditions prevent growth of more nutritious crops like maize, legumes, and green vegetables.7 Monsanto is involved in a partnership to create Water-Efficient Maize for Africa. The company has donated proprietary germplasm, advanced breeding tools and expertise, and drought-tolerant transgenes developed with BASF to help create new varieties of maize that could increase yields by 20-35 percent under moderate drought conditions. The African Agricultural Technology Foundation (AATF) is heading up the partnership, which also includes the national African research centers of Kenya, Mozambique, South Africa, Tanzania, and Uganda, and the International Maize and Wheat Improvement Center (CIMMYT). The project, which is funded by the Gates and Buffet Foundations, will make the new varieties available to African seed companies without royalty, as well as to smallholder farmers as part of their seed business. Although Mars Inc. is not an input provider, its contribution to research and development merits attention in this section. In collaboration with the United States Department of Agriculture (USDA)’s Agricultural Research Service (ARS) and IBM, the company underGLOBAL AGRICULTURAL DEVELOPMENT INITIATIVE - 25

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took a preliminary sequencing of the cocoa genome and presented its findings publicly to encourage further research for developing hardier, higher-yielding cocoa trees. The research uses modern germplasm rather than “depending on thirty- to forty-year old trees that have never been improved.”8 In a September 2010 announcement, the company emphasized the importance of cocoa to some 6.5 million smallholders who depend on the crop for their livelihoods. Improved varieties of cocoa are in particularly high demand, given a lack of robust research in recent decades and the very small number of countries producing the product. (Information on Mars Inc.’s sustainability efforts are described below.) PepsiCo has also contributed to the productivity and sustainability of their growers by developing and transferring technology. In India, a region that faces severe water shortages, an agriculture process called “direct seeding” helps rice growers avoid three waterintensive steps: puddling, transplanting, and standing water. After successful research and development trials with direct seeding, PepsiCo created a direct seeding machine for its farmers. In 2010, the company significantly expanded direct seeding, saving a significant amount of water and reducing greenhouse gas emissions.9 For agricultural technology providers, motivation to participate in such partnerships and activities likely includes the desire to demonstrate CSR and to encourage the uptake of new technologies. The partnerships try to address the reality that many developing countries are too poor and too small to make large research and development investments financial rewarding. Yet although research companies don’t reap any immediate economic gains from the arrangements, they are likely to consider the potential for smallholders to become viable commercial producers and input purchasers in the future. Mars Inc., for example, has acknowledged that its work to develop the cocoa genome and publicize the results without patent “may not benefit the bottom line in the short run,” but the company hopes that over time the investment will ensure “mutually beneficially results for the company, cocoa farmers and tree crop production.”10 Also under discussion are partnerships in which donors provide so-called “pull mechanisms” to incentivize agricultural research and development more geared toward the needs of the developing country producers. These mechanisms include advanced market commitments, patent buyouts, proportional prizes, and best-entry tournaments.11

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Equally important to gearing new inputs toward smallholders is ensuring that existing inputs become more readily available, since poor access is a key constraint for many smallholders. Access problems can often be attributed to weak distribution networks and extension services to educate smallholders about new products and their uses. TNCs are also trying to address that shortcoming, again often in partnership with governments and NGOs. Input providers can also contribute to increased uptake by smallholders if they are willing to reformulate inputs to decrease their costs. Financing If companies can tap into the smallholder market, a vastly increased customer base may compensate for the lower margins. But even a reformulated, lower-priced input may still be out of reach for smallholders. Therefore, financing to assist smallholders in gaining access to inputs (seeds, fertilizers, and machinery, for example) has become a key input in and of itself. Smallholders lack access to credit for a number of reasons: many lack formal title to their land to use as collateral and are averse to taking on debt, while many financial institutions in developing countries view lending to smallholders as a risky proposition. As a result, agricultural input suppliers and other players like transnational banks take over providing credit, often with support from governments or foundations. TNCs are also launching important advances on other intangible inputs, such as improved market information and crop insurance, which can help smallholders increase their incomes. Pioneer Hi-Bred and Monsanto, working with USAID and the Alliance for a Green Revolution in Africa (AGRA) and in association with the African Seed Trade Association (AFSTA), helped form the West African Seed Alliance (WASA) to create and support a competitive and sustainable seed industry in West Africa. Farmers in the region have poor access to improved seed varieties and hybrids; and the few options, when available, are not always suited to the conditions of the land. As a result, yields can be weak or inconsistent. WASA is a five-year, $61 million alliance to develop a commercial seed industry in West Africa that can provide small-scale farmers with affordable, timely, and reliable access to high-quality seeds and planting material. According to the alliance’s materials, the partnership “will establish a network of over 800 agro-dealers in each of the five focus countries to reach more than 500,000 farmers.” Broadly, the partnership
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will “contribute to the overall growth of the West Africa agricultural sector” by “promoting the growth and development of a reliable agricultural inputs system, and by improving the agricultural enabling policy environment for seed trade sector.”12 Funding from the alliance has gone toward creating a regional AFSTA office in Bamako and new seed companies, training thousands of farmers and agrienterprises, improving access to more seed varieties, and reforming policies and regulations. Jain Irrigation Systems Ltd., an Indian TNC, is recognized as a pioneer in providing solutions to smallholders in India as well as internationally. Jain introduced drip irrigation to India’s agriculture and has grown to become the world’s second-largest player in the micro-irrigation industry. According to the International Finance Corporation (IFC), Jain has tailored its business model to include the poor, creating a supply chain of 25,000 small farmers, 90 percent of whom work with less than one hectare of land. The use of drip irrigation has led to efficiency gains that have raised annual incomes for small farmers by up to $1,000.13 Jain allows smallholders to finance equipment over a longer term, with the Indian government helping subsidize the acquisition of equipment. According to Jain’s figures, the corporation grew its micro-irrigation business at a compounded rate of 61 percent over the last five years.14 In 2010, Jain received the IFC’s annual client leadership award for its pioneering work to promote sustainable agriculture and raise farmers’ incomes through efficient use of water, energy, and fertilizer. Jain has also announced plans to open a plant in Africa, responding to a growing need for drip water products. The corporation has recognized “huge opportunities in Africa for micro irrigation systems.”15 Syngenta, based in Switzerland, is a TNC providing crop protection and seeds. Since 2005 it has offered crop-protection products in pack sizes affordably priced for “cash in pocket” in Kenya, where smallholders make up 80 percent of all farmers. The company’s Uwezo project also includes information and training. Syngenta indicates that access to these products and services has enabled growers to move from subsistence to commercial farming, while the company “gains in higher sales and market shares.” Syngenta reported $4 million in total sales of Uwezo packs as of August 2010.16 Although mechanical equipment such as that produced by John Deere is normally assumed to be out of reach for smallholders, the company is now facilitating African farmers’ access to mechanization. While working to develop equipment designed specifically for
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smallholder farmers, the company is investing in dealer networks, parts depots, technician and sales training, and other aspects of the agriculture value chain. John Deere is also bringing in new farming practices and improved seeds and fertilizer. In Zambia, the company partnered with Afrgi Corporation Ltd. (a John Deere dealer and distributor), the IFC, and a Zambian NGO to develop a smallholder mechanization project that aims to improve the productivity and incomes of smallholder growers while also increasing overall food security and export revenues for the country. Through this project John Deere supplies mechanization packages to selected smallholder farmers who make a 20 percent down payment. The project is possible because of creative financing arrangements through which John Deere and the IFC provide partial loan guarantees that enable private lenders to offer credit to individual farmers.17 The Standard Bank of South Africa is collaborating with AGRA to create an innovative fund for smallholder farmers in Ghana, Mozambique, Tanzania, and Uganda. Along with other partners, AGRA is providing a $10 million loan guarantee fund, which allows Standard Bank to make some $100 million available for lending over three years—thus creating the “largest single financing facility targeting smallholder agriculture by a bank in Africa.”18 Rabobank Group’s recent efforts in Africa provide a different example of how a transnational bank—in this case a cooperative bank with roots in Dutch agriculture—can create opportunities for agricultural producers to access finance. In 2005 Rabobank began to assume a minority equity position in banks in Zambia, Rwanda, and Tanzania that lacked agricultural finance expertise and did not undertake lending in rural areas. Along with this investment, Rabobank also importantly provides the three banks with a comprehensive technical assistance program, while staffing the institutions with Rabobank professionals. Rabobank emphasizes that “this is a long-term commitment, in which the development into a leading rural bank prevails over short-term profitability.”19 Access to information Access to information about the larger markets is another crucial input, as it provides smallholders with market intelligence that can help them sell at more favorable prices and weigh the pros and cons of switching to higher-value-added crops.

