Market-Oriented Agricultural Infrastructure: Appraisal of Public-Private Partnerships

Food and Agriculture Organization (FAO and Overseas Development Institute (ODI). Prepared by Michael Warner, David Kahan and Szilvia Lehel. January 2008

Executive Summary

A major, if not the major, component of competitiveness in agricultural value chains is access to affordable physical infrastructure. This includes infrastructure that supports on-farm production (irrigation, energy, transportation, pre and post harvest storage), ensures efficient trading and exchange (telecommunications, covered markets), adds value to the domestic economy (agro-processing and packaging facilities), and which enables produce to move rapidly and efficiently from farm-gate to processing facilities and on to wholesalers (transportation and bulk storage). In a recent study on agricultural investment in Africa by the UK Department for International Development, poor access to infrastructure services was cited as ‘the greatest impediment to growth of agribusinesses'.

Low population densities, remote locations and weather-dependent production systems makes participation by the private sector in agricultural infrastructure highly risky. An analysis of the World Bank's comprehensive database on Private Participation in Infrastructure in developing countries attributes just 1% of total infrastructure investment value directly to the development of agriculture between 2003 and 2005. The persistent challenge seems to be to know when and where public-private partnerships are a value-adding proposition for infrastructure in market-orientated agricultural development, and how best to formulate the financial and institutional arrangements for such collaboration.

The lesson to date is that collaborative approaches will not work in all cases, and that "a public-private partnership (PPP) can never turn a poor investment into a good one." However, with a renewed commitment of Governments and donors to investment in rural infrastructure, and an emerging bull market for global trade in cereals, horticulture, meat and milk products, as well as experimentation with new forms of infrastructure financing and contracting, there are real opportunities to broaden the role of the private sector in infrastructure for agricultural development through PPP models.

Available for download at http://www.odi.org.uk/iedg/Business_Development_Performance/Papers/ODI_Agriculture_FAO-PPPsRuralInfrastructure.pdf