Asian Development Bank PPCR proposal: Rainwater Harvesting ... · gained from the model farm...

Asian Development Bank PPCR proposal:

Rainwater Harvesting and Drip Irrigation for High-Value Crop Production in Cambodia

1. Country/Region: Kingdom of Cambodia 2. CIF Project ID#: PPCRKH604A

3. Source of Funding: FIP PPCR SREP

4. Project Title: Rainwater Harvesting and Drip Irrigation for High-Value Crop Production in Cambodia

5. Type of CIF Investment: Public Private Mixed 6. Funding Request in

million USD equivalent: Grant: N/A Non-Grant:$5 million concessional loan

7. Project/Program Origin Investment Plan Set-Aside DGM (FIP only)

8. Implementing MDB(s): Asian Development Bank 9. National Implementing

Agency: Akay Flavours and Aromatics Cambodia Pvt Ltd (“Akay Flavours Cambodia”) and a local micro-finance institution

10. MDB Focal Point and Project Task Team Leader (TTL):

Janette Hall Principle Investment Specialist Private Sector Operations Dept [email protected]

Cinzia Losenno Senior Climate Change Specialist Sustainable Development and Climate Change Department [email protected]

TTL: Shuji Hashizume Investment Specialist Private Sector Operations Dept [email protected]

11. Project Description (including objectives and expected outcomes): The project’s objective is to introduce rainwater harvesting and drip irrigation technologies coupled with high-value crop production to improve the climate resilience of Cambodia’s agricultural sector, reduce drought-induced crop failures and to improve productivity and income for small scale farmers. Using drip irrigation fed from harvested rainwater, farmers will be able to irrigate year round and improve yields of high-value crops such as spices without having to extract water from rivers, lakes, or groundwater reserves. Through the project, PPCR funds of $1 million would be lent to the project developers to pay for the capital cost of installing these technologies on its 717 hectare demonstration and teaching model farm in Battambang Province. To enable farmers to purchase these technologies, a line of credit to farmers using ($4 million PPCR funds) would be provided to approximately 1,000 farmers through a local bank. Through engaging with a local financial institution, the project aims to establish a stronger track record of performance of micro-finance based agri-business projects, to de-risk this market segment, and to reduce risk premiums to make agri-business micro-finance more affordable to small-scale farmers in the long term. It aims to encourage private sector involvement in climate resilient agriculture projects, promote high-value crop production, alleviate poverty and improve livelihoods in rural areas. The expected outcome of the PPCR project is the introduction of a financially sustainable private sector agri-business model that promotes export-oriented, high revenue-generating agricultural activity built on the principles of climate resilience, environmental sustainability and pursuing mutual benefits between local communities and agribusiness developers. The project is part of a larger package of assistance being provided by ADB targeting the entire spice value chain and supporting the “outgrower” business model. Further information can be found in the “Project overview” section on page 5, and in the ADB project documentation1.

1 http://www.adb.org/projects/48901-014/main

2 Confidential – do not distribute

12. Consistency with Investment Criteria: The project focuses on advancement of key objectives of the Cambodian SPCR by contributing to mainstreaming climate resilience through scaled up financing of adaptation and risk reduction in two of the most vulnerable sectors of development – agriculture and water resources. In this context, the project will provide financing for: (i) improving rainwater harvesting systems and enhancing resilience of community water supply, and (ii) enhancing the resilience of small scale agriculture through the introduction of, inter alia, small scale irrigation. The project directly addresses three of the key vulnerabilities: (i) food and water insecurity, (ii) exposure of communities, especially women and children, to disaster risks, and (iii) involuntary migration exacerbated by climate change. The project is additional as rainwater harvesting and drip irrigation technologies are currently prohibitively expensive for small scale farmers in Cambodia due mainly to the unavailability or high cost of micro- finance (usually around 20% p.a.). However, these technologies have a short payback period and are proven to improve yields and significantly increase farm incomes if used to grow high-value crops such as spices. Thus a small amount of concessional finance is expected to have a high demonstration effect, improve adoption rates of these technologies and contribute to a transformation away from traditional furrow irrigation to higher efficiency methods. It is expected that the project will improve food and water security, shield communities from crop failure-related disaster risks, and reduce involuntary migration by providing viable local small-scale commercial farming opportunities. There is also strong potential for expansion of the outgrower business model for the private sector as it provides high returns to investors, generates a wide range of benefits for local communities and the environment, is resilient to potential future impacts of climate change and does not require significant upfront investment for purchasing land. Thus the potential for replication and scale up of the program is high, and ADB plans to foster scale up through several agriculture and natural resource management technical assistance programs ongoing in Cambodia. Whilst the enabling environment in Cambodia is relatively conducive to innovative agri-business initiatives, the project also aims to strengthen capacities at the national level to integrate climate resilience into development planning by contributing to the formulation of a Cambodian government policy promoting private sector investments in climate resilient technologies by 2020. Further information can be found in the results framework and “Consistency with PPCR objectives” section on page 9. 13. Stakeholder engagement: ADB has been engaging with a range of stakeholders through the project scoping and planning process including the project developers, local government, local authorities, local banks and microfinance institutions, technology providers, and potential recipients of financing (small scale farmers). A gender and poverty alleviation impact assessment commissioned by ADB for this project mapped out interest groups from community surveys and gained support from local community leaders. The project will continue these efforts to maximize engagement with stakeholders, both to facilitate implementation of the project and to contribute to knowledge sharing and lessons learned. Further information can be found in the “Sustainability” section on page 11.