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On the heels of the dramatic spread of cell phones among developing country farmers, the Finnish communications company Nokia launched an emerging market information service—Ovi Life Tools—in Indonesia and India in 2009 and China in 2010, and started to launch the program in Nigeria in November 2010. Through this program the company can provide tailored agricultural information, through low-end Nokia cell phones, to farmers in hard-toreach rural areas. The service is personalized to a farmer’s specific location, crops, and native language, providing information like crop advisories and weather forecasts. It also compiles information on daily market prices, enhancing farmers’ awareness of price levels and their own bargaining powers. This “input,” which is priced €1.25 Euros (250 Nigerian naira), provides farmers with crucially important market intelligence and likely gives them an incentive to choose a Nokia phone model.20 Also tapping into the spread of cell phones in Africa, Syngenta in 2010 launched another important agricultural input: crop insurance for smallholder farmers. The Syngenta Foundation for Sustainable Agriculture, with other partners, set up a pay-as-you-plant insurance program for Kenyan farmers to insure their farm inputs against drought and excess rain. Linked to solar-powered weather stations, the program provides data and payment options through low-cost cell phones. Some 12,000 Kenyan farmers used the program in 2010, which was expanded in early 2011 to offer insurance for a wider array of crops to an anticipated 50,000 users. Already, the program is considered to be the “largest agricultural insurance program in Africa and the first to use mobile phone technology to speed access and payouts to rural farmers.”21 Manufacturers and Processors As previously mentioned, the distinction between agriculturebased TNCs and food and beverage firms is not always clear cut. Agriculture-based TNCs have also moved into processing, while food and beverage firms can also be closely linked to production. The World Investment Report points out that the majority of food and beverage firms are headquartered in developed countries, and that the United States is home to the largest number of food-processing TNCs. The TNCs in this part of the value chain are highly concentrated, with the nine largest TNCs representing more than two-thirds of the foreign assets owned by the top fifty firms.22
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Whereas some TNCs have invested in domestic markets for staples, most are still focused on investments for export markets. Both types of investments enhance food security: exports-focused investments contribute to income generation as well as agricultural and economic diversification; whereas investments in staple products importantly also increase food production for the local economy. Because companies have long sourced raw materials for export from developing countries, export markets for “cash crops” tend to be better developed than domestic markets for staple crops—leading one African development expert to opine that African staple crops also need to become cash crops.23 When smallholders can organize themselves—often with help from an investor, the government and/ or NGOs—to aggregate their output and produce to similar qualifications, they are better able to tap into commercial value chains. A number of TNCs are now investing in helping developing countries generate more value from processing raw materials. Processing raw materials Olam International, headquartered in Singapore but with roots as the Indian conglomerate Kewalram Chanrai Group in Nigeria, fits multiple profiles: an agriculture-based TNC, a processor, and also a trader. The company is a leading global integrated supply manager of agricultural production and food products, as well as one of the world’s leading traders of agricultural commodities such as cocoa, coffee, cotton, cashew, rise, sesame, sugar and timber. It also handles direct sourcing and processing. In the 1980s, when a foreign exchange crisis limited the import of cotton, Olam forerunner the Kewalram Chanrai Group (which ran a cloth factory in Nigeria) undertook a vertical integration into cotton production. The company not only leased land from the Nigerian government to establish Africa’s largest cotton plantation as a nucleus, but also set up Africa’s largest outgrower scheme, encompassing 10,000 smallholders. Olam first expanded beyond cotton production in Nigeria and then throughout Africa, increasingly sourcing directly from producers rather than middlemen. The company found ways to “forward integrate” into processing, for example by investing in African cashew shelling and blanching facilities.24 Olam has a clearly stated goal of improving rural livelihoods, aiming “to move farmers from subsistence-based agriculture to commercial viability by helping them enhance efficiency and increase yield and product qualify.”
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Land O’Lakes Inc., a US-based cooperative best known for its dairy products, has been engaged in developing country agriculture through its International Development Division since 1981.25 As of 2010, Land O’Lakes was facilitating agricultural development programs in five countries in Asia and thirteen in Sub-Saharan Africa. Via a partnership with USAID, for example, the company is improving Kenya’s dairy industry competitiveness through assisting producer-owned milk bulking and cooling businesses, and increasing dairy producers’ access to services and technologies. While Land O’Lakes characterizes these activities as largely philanthropic, the company also acknowledges that the programs ultimately support its global business growth. Sustainability Given growing concerns about supply scarcities and longevity, several TNCs are working to improve the environmental sustainability of production and to increase producers’ incomes to gain the loyalty of their supply chain partners—a focus that also responds to consumer demands for more so-called “fair trade” products. Unilever, a Dutch/British TNC that also has its own estates and factories in developing countries, has been sourcing products such as tea, cassava, spices, fruit and vegetables, and other ingredients from smallholders for several decades. The company, which indicates that it currently works with 100,000 smallholders, recently set a goal under its Sustainable Living Plan of linking 500,000 smallholder farmers and small-scale distributors into its supply network by 2020. In the process, Unilever aims to help smallholder farmers improve their agricultural practices and prepare them to supply into global markets at competitive prices, thereby improving the quality of their livelihoods. The company partners with other groups “to provide training, access to markets, equipment and other practical aids to increase the yields and income of smallholders.”26 Smallholders, meanwhile, are expected to comply with the Unilever’s Sustainable Agriculture Code, which sets forth conservation and environmental principles. Unilever is the world’s largest seller of tea, producing tea on its estates in East Africa and also buying from third parties, including smallholders, on the world market. The company has made a commitment to sell 100 percent sustainable tea by 2020,27 pledging in the interim to require some of its tea-producing subsidiaries to source 100 percent of their tea from suppliers and farms that are certified by
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the Rainforest Alliance, a nonprofit organization that sets standards on biodiversity and sustainable livelihoods.28 Unilever also established the Novella Project, a public-private partnership that includes the World Agroforestry Centre, to launch a major domestication program of the Allanblackia tree. The seeds of the Allanbackia contain oil with properties that make it “a food technologists dream,” ideally suited to the manufacturing of Unilever products. Agroforester Roger Leakey praised Unilever’s efforts: “Instead of thinking in terms of establishing vast plantations, the company took the decision to work directly with African communities to develop the greater social and economic sustainability for the producers.”29 Between 2002 and 2009, the company spent more than $10 million domesticating the tree and establishing a supply chain, aiming for some 200,000 farmers to be growing twenty-five million Allanblackia within ten years.30 The Swiss TNC Nestlé also has a longstanding history of sourcing from smallholders in developing countries. The company has established half of its 443 factories in developing countries, with 60 percent located in rural areas, creating local jobs and other indirect economic benefits.31 One of the world’s largest producers of milk products, Nestlé began to emulate the milk districts it originally set up in Switzerland in countries in Asia, Latin America, and Africa. A Harvard Business School publication describes the process: “In many regions, where farming focused on a single crop, with a single harvest and therefore a single payment to local farmers, Nestlé’s milk collection sites provided farmers with a steady stream of income throughout the year, stabilizing their economic condition. In addition, there were no minimums for milk quantity, so even families with a single cow could contribute the excess milk not used for the family’s needs. A farmer with as little as 1 liter of milk to sell stood to make money. Often set up in the most rural and poor of regions, where no other commerce existed, the milk districts revealed that providing farmers’ families with a small but steady income led to additional economic development, bringing in bank branches for farmers to deposit their money, and eventually to other commerce. Aside from the nutritional value gained from drinking the milk collected, the additional income often meant families could afford to keep their young children in school rather than rely on them to earn additional income to support the family.”32 Mars Inc. is a US privately held food manufacturer, a large producer of chocolate with a corresponding longstanding interest in
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cocoa. The company has been active in Indonesia, establishing “district cocoa clinics” that supply both technical input and training to farmers. Although Mars has not yet undertaken a comprehensive study of a statistically significant sample of cocoa farmers in Indonesia, the company has compiled observations of three cocoa farms in Sulawesi to determine how better inputs and production techniques affect farmers’ incomes. Indicative results show that improved inputs and techniques can lead up to a threefold increase in annual profit per hectare.33 Increasingly concerned about the long-term outlook for cocoa production, Mars also works with other corporate, government, and foundation partners to help West African cocoa farmers increase their incomes through improved crops and reliable sales opportunities. Among Mars’ sustainability commitments, the company has pledged to use only certified cocoa by 2020—though officials have also stated clearly that they do not want to end up “in a situation down the road where [they] are certifying farmers into poverty, or just certifying farmers who are in poverty.”34 Retailers and Supermarkets The largest retailers and supermarkets distributing agriculture and food products (as well as other consumer products) tend to have significant buying power vis-à-vis their suppliers, although a recent report notes that “in the developing world, the relationship can be more collaborative…[with] big retailers, as they move into new markets, striv[ing] to ensure that farmers deliver quality produce.”35 The firms also tend to be headquartered in developed countries, with only three of the top twenty-five headquartered in Hong Kong, China, and Kuwait. In its Central American operations, the world’s largest retailer, Wal-Mart Stores Inc., indicates that “micro-, small and mediumsized businesses” make up more than 70 percent of its suppliers. Upon entering Central America in 2005 and 2006, Wal-Mart chose Hortifruti as its exclusive supplier of fresh vegetables for its stores throughout the region. Hortifruti began its “Tierra Fertil” (Fertile Ground) program in 1973, supporting and sourcing from small and medium farmers. Highlighted as a successful model of corporate social responsibility in Latin America, “this program has made it possible for the farmers to stop relying on small subsistence crops and develop diversified crops, according to market needs, in order to multiply their original income.”36
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Carrefour Group’s hypermarket in China, meanwhile, has created a “Direct Purchase” initiative to encourage purchase of fresh products directly from the farm. By sidestepping the usual intermediaries, Carrefour aims to provide better prices and greater opportunities for producers, while improving product freshness and reducing the final cost for Chinese consumers. In 2009, direct supply represented 15-20 percent of Carrefour’s national fruit and vegetable orders in China. Within the framework of this project, the company offers small farmers long-term partnerships as well as training for quality and modern agricultural production methods. Organized by the Carrefour China Foundation for Food Safety with support of the government, the training in 2009 enrolled 1,220 farmers representing 334 cooperatives in ten provinces.37 Traders/Wholesalers Trader and wholesaler TNCs impact agricultural producers through their purchasing schemes; many are also involved in processing and warehousing operations. Bunge is a US-based TNC that trades and processes agricultural commodities, creates food products, and helps farmers grow more crops, has been working for a few years on a small CSR project near its plant in the Indian state of Rajasthan. The project, which presently incorporates 3,000 farmers, aims to improve agronomic practices and the use of seed technology.38 Bunge has contracted with Srijan, a local NGO that offers farmer extension services. The project also helps to form groups of local women to serve as micro-credit agencies that enable farmers to find lower cost financing. Beyond the CSR aspects of this project, Bunge is motivated by the prospect of higher yields, more profitable farmers, and greater volumes of soy, though a company executive acknowledges that “there is still a long way to go.”39 Cargill is a privately held US-based trading company as well as an international producer and marketer of many food and agricultural products, whose business model facilitates creating market opportunities for farmers. The company works in many developing markets, including some of the least developed markets across the globe. Cargill has committed itself to working with other industry partners, government, NGOs, and local communities to tackle “the complex economic, environmental and social challenges in our supply chains.” The company refers to “responsible sourcing,” that “takes into account social and environmental considerations
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when managing relationships with suppliers and is an integral part of managing the chain of supplies from where they are produced to where they are used.”40 Cargill’s broader commitment includes delivering free medical care, building schools, offering daycare, and providing housing for plantation workers and their families.41 One of the best examples of Cargill’s business model that builds capacity for farmers is its animal nutrition business. In Vietnam, Cargill has worked consistently with farmers to train them on best applications of feed use, food safety standards, and consumer quality requirements. The company has built up a network of trainers, dealers, and distributors that assist in getting high-quality animal feed to the farmers. Alongside this business, Cargill employees have built forty schools in remote rural communities across the country. Cargill participates, along with Mars and other chocolate companies and the Gates Foundation, in the West Africa Cocoa Livelihoods program. It also cofounded the “UTZ Certified” cocoa program to help produce cocoa more effectively and to improve the livelihoods of farmers who grow it. By introducing independent certification to improve agricultural, environmental, and social practices in cocoa production, the program assures buyers and consumers that the cocoa is produced responsibly. Cargill is training farmers across cooperatives in Côte d’Ivoire and will reach over 25,000 farmers by the end of 2010. Farmer Field Schools will enable cooperatives and farmers to become “UTZ Certified” so by the end of 2010, Cargill will process 15,000 tons of cocoa into high-quality cocoa and chocolate products. Small-scale farmers who have participated in the training are benefiting from an average 30 percent increase in their incomes due to higher yields and improved-quality crops, and are eligible for quality-related bonus payment from Cargill.42 In Zimbabwe, Cargill operates a farmer training program for 60,000 cotton growers to help them move beyond subsistence-level livelihoods. The effort has led to increased production, in some cases a tripling of yields.43 Training on proper use of pesticides lowers costs for farmers while safeguarding the environment—pesticide spraying has been reduced from as many as twenty-two applications a season to as few as nine. Simply training farmers on the optimum time to pick cotton can result in 20 percent more cotton of higher quality, allowing farmers to improve their incomes and lifestyles. Cargill is also providing training to more than 12,000 smallholder farmers to help them grow and harvest palm more safely, sustainably and profitably on plantations in South Sumatra and West Kalimantan, Indonesia. The company is helping 8,800 of these farm36 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

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Box 2: Certification As exemplified in several cases here, an increasing number of companies across the supply chain are implementing private certification standards for their products, using third-party standards from private certification systems or sometimes developing their own. Many of these certification efforts aim foremost to promote more environmentally sustainable production—a topic outside of this paper’s focus on efforts to increase smallholder incomes. Yet certification schemes no doubt end up impacting smalholders; ideally, sustainably grown and certified crops result in higher prices for smallholders. This important trend has led to innovative results. The World Wildlife Fund (WWF), for example, is trying to work with the top 100 agribusiness companies to create more sustainable value chains. One of its partner companies, Coca-Cola, has agreed to pay fruit suppliers in Turkey not only for the cost of the fruit the company uses to produce juice for the European market, but also for the carbon sequestered by the fruit trees in order to offset the carbon footprint of shipping the product. This type of “bundling”— where companies pay for the product and associated externalities—can therefore not only have positive environmental impacts, but also can yield higher incomes for producers. A word of caution would not be remiss, however. Complying with a proliferating number of differing private standards can involve significant costs for smallholders, who must not only change their production practices but also undergo certification to prove compliance. Without proper training and assistance, this trend may in fact hinder smallholders from tapping into supply chains. It is also important to ensure that sustainability standards do, in fact, result in higher prices for producers—a number of critics have expressed concerns that the standards can create greater financial rewards for retailers than for farmers.

ers gain Roundtable on Sustainable Palm Oil (RSPO) certification. About half achieved this milestone in August 2010, making them the first group of palm smallholders in the world to earn this accreditation under new smallholder criteria, which set strict social and environmental standards for palm growth. Box 2 contains a broader discussion of the issues around certification.

Scaling up Public-Private Partnerships
Considering that there are approximately 500 million smallholders around the world, it is clear that the size and pace of investments must be increased.44 Larger, coordinated investments by multiple parties, focused on a specific value chain, for example cocoa, are likely to have a more significant impact (see Box 3). This compilation would be incomplete without also referring to recent attempts at significantly scaled-up, transformative investments in specific regions that have the potential to be agricultural
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Box 3: Multiparty Investments in the Cocoa Value Chain: Scaling Up USAID and USDA partnered with the World Cocoa Foundation (with 45-plus chocolate industry members), the Smithsonian Institution, and the International Institute of Tropical Agriculture to establish the Sustainable Tree Crops Program Alliance. The effort promotes shade-crop biodiversity methods that improve the quality and availability of cocoa beans for the international chocolate industry, ultimately raising the standard of living for participating farmers and improving labor conditions for cocoa workers.e Meanwhile, Mars, Cargill, and other leading cocoa and chocolate industry companies have partnered with the Bill & Melinda Gates Foundation to improve the livelihoods of cocoa farmers in West Africa. The West Africa Cocoa Livelihoods Program is a $40 million effort to help approximately 200,000 farmers in Côte d’Ivoire, Ghana, Nigeria, Cameroon, and Liberia improve the quality and quantity of their crops. The five-year project aims to double farmers’ incomes by 2013, improve cocoa quality, and encourage supply chain efficiencies. It will also offer training and support for farmers, as well as improved access to market information so farmers can diversify into alternative food and cash crops to maximize their incomes.

breadbaskets. The paper focuses here on the concept of “agricultural growth corridors,” projects that guide public and private investments toward specific regions to boost productivity in clusters of existing infrastructure and to create new support infrastructure. Two blueprints for agricultural growth corridor investments— the Beira Agricultural Growth Corridor and the Southern Agricultural Growth Corridor of Tanzania—were launched at the World Economic Forum meeting in Davos in 2010 and 2011 respectively (see Box 4). Many TNCs, SMEs, government agencies, international organizations, and foundations have been involved in drawing up these large-scale investment plans, which call for several billions of dollars of private and public investments and envision leaps in agricultural production and productivity as more smallholders are linked into commercial markets. Given the size and scope of the plans, the significant publicity around them, and the large number of parties involved, these investment blueprints—if implemented—represent an ambitious new direction for PPPs. At the January 2011 Davos meeting, USAID administrator Rajiv Shah demonstrated support for such efforts by endorsing the World Economic Forum’s “New Vision for Agriculture.” The initiative aims to leverage private-sector investment to scale up agricultural growth in food-insecure countries,45 beginning with the Beira growth corridor in Mozambique and subsequently the Tanzania corridor. USAID has also opted to invest $2 million to a catalytic fund for the Tanzanian project this year.46 The project’s USAID-backed efforts

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have attracted hefty private sector investments recently, including a $20 million plan by Yara International ASA, the Norwegian fertilizer company, to build a port-based fertilizer facility in Dar es Salaam. The facility is expected to significantly improve the efficiency of agricultural input deliveries along the corridor. USAID has also contributed to TransFarm Africa, an initiative funded primarily by The William and Flora Hewlett Foundation, which combines investment and a demand-driven approach to policy reform to target the “missing middle” of African agriculture and remove past barriers to agricultural development. TransFarm Africa is working to advance commercial agriculture along Africa’s growth corridors in ways that improve incomes for smallholder farmers and integrate them into regional food economies.47 The two growth corridor schemes would take public-private partnerships to a new level of ambition, aspiring not only to increase agricultural productivity but also to create vast infrastructure improvements and functioning markets. The projects don’t focus solely on assisting smallholders, but they do include specific goals for incorporating smallholders into supply chains, often using commercial agricultural holdings for outgrower schemes. Importantly, the two corridors have active support from the governments of Mozambique and Tanzania, international organizations, donors, and foundations, as well as from the private sector, ranging from large TNCs to SMEs and smallholder cooperatives in the regions. Considerable analysis and consultation has gone into feasibility studies and investment plans. These ambitious blueprints respond to fundamental challenges facing the food and agricultural sector with a multipronged approach: they harness large-scale investments toward areas of high agricultural potential, generate job opportunities both on and off farms, and give special attention to smallholder integration. Their success will depend on a number of factors. They will require a long-term commitment from all participants, particularly on the objective that focuses on smallholders. They will require tight coordination, given the multitude of actors and necessary investments. Most crucially and fundamentally, they will require the right amount and types of financing. As laid out in one of the investment blueprints, the financing will need to cover “the fixed capital costs and working capital costs of large commercial agribusiness investments, medium size commercial farm/processing hubs and smallholder farmer improvement programs” as well as “the agriculture-supporting infrastructure investments, principally irrigation,
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without which the small and medium size farm investments will not proceed.”48 Financing start-up agricultural ventures, especially in Africa, has never been an easy prospect. Commercial funders are likely to view such projects as “subcommercial” due to their low expected returns—associated with significant starting costs and high unit costs of fixed investment in “greenfield” agriculture. Even if they are considered fully commercial (defined as providing 15-20 percent return on equity), “the private equity market and DFIs have little interest in pure ‘greenfield’ agricultural ventures in Africa particularly when the sponsors have a limited track record,” and commercial lenders are “usually unwilling to extend much credit, even for working capital, for start-ups.”49 Summarizing these difficulties, “[l] ow expected returns in the early years result from the absence of economies of scale and the benefits of ‘learning by doing’—a classic barrier to entry,” and [l]ow expected returns prevent the early stage investments taking place so the benefits of scale and scope and learning by doing are never realized.”50 The blueprints call upon governments and/or international communities and foundations to overcome such obstacles by providing “patient capital”—long-term, subordinated capital at a low cost—to help finance agriculture-supporting infrastructure. The plans also call for very early-stage “social” venture capital to fund the start-up costs of medium-size farm investments and smallholder farmer schemes, along with subsidized working capital for mediumsized and smallholder farmers.51 Albeit on a larger scale, the agricultural development corridors highlight the general challenges of financing private-sector investments in the agricultural sectors of developing countries, along with the need for PPPs in this space. Given the attention that global food security has regained within the international community in recent years, and the significant investment needs of agrifood sectors of developing countries, it is an opportune time to consider both how best to strengthen PPPs and how to provide innovative sources of finance for private-sector investments.

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Box 4: Growth Corridor Approaches The investment blueprint for the Beira Agricultural Growth Corridor (BAGC) was launched in 2010 as a partnership between governments, private investors, donor agencies and regional organizations. The project aims to boost agricultural productivity in Mozambique and the wider region. The Beira corridor is the gateway to South East Africa, linking inland areas of Zambia, Malawi, Zimbabwe, and Mozambique by road and rail networks to shipping facilities at the Indian Ocean at Beira. To fully realize the area’s agricultural potential, significant investments in agriculture-supporting infrastructure, particularly irrigation, will be necessary. If fully implemented, the investment blueprint would result in more than $1 billion per year in revenue for farmers—through vastly improved fields, lower operating costs, and better access to domestic and global markets. The BAGC report shows that $250 million of patient capital could induce private investment in Mozambique of more than $1 billion. The report also estimates that over a twenty-year period, more than 350,000 new jobs could be created with major benefits for more than 200,000 smallholder farmer households, many of whom would gain access to affordable irrigation.f The investment blueprint for the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) was launched in January 2011. The corridor aims to harness the largely underutilized agricultural potential of Tanzania through links to the port of Dar es Salaam on the Indian Ocean, and to the neighboring countries of Malawi, Zambia, and the Democratic Republic of Congo. The project calls for developing six clusters of profitable, small-, medium- and large-scale farms and associated agribusinesses, centered in areas of the corridor with particularly high agricultural potential. Among other objectives, the SAGCOT blueprint seeks to commercialize smallholder production “by providing opportunities for smallholder producers to engage in profitable agriculture,…by incentivizing stronger linkages between smallholders and commercial agribusinesses, including ‘hub and outgrower’ schemes that allow smallholders in the vicinity of large-scale farms to access inputs, extension services, value adding facilities and markets.”g SAGCOT has set ambitious objectives to meet by 2030, among them turning tens of thousands of smallholders into commercial farmers with access to irrigation and weather insurance, and lifting more than two million people permanently out of poverty.

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US Government Agencies: Roles and Initiatives
As examples in the previous section demonstrate, most TNC investments in the agricultural and food sectors of developing countries are pursued as PPPs, involving collaboration between the privatesector investor, a government, and often also a civil society organization and/or foundation. In this section, we first explore how the US government engages in PPPs. Though governments can support private-sector activity in developing countries through a number of means beyond PPPs, this section focuses more narrowly on how the US government can use reforms and incentives to spur private-sector investment.