Confidential – do not distribute 3

14. Gender considerations: The Akay group has adopted an inclusive approach to gender in their development activities and currently roughly 70% of the workforce on the 717 hectare demonstration model farm in Battambang Province are women. The gender action plan for the project includes a range of measures to increase the role of women including: (i) efforts to ensure equal access to women for financing to purchase drip irrigation and equipment needed for rainwater harvesting as well as equal access to training and offtake agreements for farm produce, (ii) efforts to increase the number of new jobs being awarded to women on the model farm, (iii) efforts to improve operations and facilities for women including establishing a child care facility for mothers at the model farm and the provision of housing facilities for women, and (iv) increased flexibility in working hours, and the provision of health and family planning services for farm workers and contract farmers. Due to the traditionally strong role of women in the agricultural workforce in Cambodia, this project has good potential to directly impact the lives of women. Roughly 63% of women surveyed through an ADB gender impact assessment of the project were primary income earners for their households, meaning potential gender impacts would have a direct impact on the condition of their households. For example, for every one woman, approximately another 5 people (average household size in survey) in her home would feel effects of employment, income and social infrastructure changes. Further information can be found in the “Gender benefits” section on page 11, and a copy of the Gender Action Plan is included in Appendix 5. 15. Indicators and Targets (consistent with results framework):2

Core Indicator Target Quality of and extent to which climate responsive instruments/ investment models are developed and tested.

- Cambodia Post Bank provides 1-2 additional financial products/instruments that supports climate resilience to its customers outside of the PPCR facility, or another financial institution replicates the PPCR facility on a commercial basis by 2020

Extent to which vulnerable households, communities businesses and public sector services use improved PPCR supported tools, instruments, strategies, activities to respond to CV&CC;

- Capacity of new ponds built on out-growers’ farm – 1,000m3/ farm - Area of drip irrigation installed on out-growers’ farms - 2,000 Ha

Number of people supported by the PPCR to cope with effects of climate change;

- Number of out-grower farmers utilizing water harvesting ponds on farms – 1,000 farmers - Number of out-grower farmers utilizing drip irrigation on farms – 1,000 farmers - Number of Akay farm employees in Cambodia – 260 (at least 70% women)

16. Co-Financing: Amount (in USD): Type of contribution: MDB (Asian Development Bank) $13.5 million Convertible debentures and loans Agence Française de Développement (AFD)

$10.0 million Loan

Private Sector $3.8 million$1.5 million

Loans (commercial banks) Equity (Akay group)

Co-Financing Total: $28.8 million

2 National level Core Indicators pertaining to (1) Degree of Integration of climate change in national, including sector, planning, and (2) Evidence of strengthened government capacity and coordination mechanism to mainstream climate resilience will be included in the M&R framework for the SPCR as a whole, with relevant inputs from various projects under the SPCR, supported by the PPCR funded CDTA. In this context, the project also aims to contribute to these two core indicators by strengthening capacities at the national level to integrate climate resilience into development planning by contributing to the formulation of a Cambodian government policy promoting private sector investments in climate resilient technologies.


17. Expected Board approval date:

Board approval date (Phase I & II): September 2014 Expected MDB approval date (Investment Committee) (Phase II): September 2015 Expected Project closure3 date: June 2016

3 This refers to the financial closure date which is the date when loan documents are expected to be signed and conditions

precedent satisfied.