Section III

The United States Agency for International Development and Public-Private Partnerships
“For its entire history, USAID has acted either as a direct donor or through a client-vendor relationship with organizations that carry out projects defined by USAID. With the advent of the Global Development Alliance, however, USAID welcomes companies and NGOs as equals in the development process” —Daniel F. Runde, [former] director, Office of Global Development Alliance1 USAID finances and manages US development efforts abroad, and has a long history of working with nonstate actors. Founded in 1961, USAID is an independent federal agency that receives foreign policy guidance from the United States Secretary of State. US development policy has a dual objective to strengthen national security by promoting democratic reform and free markets abroad, and to improve the lives of citizens in developing countries. USAID’s programs are designed to support economic growth, agriculture and trade, global health, democracy, conflict prevention and humanitarian assistance. The agency extends assistance to countries that are recovering from disaster, trying to escape poverty, or engaging in democratic reform. Today USAID has 9,000 employees and includes missions in over eighty countries.

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Throughout its history, USAID has worked with NGOs, foundations, and international organizations to implement its goals. During the 1960s and 1970s, USAID support for the Green Revolution was carried out in close collaboration with the Rockefeller and Ford Foundations, as well as US land grant universities. In recent years, however, USAID has looked increasingly to the private sector. The 2001 establishment of the GDA by then-USAID administrator Andrew Natsios marked a significant expansion of the agency’s ties to private-sector companies. The realization that “about 80 percent of US funds moving into the developing world come from the private sector”—compared to the 1970s, when US government funding was the largest source of funds for developing countries; and the 1990s, when “most international resource flows still came from governments”2—compelled the creation of the GDA. The new alliance also followed on the heels of the United Nations Millennium Declaration of September 2000, which not only brought global attention to food insecurity but also highlighted the need for agricultural innovation and investment in developing countries. The GDA was heralded as a major shift for USAID, namely “from being primarily a funder of development projects to being an equal partner and manager of collaborative public-private relationships,” and its innovative approach encouraged interest from development partners.3 While the alliance explored a number of collaborations, priority went to partnerships with businesses. The GDA operates under the premise that companies can bring valuable skills, technology, and management practices to such partnerships, and that “corporate skill at managing inputs in complex supply chains and production processes” can be applied directly to development problems.4 In 2006, when the GDA became a permanent office within USAID, the program highlighted a number of its best partnerships, many of which are still operating today. One of these is the Conservation Coffee Alliance, in which USAID partnered with Conservation International and Starbucks Coffee Company to expand cultivation and sale of high-quality, shade-grown coffee in Mexico and Central America.5 In another example, USAID worked with Schaffer and Associates International LLC and the government of Mali on the Markala Sugar Project to establish a sugar industry in Mali, with an investment expected to attract the largest amount of FDI to Mali in the country’s history.6 An initial GDA grant investment of under $1 million, at a critically timed early development stage, is resulting in the $640 million Illovo Sugar-led integrated project, which is
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expected to transform a large region of Mali. The project will produce 200,000 tons of sugar and fifteen million liters of ethanol, employ over 6,000 people, and create thousands of independent farmers. The GDA’s creation also led to a new type of procurement tool: in addition to the grants and contracts that USAID had historically set up to help partners fulfill specific development goals, the agency could now also enter into collaboration agreements, which allowed grants to go directly to companies under certain conditions. Before entering such an agreement, USAID must determine whether the company is the best suited entity for its specific program: a collaboration agreement with Starbucks, for example, hinged upon the company’s unique skill set for training coffee farmers to grow better-tasting and thus higher-priced coffee. USAID has only set up a handful of collaboration agreements—in part because a company seldom has the unique capability to implement a program, but also because the agreements are difficult and lengthy to negotiate, with high transaction costs on both sides. A number of other changes within USAID have facilitated PPPs. The agency began issuing annual program statements “that set forth in clear and simple terms the parameters for fundable alliances,”7 in essence inviting proposals for collaborations from outside partners. In addition, the agency established new policies to clarify legal concerns like competition and conflicts of interest. USAID stresses that “the most sustainable and successful partnerships under the GDA model originate at the intersection of businesses’ core interests (rather than a purely philanthropic focus) and one or more of USAID’s development objectives.”8 Initially the GDA worked with a separate incentive fund, through which it sought to leverage privatesector engagement, but now such funds come primarily from USAID mission budgets. The change allowed USAID to explore real engagement and ownership by private-sector partners, rather than focusing its interest on matching funds.9 The concept of partnerships has by now become so integrated and streamlined within USAID that a separate Private Sector Alliances Division may no longer be maintained when the agency undergoes a planned broad restructuring. Despite this mainstreaming, there is still much room for improvement when it comes to PPPs. A tool more widely used for forming PPPs is a Memorandum of Understanding (MOU) between USAID, one or several corporate partners, and sometimes also one or several NGOs. MOUs negotiated with TNCs essentially formalize an agreement to work jointly as partners, but are not legally binding and must still go through specific programs before USAID resources
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are expended.10 When effective, MOUs allow USAID and a privatesector party to jointly define a development problem, clearly define value added from their collaboration, and think through how each partner can be most effective in tackling the problem through complementary actions. Each party, however, is still required to undergo its own internal processes for allocating funds—which for USAID can take up to a year after conclusion of the MOU, which itself can take more than a year to negotiate. MOUs require USAID to prepare and submit a request for proposals, then evaluate the proposals it receives. The complicated negotiation process has proved to be a source of frustration and confusion for many private-sector players, who in some cases get an additional surprise when they discover that complete MOUs do not translate into legally binding resource commitments. In most cases, companies are not seeking direct USAID funds (as they would through a collaboration agreement), but are keen to see USAID funds dispersed through a program implementer to complement their own funding plans. USAID itself has referred to such alliances as a “time-intensive undertaking.”11 There is no doubt that for every successful MOU, there are others that have produced little or no operational value. Given the importance of public-private collaboration for tackling serious development problems—and the emphasis that international development agencies, TNCs, and NGOs are placing on this tact—it has become critical to ensure that PPPs are truly effective. This will require a greater focus on evaluating the outcomes of the partnerships. It is no longer sufficient to measure “success” in terms of the number of PPPs initiated, or even in terms of the overall amount of investment they create. A greater focus on results and outcomes is necessary to ensure that their value supersedes their transaction costs.12 In October 2010 USAID administrator Shah announced creation of a new Feed the Future Private Investment Center that seeks to “expand on existing relationships with multinationals and local businesses, and facilitate engagement with new private sector partners.”13 The new investment center is tasked with examining ways to streamline and expedite partnerships and programming resources, but has announced no new initiatives to date. Given the pressing need for food-security-related investment, it is vital that USAID and private-sector companies engage productively to implement partnerships more efficiently. For such a partnership to be successful, it must no doubt bridge the language and culture gaps that can exist between private-sector players and
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government officials. There may well be a role for a NGO to facilitate an action-oriented dialogue on these important but technically and bureaucratically complex negotiations. Those dialogues should include questions like: 1) What minimum requirements must be met before entering into a MOU negotiation to ensure that the MOU can clearly add value?, and 2) Is there a faster way for USAID to disperse funds in order to implement MOUs more swiftly?

Encouraging Reform Conducive to Private-Sector Investment
“It is no coincidence that many of the negative characteristics associated with African economic performance—low growth, a large informal sector, and a concentration of activity in a few large firms connected to the state—are traceable to the failure of public policy to create an enabling (or even permissive) environment for the private sector” —Center for Global Development’s “A Doing Business Facility: A Proposal for Enhancing Business Climate Reform Assistance”14 Whereas PPPs facilitate and leverage TNC investment on specific projects, the US government also emphasizes the need for political and economic reform in developing countries, which could attract more investment from local as well as foreign private-sector companies. Though the developing country governments themselves must undertake such reforms, donor country governments undoubtedly play a key role in supporting and encouraging them. Dispersals of aid in the 1990s were often made contingent on structural reforms within the developing country, but this type of conditionality has since lost favor. Development partners are now focusing more on support for “country-owned” reforms, rather than imposing reforms from outside. The Millennium Challenge Corporation (MCC), created in 2004 to promote private-sector-led economic growth to reduce poverty in developing countries, in a sense combines these two approaches. The corporation both supports “country-owned” reforms and requires countries to fulfill certain conditions. Before they can tap into MCC financing, countries must meet a number of transparent and objective governance indicators based on relative rankings. All three indi-

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cators—Ruling Justly, Investing in People and certainly Economic Freedom (which includes natural resource management, business start-up, inflation, trade and fiscal policy and land rights/access)— are important determinants for private investment. In the words of MCC chief executive officer Daniel Yohannes, “the ability to say no is a critical component of effective aid. MCC’s focused mandate and transparent selection process allow us to say no to those countries that are not accountable to their people and not pursuing policies that promote free markets and economic growth.”15 Countries that pass these eligibility criteria enter into a poverty reduction contract with the MCC, which provides large five-year grants for the country to achieve its vision.16 With some $7.4 billion approved, a significant amount of MCC funding supports private-sector priorities like infrastructure, agriculture, and finance and enterprise development.17 The Feed the Future Initiative shares this approach of concentrating on countries that demonstrate a serious intent for agricultural development. USAID has agreed to work primarily with “focus countries”—those plagued with chronic hunger and poverty in rural areas and vulnerable to food price shocks, but also “currently demonstrate potential for rapid and sustainable agricultural-led growth, good governance and opportunities for regional coordination through trade and other mechanisms.”18 USAID makes investments in focus countries in two phases: “foundational investments” to help a country develop its food security investment plan, then largerscale investments in priority areas the investment plan sets out, if a multistakeholder review panel finds it technically sound. Moreover, Phase II countries must “provide evidence of coordination and consultation with key stakeholders and demonstrate commitment and capacity to address the challenges of food insecurity as indicated by follow through on its financial and policy commitments.19 It is interesting to note that the administration of President Barack Obama is taking this more selective approach to development policy, calling on the United States to “invest in sustainable economic growth in a select number of well-governed countries and to partner with these countries on tackling the tough policy reforms necessary to create an environment in which the private sector can thrive; citizens can hold their governments accountable; and U.S. taxpayers can see they are getting a good return on their investment.”20

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Facilitating Investment
Although governments in investment-seeking countries bear the greatest responsibility for creating an enabling environment, governments of donor countries can also facilitate TNC investments. Development agencies such as USAID can help steer governments to think more strategically about how private investment can help meet certain needs, and how to encourage such investment most effectively. This can but does not always require a more formal agreement, such as a MOU. Donor countries can also offer assistance to potential investors. Bilateral development finance institutions, for example, can offer a number of products (such as equity, mezzanine, loans, guarantees, and syndication) and services (long-term financing, local currency financing, capacity development, corporate governance support, environmental and social management support) to their clients, which can include TNCs. The IFC, part of the World Bank Group, and the private sector arm of the African Development Bank (AfDB) also provide such services. In the United States, some of these functions are carried out by the Overseas Private Investment Corporation (OPIC), which the Foreign Assistance Act established in 1969 as a successor to an investment-guarantee program for US corporations working in USAID’s developing countries. OPIC provides direct loans, guarantees, equity funds, and political risk insurance that in turn trigger private capital, mostly from the U.S., to invest in emerging and developing markets. The United States Trade and Development Agency (USTDA) can also offer critical front-end support to investors in the form of costsharing feasibility studies. Its primary mission is to help companies create US jobs through goods and services for priority development projects in emerging economies. USTDA “links US businesses to export opportunities by funding project planning activities, pilot projects, and reverse trade missions, while creating sustainable infrastructure and economic growth in partner countries.”21 Within USAID’s toolbox, another important instrument is the ability to encourage financial institutions throughout the developing world to lend to sectors, such as agriculture, that traditionally have difficulties raising finance. The Development Credit Authority (DCA) undertakes risk sharing, mobilizing financing through credit guarantees. With $82 million of USAID investment in between 1999-2010, DCA has made available more than $2.3 billion in private credit.22 Administrator Shah has indicated that in addition to
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expanding access to credit through credit guarantees, he would like to see DCA develop real equity investments, referring to these as “the missing piece in many countries, especially for small and medium enterprises that don’t have access to even a little bit of equity that is necessary to then leverage much larger debt flows.”23

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Recommendations: Increasing and Improving Transnational Corporations’ Investments
This paper concludes with a number of reflections on ways to ratchet up TNC investments in the agrifood sectors of developing countries. Undoubtedly there are many other suggestions that could be added to this list, and it is our hope that this broad overview paper facilitates further discussion. We begin with recommendations for future research and analysis, then focus on TNCs themselves, before moving to a set of recommendations for how various players can scale up PPPs and address important questions on financing. We end with recommendations specific to the US government.

Section IV

Next Steps for Research
This paper is certainly not the first one to list examples of TNC investments that have important social benefits. What is necessary now is more thorough analysis and research, fully developed case studies, and systematic tracking of progress over time. UNCTAD’s 2009 World Investment Report, which focused on investments of transnational companies in the agricultural sector of developing countries,1 is an excellent compilation of FDI flows. It should be released in an updated version every few years. A focus on FDI alone, however, is not enough. FDI—which implies equity involvement—does not cover the myriad of nonequity ways in which agribusiness TNCs are also involved in agricultural production, such as through contract farming and production standards. It is also important to note that land leases, often undertaken for fifty to 100 years, are not considered to be part of FDI, so UNCTAD’s database does not cover them.2 While TNCs should certainly track their own initiatives, there may also be a role for third-party NGOs to follow and measure these types of investments. Such research could also explore which specific investments and PPPs have succeeded most, and which impacts have led to the greatest competitiveness and income gains for smallholders. There is also need for additional research on Chinese investments in the agrifood sectors of developing countries. Although this paper refers to the Chinese government launching a commercial equity fund to facilitate investments in Africa in 2007, there is little data available on Chinese companies’ investments in the agricul50 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

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tural sectors of developing countries, nor is there great detail on the terms of government finance available to such companies. Despite the large amount of Chinese investment flowing into Africa, there seems to be scant knowledge about its impact on agricultural development, and little discussion about this beyond occasional alarming press reports about large-scale land investments. Regardless of whether such reports are valid, collaboration with China is essential for ensuring that investments are tailored to create broad social benefits. In other words, private and public investors are well advised to think about how most effectively to leverage significant Chinese investment. We would also encourage TNCs from other countries to enter into a greater dialogue with their Chinese counterparts on these questions. It would be beneficial, for example, for Chinese companies to participate as industry partners in efforts such as the World Economic Forum’s “New Vision for Agriculture.”

Recommendations for Transnational Corporations
The transition from CSR, in which efforts are pursued separate from profit maximization, to CSV, where efforts are integral to profits (as Porter describes), is not likely to occur automatically.3 Corporate leaders must shepherd this transition, if is to occur effectively. Corporate social responsibility projects should still retain an important role—and TNCs should certainly not be discouraged to continue their philanthropic activities. However, companies should consider how their corporate social responsibility projects could also impact their business opportunities. Pioneer, for example, has established a Sustainable Agriculture and Development unit, while Monsanto has created a Sustainable Agriculture Partnerships unit. Such units act as a bridge between the organizations’ business divisions and their philanthropy efforts: “It balances long- and short-term investments, and uses private and public funding from agricultural donors and local governments to develop under-served smallholder markets and crops. Through partnerships and innovative business approaches, this department pilots projects relating to smallholders, which are then scaled up commercially by the company. This results in more effective use of development resources from public, private, academic, and civil society organizations.”4 Such a transition from CSR to CSV also requires, among other factors, a less risk-averse approach to investments in developing countries. Many major companies are willing to direct a large
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amount of investment toward research and development efforts, fully aware that only a small portion of those investments will bear fruit. A similar approach to investing in the capacity of smallholders—realizing that some efforts will be successful while others will not—would encourage progress. TNCs could also usefully adopt a longer-term perspective on investment returns. Although capital markets clearly create pressure for quick financial results, TNCs need to foster, for themselves and their shareholders, a more patient approach on investments in the food and agricultural sectors of developing countries. Privately held firms clearly have more flexibility in this regard, but other firms, such as Nestlé and Unilever, have taken steps to reduce the emphasis on short-term profits by not publishing quarterly results (see Box 5 for further information about Unilever’s Sustainable Living Plan). It remains to be seen whether shareholders can be persuaded to take a longer-term perspective. For now the fact remains that “nearly all private capital—tens of trillions of dollars worldwide—is tied up in investments seeking only to maximize financial returns,” and a great deal of work will be necessary if social or “industry-impact” investing is to take hold and spread, such as developing standards for measuring such impacts.5 It is necessary to acknowledge these realistic restraints when encouraging long-term market investment.
Box 5: Unilever’s Sustainable Living Plan Unilever’s Sustainable Living Plan seeks to halve the environmental impact of Unilever products, to help one billion people improve their health and well-being, and to source 100 percent of Unilever’s agricultural materials from sustainable sources. Paul Polman, the chief executive officer of Unilever, describes the plan as the company’s “blueprint for a new future.” “To deliver this, will require us to manage the business for the long term,” Polman said in a speech at the annual City Food Lecture in 2011. “That is why we have stopped giving guidance to the markets; stopped given quarterly profit updates; and stopped reacting to the short termism of so much of the financial community. We have made it clear to investors that if they are looking to make a quick return, then maybe Unilever is not the best place to put their money. If, however, they are investing for the future and are prepared to stay with us over the long term, then we will deliver for them good, predictable and sustainable returns. We have done the same thing with employees by weighing their compensation schemes towards medium and long term results.”h Indeed, since Polman became chief executive officer in 2009, Unilever has stopped providing earnings guidance and quarterly profit updates to investors. That move initially dropped the company’s share price, as worried investors pulled out their money, but Polman believes that the sustainable plan will lead to more investor support for the long-term strategy.

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TNCs need to demonstrate impact more transparently. Admittedly, it is difficult for companies to “prove” how their efforts have strengthened the food and agricultural sectors of developing countries, since doing so could involve disclosing confidential business information. Skeptics might also dismiss such information as “corporate propaganda.” Yet it behooves companies to make thorough measurements of their investments, as they concern both the smallholders and the company’s bottom line, and track them over time using solid baseline studies. Undoubtedly, companies are already doing so for internal purposes, but they are well advised to make such information publically available; press releases announcing new initiatives and unverified information about impacts are not enough. One model to emulate is Nestlé’s recently released Shared Value Report on Rural Development.6 Detailed and methodical reporting will facilitate more fruitful interactions with governments and other players, and will demonstrate to other companies that there are important “win-win” opportunities to pursue. “We’re already seeing tremendous benefit from bringing fierce competitors and strange bedfellows together. It is helping them identify and mitigate risks in their supply chain and source commodities more efficiently.” —Jason Clay, Senior Vice President, Markets, World Wildlife Fundi Lastly, TNCs cannot and should not be expected to become involved in creating more socially and environmentally sustainable supply chains out of purely altruistic motivations. There is no doubt that many initiatives also involve an important marketing element. Yet when TNCs undertake initiatives that focus too exclusively on market differentiation, they lose important opportunities for affecting change on a larger scale. Partnering with other companies, even competitors, on a pre-competitive basis, would allow for greater impact on the ground and greater opportunities for shared market development. Historically, there has been a fair amount of distrust between the corporate sector and NGOs, with many NGOs viewing TNC investments in developing countries with suspicion. Today, though, many NGOs are recognizing the advantages of private-sector-led agricultural development.

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Recommendations for Governments
Public-Private Collaboration While public-private collaboration on food security and agricultural development can take many forms, PPPs will continue to be of vital importance for increasing TNC investments. Companies whose value chains rely predominantly on smallholder-produced crops (such as cocoa and coffee) have a strong self interest in assuring their future supply; but even these alliances often require assistance from governments, foundations, and NGOs to help jumpstart more sustainable production and increase smallholder productivity. Companies involved with nonvalue added crops—staple commodities—will realistically only make serious investments into efficient markets that provide economies of scale. Market models that provide for productivity at the farm level, either through high-yielding smallholders or larger farms, are essential. Without them, investments will not yield sufficiently high returns in a reasonable amount of time. It is unrealistic to expect TNCs alone, beyond CSR-type projects, to create a more competitive agricultural sector in poor countries. Training and organizing smallholders is a laborious, expensive task that requires broad-reaching changes in infrastructure, financing, and agronomic practices. Development agencies, foundations, and specialized NGOs must work jointly with agricultural processors, acknowledging that TNCs themselves can’t take on the responsibilities single-handedly. Governments play a crucial role in creating environments that encourage private investment, and their participation goes beyond negotiating complex PPPs. Fundamental obstacles like corruption, weak legal systems, and poor governance can hinder TNC investment. Regional trade and regulatory barriers can also pose complications, and must be removed in order for private-sector investment to flourish. Although conditionality is a politically sensitive issue, donor governments and international institutions must emphasize the importance of key reforms in developing countries. Developing country governments must closely examine the role that private investment can play in their agricultural development strategies and work to facilitate such investment. Governments are advised to remember that large TNC investments are competitive— investors can go anywhere and are not required to invest in their particular country. Developing country ownership of PPPs is essen54 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

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tial. Governments that are eager for such investments should present a positive collaborative attitude at the front-end of negotiations of complex public-private partnerships. They should also consider financial concessions to the investor, including tax incentives, cofinancing of critically needed infrastructure and training and capacity building programs, and funds to help with environmental and social-impact assessments. The critical point to remember is that a PPP must be a true partnership in which all sides feel they have received fair value for the risk and resources they put forward. That is not to suggest that governments should unequivocally embrace all large-scale investment offers. As noted in Section I, recent large-scale land acquisitions have attracted justified international concern. As a result, the Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development (IFAD), UNCTAD, and the World Bank are working with governments to develop an international code of conduct for responsible agricultural investment.7 As noted in those draft principles, “[m]any assume that positive social effects will occur automatically as resources pour in and jobs are created. Technology transfers and improvements in infrastructure are also assumed to happen automatically, as investors bring in new skills and build up regions to make their investments more profitable. In fact, the achievement of such effects even at the project level usually depends in deliberate public-private collaboration and joint planning.”8 Developing country governments should therefore ensure that investments 1) fit into their own development priorities, 2) create sustainable agricultural development and economic growth and, where possible 3) strive to integrate smallholders into the supply chain in addition to creating off-farm employment in poor rural areas. Governments of donor countries must also become smarter about leveraging private-sector investment. This will require development agencies to make a significant shift from their traditional approaches. One example is The Ministry of Foreign Affairs of the Netherlands, an active government partner in PPPs, which sees its role as “increasingly that of a broker who brings parties together, rather than just a funding source.”9 Governments should also pay attention to improving the efficiency of PPP negotiations, which are often discouragingly slow. Efforts to scale up PPPs should be applauded, but partners must ensure a long-term, sustained commitment. Ambitious initiatives such as the agricultural growth corridors announced at Davos have the potential to redefine the direction of PPPs. To be impleGLOBAL AGRICULTURAL DEVELOPMENT INITIATIVE - 55

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mented successfully, they require ongoing high-level commitment by governments and CEOs “outside of the spotlight” provided by the Davos gathering. Finance “The challenge for the international community is how to get things started: how to deploy development assistance resources in ways that will overcome the barriers to entry, resulting in rapid growth of profitable commercial agriculture and a rapid reduction in poverty.” —Keith Palmer, “Financing Early Stage Agriculture in Africa,” World Finance, January-February 2011j Questions surrounding financing are usually the thorniest in public-private collaborations. Greater effort must go toward developing innovative approaches and understanding appropriate funding divisions for such investments: which types of costs should be met by the private sector, and which types require funding from governments, international organizations, or foundations? TNCs themselves do not require concessionary financing for their commercial investments, but those investments will not be forthcoming unless some pre-project financing is made available—namely for “public good” aspects, such as infrastructure and training for out-growers. Many innovative schemes are already under way. The agricultural corridors, for example, foresee the establishment of separate Infrastructure Service Companies (ISCs) that would design and finance the high-cost agricultural infrastructure from a combination of patient capital from governments and foundations, and from lease charges from medium-sized commercial farms and smallholder organizations (the latter at a discounted rate). Such schemes will have greater chances of success if there is consensus on how best to use concessionary funding from governments, international organizations, and foundations. At the global level, the MDBs like the World Bank Group and the AfDB must internally synchronize support between their publicand private-financing branches to work effectively with their government and private-sector clients. The heavy cost and burden of developing and implementing PPPs must be borne equally between public and private participants, if the PPP model is to be institutionalized as a standard rather than exceptional project model.
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Traditionally TNCs have been hesitant to make large-scale investments in poor developing countries, where they must calculate discounted “risk-adjusted” returns on investments and have struggled to secure financing from commercial lenders—in particular for “greenfield” investments. A variety of factors today could potentially alter this pattern. Recession and slow growth in developed markets has created significant excess capacity, meaning that investment options have become geared more toward consolidation than toward organic growth; for many large TNCs, antitrust concerns have also influenced this pattern. Given these realities, TNCs are particularly eager to find new investment opportunities in markets promising significant growth. Meanwhile, developing countries—many of which are experiencing higher growth rates than developed countries and face significant population pressures—are keen to promote agricultural development and to attract investment. Thirdly, several large foundations have identified progress in the agrifood systems of poor developing countries as a priority for their philanthropy; some large governmental donor organizations are making similar commitments. This confluence of factors could well lead to increased investments from TNCs that are willing to take chances on investments with long-term profit outlooks. US Government USAID provided significant thought leadership on PPPs with the creation of the GDA in 2001. USAID’s Feed the Future Initiative now provides further impetus to think creatively about private-sector collaboration to promote agricultural development and food security. The recently announced Feed the Future Private Investment Center is an important step—that now needs follow-up with concrete initiatives. Given the pressing need for food security-related investments, it is vital that USAID and private-sector companies engage productively to implement partnerships in a more timely and efficient manner, and to ensure significant value for both parties. As suggested in Section III, a business-government dialogue must try to bridge the language and culture gaps that can exist between these two sets of actors; and there may well be a role for a NGO to facilitate such interactions. Beyond looking at how to improve individual PPPs, a more structured and frequent government-business dialogue on the investment and development needs of Feed the Future countries could help both sides explore how their complementary actions
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could achieve more together than each side could on its own. What are the most useful types of collaboration between governments and TNCs (keeping in mind that these do not always involve cofinancing of particular programs)? More specifically on PPPs, key questions include: 1) What minimum requirements must be met before entering into a MOU negotiation to ensure that the MOU can clearly add value? ) Is there a faster way for USAID to disperse funds in order to operationalize MOUs more swiftly? The US government—through its own agencies and through its leverage in multilateral development banks—should explore innovative financing options to catalyze larger amounts of private investment. It would be useful to explore how other governments and institutions are providing access to patient capital, social venture capital, and risk loan guarantees—and whether the US government could realistically emulate or support such approaches in an international context.

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About the Author
Charlotte Hebebrand has served as Chief Executive of the International Food & Agricultural Trade Policy Council (IPC) since February 2006. The IPC is committed to promoting a more open and equitable global food system and is composed of a diverse mix of distinguished international agricultural trade experts from around the world. Charlotte has written several papers and articles on international agricultural matters and edited many more. Charlotte came to IPC from the European Commission’s Washington Delegation, where she served as Special Advisor, respectively, on international development, trade, agriculture and food safety issues. Prior to her time with the EC, Charlotte worked at the Brookings Institution’s Foreign Policy Division. Charlotte has a B.A. from Georgetown University and a M.A. in International Relations and Economics from Johns Hopkins University’s School of Advanced International Relations.

About the International Food & Agricultural Trade Policy Council
The International Food & Agricultural Trade Policy Council promotes the role of trade in creating a more open, equitable, productive and sustainable global food & agricultural system. IPC makes pragmatic trade policy recommendations to help solve the major challenges facing the global food & agricultural system in the 21st century—the need to promote global food security, to sustainably increase productivity, and to contribute to economic growth and development. IPC convenes influential policymakers, agribusiness executives, farm and civil society leaders, and academics from around the world in order to clarify complex issues, foster broad stakeholder participation in policy deliberations, and build consensus around pragmatic policy recommendations.

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Acronyms
AATF AfDB AFSTA AGRA ARS BAGC CAADP CIMMYT CSR CSV DCA FAO FDI GADI GDA GNI IFAD IFC ISC MCC African Agricultural Technology Foundation African Development Bank African Seed Trade Association Alliance for a Green Revolution in Africa Agricultural Research Service Beira Agricultural Growth Corridor Comprehensive Africa Agriculture Development Programme International Maize and Wheat Improvement Center Corporate Social Responsibility Creating Shared Value Development Credit Authority Food and Agriculture Organization of the United Nations Foreign Direct Investment Global Agricultural Development Initiative Global Development Alliance Gross National Income International Fund for Agricultural Development International Finance Corporation Infrastructure Service Companies Millennium Challenge Corporation

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Acronyms

MDB MOU OPIC PPP RSPO SAGCOT SMEs STE TNC UNCTAD USAID USDA USTDA WASA WWF

Multilateral Development Banks Memorandum of Understanding Overseas Private Investment Corporation Public-Private Partnership Roundtable on Sustainable Palm Oil Southern Agricultural Growth Corridor of Tanzania Small and Medium Enterprises State Trading Entity Transnational Corporation United Nations Conference on Trade and Development United States Agency for International Development United States Department of Agriculture United States Trade and Development Agency West African Seed Alliance World Wildlife Fund

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Endnotes
Executive Summary
1. United Nations High-Level Task Force on the Global Security Crisis, Comprehensive Framework for Action (July 2008). www.un.org/issues/ food/taskforce/Documentation/CFA%20Web.pdf 2. Food and Agriculture Organization, International Food Policy Research Institute, International Fund for Agricultural Development, Organisation for Economic Co-operation and Development, United Nations World Food Programme, the World Bank, the World Trade Organization, United Nations Conference on Trade and Development, and the United Nations HighLevel Task Force, Price Volatility in Food and Agricultural Markets (Draft policy report for June 2011 G20 Discussion, March 3). boell.org/downloads/ G20PriceVolatilityMarch3version-1.pdf 3. International Fund for Agricultural Development, IFAD Rural Poverty Report 2011 (Rome: 2011). http://www.ifad.org/rpr2011/index.htm 4. The G20 is also exploring a number of ideas. 5. Keith Palmer makes a compelling case on the need for donors to provide “patient capital.” See Keith Palmer, “Financing Early Stage Agriculture in Africa,” World Finance, (January/February 2011), 89. 6. For more on how “pull mechanisms” could work to promote agricultural innovation, see Kimberly Ann Elliott, Pulling Agricultural Innovation and the Market Together—Working Paper 215 (Center for Global Development, June 2010). www.cgdev.org/content/publications/detail/1424233 7. Michael E. Porter and Mark R. Kramer, “Creating Shared Value: How to reinvent capitalism—and unleash a wave of innovation and growth,” Harvard Business Review 89 (January-February 2011). 8. Food and Agriculture Organization of the United Nations, International Fund for Agricultural Development, United Nations Conference on Trade and Development, and the World Bank, Principles for Responsible Agricultural Investment That Respects Rights, Livelihoods and Resources. (Discussion Note, January 25, 2010). siteresources.worldbank.org/INT ARD/214574-1111138388661/22453321/Principles_Extended.pdf 9. Ibid, 16.

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Endnotes

10. Ray A. Goldberg, Kerry Herman, and Djordjija Petkoski, Fighting Malnutrition and Hunger in the Developing World, Note 909-406 (Harvard Business School), 4.

Introduction
1. The United Nations Conference on Trade and Development, World Investment Report 2009: Transnational Corporations, Agricultural Production and Development. (New York and Geneva: United Nations, 2009). www.unctad.org/en/ 2. United Nations Task Force, Comprehensive Framework. 3. FAO, et al, Principles for Responsible Agricultural Investment. 4. Baba Dioum, Proposal for Framework Design and Private Sector Coordination, (Report for the Conference of Ministers of Agriculture of West and Central Africa, Dakar, Senegal: May 23, 2007). www.caadp.net/pdf/ CAADP-Pillar-2-Framework-Design-and-Private-Sector-Coordination,CMA-AOC,-May-2007.pdf 5. G8, “L’Aquila” Joint Statement on Global Food Security (Joint statement from the G8 Summit, L’Aquila, Italy: July 10, 2009). www. g8italia2009.it/static/G8_Allegato/LAquila_Joint_Statement_on_Global_ Food_Security%5B1%5D,0.pdf 6. United States Agency for International Development, “USAID Administrator Dr. Rajiv Shah Announces 20 Feed the Future Initiative Focus Countries” (Press release, April 24, 2010). www.usaid.gov/press/ releases/2010/pr100424.html 7. European Commission, Green Paper: EU development policy in support of inclusive growth and sustainable development—Increasing the impact of EU development policy (Brussels, Belgium: November 10, 2010). 8. Hannah Edinger and Ron Sandrey, The Relevance of Chinese Agricultural Technologies for African Smallholder Farmers: Agricultural Technology Research in China, (Stellenbosch, South Africa: University of Stellenbosch Centre for Chinese Studies, April 2009), 38.

Section I
1. International Finance Corporation and World Bank, Doing Business 2011: Making a Difference for Entrepreneurs (Washington, DC: 2010). www.doingbusiness.org/~/media/fpdkm/doing%20business/documents/annualreports/english/db11-fullreport.pdf
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2. Transnational corporations (TNCs) are incorporated or unincorporated enterprises comprising parent enterprises and their foreign affiliates. A parent enterprise is defined as an enterprise that controls assets of other entities in countries other than its home country, usually by owning a certain equity capital stake. An equity capital stake of 10% or more of the ordinary shares or voting power for an incorporated enterprise, or its equivalent for an unincorporated enterprise, is normally considered as the threshold for the control of assets.A foreign affiliate is an incorporated or unincorporated enterprise in which an investor, who is a resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise (an equity stake of 10% for an incorporated enterprise, or its equivalent for an unincorporated enterprise). UNCTAD World Investment Report 2009. 3. UNCTAD, World Investment Report 2009, 15. 4. Jason Clay, Senior Vice President of Markets, World Wildlife Fund, personal correspondence with author. 5. For a cogent discussion of concerns related to concentration, see Gabor Konig, The Impact of Investment and Concentration Among Food Suppliers and Retailers in Various Countries (Paper for the Organisation for Economic Cooperation and Development’s Global Forum on International Investment VIII, Paris, France: December 2009). www.oecd.org/dataoecd/30/40/44231819.pdf 6. United Nations Conference on Trade and Development, “Global and Regional FDI Trends in 2010.” Global Investment Trends Monitor 5 (January 17, 2011). 7. Ibid. 8. UNCTAD, World Investment Report 2009, 15. 9. Ibid, 118. 10. Klaus Deininger and Derek Byerlee, Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits? (Washington, DC: The World Bank, September 7, 2010). siteresources.worldbank.org/INTARD/ Resources/ESW_Sept7_final_final.pdf 11. Paul Collier and Stefan Dercon, African Agriculture in 50 Years: Smallholders in a Rapidly Changing World? (Conference paper for the Food and Agriculture Organization’s Expert Meeting on How to Feed the World in 2050, Rome, Italy: June 24-26, 2009). ftp://ftp.fao.org/docrep/fao/012/ ak542e/ak542e18.pdf

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Endnotes

12. McKinsey Global Institute, Lions on the move: The progress and potential of African economies (italicized) (June 2010). 13. Palmer, “Financing Early Stage Agriculture,” 89. 14. Forest Reinhardt, Nestlé: Sustainable Agriculture Initiative, Note 705-018 (Harvard Business School, 2004), 5. 15. Ibid, 5. 16. Ibid, 6. 17. C.K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Philadelphia: Wharton School Publishing, 2004). 18. Porter and Kramer, “Creating Shared Value,” 8.

Section II
1. Collier and Dercon, African Agriculture 2. Nestlé, Creating Shared Value and Rural Development Summary Report 2010 (Vevey, Switzerland: March 2011). www.nestle.com/csv 3. Most smallholders will not be able to afford to buy or lease more land in the short run, but can access more land and larger bargaining powers through cooperatives. 4. We recommend here the services of Technoserve, a US-based but international consultancy that has worked effectively with a number of large corporations in this field: technoserve.org/work-impact/sectors/agriculture-agribusiness.html 5. UNCTAD, World Investment Report 2009. 6. Ibid, 124. 7. Mastandrea, Ashley, The Africa Biofortified Sorghum Project Consortium: Food Safety and Fighting Malnutrition in Africa (Alliance for Case Studies for Global Health, April 25, 2010). www.casestudiesforglobalhealth.org/case_ study_PDFs/GHCS_17_Sorghum.pdf 8. Jeff Morgan, Director of Global Programs for Mars Inc., personal correspondence with author.

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9. PepsiCo executive, conversation with the author (April 2011). 10. Mars Inc. “MARS, USDA-ARS, And IBM Unveil Preliminary Cacao Genome Sequence Three Years Ahead Of Schedule” (Press release, September 15, 2010). www.mars.com/global/news-and-media/ press-releases/news-releases.aspx?SiteId=94&Id=2460) 11. Elliott, Pulling Agricultural Innovation 12. United States Agency for International Development, “Alliances in Action: West Africa Seed Alliance” (Fact sheet, December 2009). www.usaid. gov/our_work/global_partnerships/gda/resources/West_Africa_Seed_ Alliance.pdf 13. International Finance Corporation, “IFC Award to India’s Jain Irrigation Highlights Development Benefits of Sustainable Water Use” (Press release, October 8, 2010). www.ifc.org/ifcext/media.nsf/content/SelectedPressRelea se?OpenDocument&UNID=6C0301579FAC0900852577B60045E28C) 14. Jay Shankar, “Janus-Backed Jain Irrigation Plans to Build a Plant in Africa, Mundra Says,” Bloomberg (December 13, 2010). www.bloomberg. com/news/2010-12-14/janus-backed-jain-irrigation-plans-to-build-plantin-africa-mundra-says.html 15. Ibid. 16. Syngenta staff, correspondence with author (April 2011). 17. John Deere staff, correspondence with author (March 2011). 18. Standard Bank, “We help transform small scale farmers,” (Press release, March 8, 2009). www.standardbank.co.ls/SBIC/ Frontdoor_02_01/0,2454,10293765_31638885_0,00.html 19. Rabobank Group executives, conversation with author (February 2011) 20. Nokia executive, conversation with author. Nokia press release, Syngenta Foundation doc on input providers/smallholders; author conversation with Nokia executive 21. Safaricom, Syngenta Foundation for Sustainable Agriculture, and UAP Insurance, “As Drought Sows Fear in Kenyan Fields, Major Expansion of Innovative Micro-Insurance Program Gives Farmers New Way to Manage Risks: Agricultural Index Insurance Initiative” (Press release, February 25, 2011). 22. UNCTAD, World Investment Report 2009, 125. 66 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

Endnotes

23. Alliance for a Green Revolution in Africa official, conversation with author (March 2011). 24. David E. Bell and Mary Louise Shelman, OLAM International, Case 509002 (Harvard Business School, 2008). 25. Land O’Lakes Inc., Land O’Lakes 2010 Annual Report. www.landolakesinc.com/investors/annualreport/default.aspx 26. Unilever, “Smallholder Farmers: Helping Smallholder Farmers,” Unilever Sustainable Living Plan. www.sustainable-living.unilever.com/the-plan/ better-livelihoods/smallholder-farmers 27. Ibid. 28. Ibid. 29. Charlie Pye-Smith, “Seeds of Hope: A public-private partnership to domesticate a native tree, Allanblackia, is transforming lives in rural Africa,” Trees for Change, no. 2 (World Agroforestry Centre, 2009). 30. Ibid. 31. Nestlé, Creating Shared Value, 8. 32. Goldberg, Herman, and Petkoski, Fighting Malnutrition, 4. 33. Mars Inc., correspondence with author (February 2011). 34. Morgan interview. 35. Andrea Felstead, “Supermarkets: Schemes to help developing world smallholders,” Financial Times (October 14, 2010). www.ft.com/cms/ s/0/86a5cb8c-d65a-11df-81f0-00144feabdc0.html#axzz1KUuLwY3Y 36. Wal-mart Centroamerica, Social Responsibility and Sustainability Report 2007. www.walmart-centroamerica.com/downloads/CSR_Report_2007.pdf 37. Carrefour, Sustainable Development at Carrefour: Expert Report 2009. www.carrefour.com/cdc/responsible-commerce/sustainable-development-news/2009-sustainability-report.html 38. Bunge, “Bunge Citizenship: India.” www.bunge.com/citizenship/india.html 39. Bunge executive, correspondence with author (March 2011).

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40. Cargill, “Responsible supply chains at Cargill.” www.cargill.com/corporate-responsibility/responsible-supply-chains/index.jsp 41. Cargill, “Helping Farmers Succeed,” Cargill 2010 Corporate Responsibility Report. www.cargill.com/cs/cr-report/ruraldev/supportingfarmers.html 42. Cargill, “Increasing Cocoa Farmer Incomes,” Cargill 2010 Corporate Responsibility Report. www.cargill.com/cs/cr-report/supplychains/cocoa. html 43. Cargill, “Helping Farmers.” 44. IFAD, Rural Poverty Report. 45. The seventeen global companies that champion the initiative are Archer Daniels Midland, BASF, Bunge, Cargill, Coca-Cola, DuPont, General Mills, Kraft Foods, Metro, Monsanto, Nestlé, PepsiCo, SABMiller, Syngenta, Unilever, Wal-mart, and Yara International. 46. United States Agency for International Development, “USAID Administrator Highlights Private Sector Partnerships to Reduce Hunger and Poverty at the World Economic Forum” (Press release, January 28, 2011). http://www.usaid.gov/press/releases/2011/pr110128.html 47. The Aspen Institute, “TransFarm Africa Initiative.” www.aspeninstitute. org/transfarmafrica 48. Beira Agricultural Growth Corridor, Delivering the Potential (Report for the World Economic Forum, Davos, Switzerland: January 27, 2010), 32. http://beirra.com/documents/iblow.pdf. 49. Ibid. 50. Ibid, 33. 51. Ibid, 34.

Section III
1. United States Agency of International Development, The Global Development Alliance: Public-Private Alliances for Transformational Development (Washington DC: January 2006), 11. www.usaid.gov/our_ work/global.../GDA_Report_Jan2006_Full.pdf 2. Ibid, Foreword.

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Endnotes

3. Ibid, 21. 4. Ibid, 27. 5. Ibid, 48. 6. Ibid, 147. 7. Ibid, 31. 8. United States Agency for International Development. “Office of Development Partners/Private Sector Alliances” (Fact sheet). www.usaid. gov/our_work/global_partnerships/gda/resources/PSA_Fact_Sheet.pdf 9. United States Agency for International Development representatives, conversation with author (March 2011) 10. Resources can be allocated more swiftly if the Memorandum of Understanding can be implemented through an existing program that can be modified accordingly, as opposed to a new program that must be developed from scratch. 11. United States Agency for International Development, Conducting a Multi-sector Alliance Assessment: A Framework for Developing Alliance Strategies and Programming (Washington, DC: May 11, 2010), 3. www.usaid. gov/our_work/global.../USAIDMultisectorAlliances.pdf 12. For a cogent discussion of why measuring the impact of Public-Private Partnerships is difficult but also crucially important, see United States Agency for International Development, (Re)Valuing Public-Private Alliances: An Outcome-Based Solution (Washington, DC: 2010). www.enterprisedevelopment.org/page/key-events-publications 13. Rajiv Shah, United States Agency for International Development. “Remarks to the World Food Prize Conference,” (Speech, Des Moines, IA: October 15, 2010). www.worldfoodprize.org/documents/filelibrary/2010rel atedpressreleases/WFP_DB9DFC578AFA0.pdf 14. Center for Global Development, A Doing Business Facility: A Proposal for Enhancing Business Climate Reform Assistance (Washington, DC, March 2010). www.cgdev.org/content/publications/detail/1423783 15. Daniel W. Yohannes, American Enterprise Institute, “Investing in Development: On the Road to Better Aid, MCC is Paving the Way,” (Speech for Millennium Challenge Corporation, Washington, DC: January 13, 2011). www. mcc.gov/pages/press/speech/speech-011311-investingindevelopment
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16. Smaller so-called “threshold grants” are granted to countries that come close to meeting the criteria and have shown commitment to policy reform. 17. Millennium Challenge Corporation, “About MCC” (April 2011). www.mcc.gov/pages/about 18. Feed the Future, “Our Investments in Food Security: Where FFF is Investing.” www.feedthefuture.gov/investment.html 19. Ibid. 20. Yohannes, “Investing” 21. United States Trade and Development Agency, “About USTDA.” www.ustda.gov/Wabout/index.asp 22. United States Agency for International Development, Credit Guarantees: Promoting Private Investment in Development—Year in Review 2010. (Washington, DC). http://www.usaid.gov/our_work/economic_growth_ and_trade/development_credit/YIR_2010.pdf 23. Rajiv Shah, United States Agency for International Development. “Remarks at Sida Signing Ceremony.” (Speech, Washington DC: March 26, 2010). www.usaid.gov/press/speeches/2010/sp100326.html

Section IV
1. UNCTAD, World Investment Report 2009. 2. Masataka Fujita, chief, United Nations Conference on Trade and Development Investment Trends and Data Section, conversation with author (February 2011) 3. Porter and Kramer, “Creating Shared Value,” 16. 4. Claudia Genier, Ramya Krishnaswamy, and Marc Pfitzer, Market Development Investments by Agricultural Input Companies and their Foundations: Transforming Smallholder Agriculture (Draft for The Syngenta Foundation for Sustainable Agriculture, May 2009), 26. www.smallholdercoalition.org/files/Market-Development-Investments-by-Agricultural-InputCompanies.pdf 5. One example to note is that USAID, along with the Rockefeller Foundation and JP Morgan Chase supports a not-for-profit organization, Global Impact Investment Network, that seeks to address systemic barriers to effective impact investing. See United States Agency for International Development, 70 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

Endnotes

Alliances in Action: Impact Reporting and Investing Standards (Iris) Alliance (November 2009). www.usaid.gov/our_work/global_partnerships/gda/ resources/IRIS.pdf 6. Nestlé, Creating Shared Value, 8. 7. FAO, et al, Principles for Responsible Agricultural Investment. 8. Ibid, 16. 9. Ministry of Foreign Affairs of the Netherlands, “Public Private Partnerships—Ten ways to achieve the MDGs, Development Cooperation, Ministry of Foreign Affairs of the Netherlands,” (July 2010)

Figures and Boxes
a. FIGURE 1. Migration and Remittances Factbook is compiled by Dilip Ratha and Zhimei Xu, Migration and Remittances Team, Development Prospects Group, World Bank. http://siteresources.worldbank.org/ INTPROSPECTS/Resources/334934-1199807908806/World.pdf.; “Official Development Assistance,” OECD: http://stats.oecd.org/wbos/Index.aspx? DatasetCode=ODA_DONOR. b. FIGURE 2. Jason Clay, Senior Vice President, Markets, World Wildlife Fund, personal correspondence with author. presentation image c. FIGURE 3. United Nations Conference on Trade and Development, UNCTADSTAT (March 2011). http://unctadstat.unctad.org/ReportFolders/ reportFolders.aspx d. BOX 1: Bunge executives, correspondence with author (March 2011). e. BOX 3: USAID, Global Development Alliance, 38. f. BOX 4: Beira Agricultural Growth Corridor, Delivering the Potential. g. BOX 4: Southern Agricultural Growth Corridor of Tanzania, Investment Blueprint (Report for the World Economic Forum, Davos, Switzerland: January 28, 2011), 3. www.africacorridors.com/sagcot/resources.php h. BOX 5: Paul Polman, Unilever, “Food Security in a Changing Climate” (City Food Lecture, London: January 18, 2011). CityFoodLecture2011F_ tcm13-2555957.pdf.

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i. Jason Clay, “Businesses are increasingly seeing sustainability as a pre-competitive issue,” The Guardian UK (March 9, 2011). www.guardian.co.uk/sustainable-business/blog/precompetitioncollaboration-do-more-with-less j. Palmer, “Financing Early Stage Agriculture.”

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Mastandrea, Ashley. 2010. “The Africa Biofortified Sorghum Project Consortium: Food Safety and Fighting Malnutrition in Africa.” Alliance for Case Studies for Global Health, April 25. www.casestudiesforglobalhealth. org/case_study_PDFs/GHCS_17_Sorghum.pdf McKinsey Global Institute. 2010. “Lions on the move: The progress and potential of African economies.” McKinsey & Company, June. Millennium Challenge Corporation. www.mcc.gov/pages/about 2011. “About the MCC.”

Ministry of Foreign Affairs of the Netherlands. 2010. “Public Private Partnerships—Ten ways to achieve the MDGs, Development Cooperation, Ministry of Foreign Affairs of the Netherlands.” July. Morgan, Jeff. Director of Global Programs for Mars Inc. Interview with Author. Nestlé. 2011. “Creating Shared Value and Rural Development Summary Report 2010.” Vevey, Switzerland, March. www.nestle.com/csv Palmer, Keith. 2011. “Financing Early Stage Agriculture in Africa,” World Finance, January/February. PepsiCo. 2011. Conversation with the author. April. Polman, Paul. Unilever. 2011. “Food Security in a Changing Climate.” City Food Lecture, London, January 18. CityFoodLecture2011F_tcm132555957.pdf Porter, Michael E. and Mark R. Kramer. 2011. “Creating Shared Value: How to reinvent capitalism—and unleash a wave of innovation and growth.” Harvard Business Review 89. January-February. Prahalad, C.K. 2004. “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits.” Philadelphia: Wharton School Publishing. Pye-Smith, Charlie. 2009. “Seeds of Hope: A public-private partnership to domesticate a native tree, Allanblackia, is transforming lives in rural Africa.” World Agroforestry Centre. Trees for Change, no. 2. Reinhardt, Forest. 2004. “Nestlé: Sustainable Agriculture Initiative.” Note 705-018. Harvard Business School. Safaricom, Syngenta Foundation for Sustainable Agriculture, and UAP Insurance. 2011. “As Drought Sows Fear in Kenyan Fields, Major Expansion of Innovative Micro-Insurance Program Gives Farmers New Way to Manage Risks: Agricultural Index Insurance Initiative.” Press release, February 25. 76 - THE CHICAGO COUNCIL ON GLOBAL AFFAIRS

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Shah, Rajiv. 2010. United States Agency for International Development. “Remarks to the World Food Prize Conference.” Speech, Des Moines, IA, October 15. www.worldfoodprize.org/documents/filelibrary/2010relatedpr essreleases/WFP_DB9DFC578AFA0.pdf Shah, Rajiv. 2010. United States Agency for International Development. “Remarks at Sida Signing Ceremony.” Speech, Washington, DC, March 26. www.usaid.gov/press/speeches/2010/sp100326.html Shankar, Jay. 2010. “Janus-Backed Jain Irrigation Plans to Build a Plant in Africa, Mundra Says.” Bloomberg, December 13. www.bloomberg.com/ news/2010-12-14/janus-backed-jain-irrigation-plans-to-build-plant-inafrica-mundra-says.html Southern Agricultural Growth Corridor of Tanzania. 2011. “Investment Blueprint.” Report for the World Economic Forum, Davos, Switzerland, January 28. www.africacorridors.com/sagcot/resources.php Standard Bank. 2009. “We help transform small scale farmers.” Press release, March 8. www.standardbank.co.ls/SBIC/ Frontdoor_02_01/0,2454,10293765_31638885_0,00.html Unilever. “Smallholder Farmers: Helping Smallholder Farmers.” Unilever Sustainable Living Plan. www.sustainable-living.unilever.com/the-plan/ better-livelihoods/smallholder-farmers United Nations Conference on Trade and Development. 2011. “Global and Regional FDI Trends in 2010.” Global Investment Trends Monitor 5, January 17. United Nations Conference on Trade and Development. 2009. “World Investment Report 2009: Transnational Corporations, Agricultural Production and Development.” New York and Geneva: United Nations. www.unctad.org/en/docs/wir2009_en.pdf United Nations High-Level Task Force on the Global Security Crisis. 2008. “Comprehensive Framework for Action.” July. www.un.org/issues/food/ taskforce/Documentation/CFA%20Web.pdf United States Agency for International Development. 2009. “Alliances in Action: West Africa Seed Alliance.” Fact sheet, December. www.usaid.gov/our_ work/global_partnerships/gda/resources/West_Africa_Seed_Alliance.pdf United States Agency for International Development. 2010. “USAID Administrator Dr. Rajiv Shah Announces 20 Feed the Future Initiative Focus Countries.” Press release, April 24. www.usaid.gov/press/releases/2010/ pr100424.html

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United States Agency for International Development. 2011. “USAID Administrator Highlights Private Sector Partnerships to Reduce Hunger and Poverty at the World Economic Forum.” Press release, January 28. http:// www.usaid.gov/press/releases/2011/pr110128.html United States Agency of International Development. 2006. “The Global Development Alliance: Public-Private Alliances for Transformational Development.” Washington, DC, January. www.usaid.gov/our_work/ global.../GDA_Report_Jan2006_Full.pdf United States Agency for International Development. “Office of Development Partners/Private Sector Alliances.” Fact sheet. www.usaid.gov/our_work/ global_partnerships/gda/resources/PSA_Fact_Sheet.pdf United States Agency for International Development. 2010. “Conducting a Multi-sector Alliance Assessment: A Framework for Developing Alliance Strategies and Programming.” Washington, DC, May 11. www.usaid.gov/ our_work/global.../USAIDMultisectorAlliances.pdf United States Agency for International Development. 2010. “(Re)Valuing Public-Private Alliances: An Outcome-Based Solution.” Washington, DC. www.enterprise-development.org/page/key-events-publications United States Agency for International Development. 2010. “Credit Guarantees: Promoting Private Investment in Development—Year in Review 2010.” Washington, DC. http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/YIR_2010.pdf United States Agency for International Development. 2009. “Alliances in Action: Impact Reporting and Investing Standards (Iris) Alliance.” November. www.usaid.gov/our_work/global_partnerships/gda/resources/IRIS.pdf United States Trade and Development Agency, “About USTDA.” www.ustda. gov/Wabout/index.asp Wal-mart Centroamerica. 2007. “Social Responsibility and Sustainability Report 2007.” www.walmart-centroamerica.com/downloads/CSR_ Report_2007.pdf Yohannes, Daniel W. 2011. American Enterprise Institute, “Investing in Development: On the Road to Better Aid, MCC is Paving the Way.” Speech for Millennium Challenge Corporation, Washington, DC: January 13. www. mcc.gov/pages/press/speech/speech-011311-investingindevelopment

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