1. Project overview

1. This project introduces drip irrigation4 and improved rainwater harvesting5 technologies to a 717 hectare demonstration farm in Battambang Province in Cambodia (the “model farm”) with the aim of disseminating climate resilient farming methods and technologies to local farming communities. The model farm has been developed as a training centre for approximately 4,000 local farmers with landholdings in the surrounding region (typically 2 hectare plots), and farmers use the facility to learn about new agricultural practices for growing high-value crops (such as organic spices). Using knowledge gained from the model farm (including rainwater harvesting and drip irrigation technology), local farmers are beginning to cultivate the surrounding land, estimated at approximately 20,000 hectares. Farms in the region are typically rain-fed for 7-8 months a year, and irrigation is needed to cover the 4-5 month dry season. Using drip irrigation fed from harvested rainwater, farmers will be able to irrigate year round without having to extract water from irrigation canals, lakes, rivers or groundwater reserves. Under the proposed “outgrower scheme”, the developer, Akay Flavours and Aromatics Cambodia Pvt Ltd (“Akay Flavours Cambodia”) will act as an offtaker for local produce and will export processed products to international markets, primarily in China, the US and Japan. 2. PPCR funds will be used for (i) a loan to Akay Flavours Cambodia for capital expenditure for establishing demonstration drip irrigation and rainwater harvesting ponds on the model farm ($1 million concessional loan), and (ii) a loan to Cambodia Post Bank, a local financial institution, for on-lending to local farmers to pay for the capital outlay and installation costs for rainwater harvesting ponds and drip irrigation systems for individual farms, and also potentially for additional agricultural inputs such as high quality seeds, plants, fertilizers and pesticides ($4 million concessional loan). The financing will be supported with technical assistance administered by Akay Flavours Cambodia through the model farm in association with ADB technical assistance programs currently being executed in Cambodia. The project will be implemented in parallel with financing from ADB’s Private Sector Operations Department of up to $16.5 million in convertible debentures and loans to support the Akay group’s operations in both India and Cambodia across the spice value chain. For further information on ADB financing please refer to the project documents hosted on the ADB website6. 2. Project objectives

3. The project’s objective is to introduce rainwater harvesting and drip irrigation technologies coupled with high-value crop production to improve the climate resilience of Cambodia’s agricultural sector, reduce drought-induced crop failures and to improve productivity and income for small scale farmers. Using drip irrigation fed from harvested rainwater, farmers will be able to irrigate year round and improve yields of high-value crops such as spices without having to extract water from rivers, lakes, or groundwater reserves. Further information on rainwater harvesting and drip irrigation technologies and their benefits can be found in Appendix 1, and Appendix 3 provides information on their market context in Cambodia. Agriculture in Cambodia is dominated by rice farming, and there is a strong need to diversify the sector, particularly towards growing higher value crops. Further information on the country context and Cambodia’s vulnerabilities to the potential impacts of climate change can be found in Appendix 2.

4 Drip irrigation, also known as trickle irrigation or micro irrigation or localized irrigation, is an irrigation method that saves water and fertilizer by allowing water to drip slowly to the roots of plants, either onto the soil surface or directly onto the root zone, through a network of valves, pipes, tubing, and emitters. 5 Rainwater harvesting is the collection and storage of rainwater for reuse before it reaches groundwater systems such as aquifers. The harvested water can be used for irrigation, drinking water and other purposes. 6 http://adb.org/projects/details?page=overview&proj_id=48901-014


4. More broadly, the expected outcome of the project is to introduce a financially sustainable private sector agri-business model that promotes export-oriented, high revenue-generating agricultural activity built on the principles of climate resilience, environmental sustainability and pursuing mutual benefits between local communities and agribusiness developers. The project aims to boost the climate resilience of Cambodia’s agricultural sector (the Tonle Sap Lake Floodplain in particular), and leapfrog traditional inefficient furrow irrigation and hand-watering techniques. 5. By providing capital for both systems and on-lending, the project aims to demonstrate that farming revenues can be increased through improved water management practices and technologies. These will deliver better crop yields at lower cost, whilst protecting against future potential impacts of climate change (mainly drought induced crop failures). The model farm provides an effective real-world tool for farmers to learn about new technologies, new varieties of crops and organic farming methods. ADB expects that by demonstrating the success of the business model and de-risking it in the context of Cambodia, farmers, financiers, and agribusiness developers in other parts of the country will replicate the model. 3. Project management and implementation

3.1. The Akay group

6. The Akay group is a leading high-value spice producer and exporter from India with several subsidiaries in India and Cambodia and a twenty year track record of developing agribusiness projects. The Akay group in India has successfully piloted and tested its “outgrower” business model with a demonstration farm in Karnataka India, where it currently engages farmers through contract farming of chili peppers. It has also implemented drip irrigation systems for its India operations, and has approximately 1,300 hectares of land equipped with drip irrigation infrastructure to grow chili peppers and turmeric. Since its establishment in 1993, the Akay group has grown into one of the top five exporters of spice oleoresins in the world. It is headquartered in Cochin, India and operates five processing plants (four in India and one in the PRC) with a total capacity of 32,000 tons per year. The Akay group’s operation in Cambodia will be undertaken by an entity to be incorporated (Akay Flavours and Aromatics Cambodia Pvt Ltd) that will enter into a long-term lease agreement with Akay Cambodia (land holding company), which owns the 717 ha farm land7. Due to the reliance of Akay’s outgrower business model on productive cooperation with a large number of poor farmers, the companies development activities focus strongly on social development, job creation, gender empowerment, and sustainability. To date the Akay group estimates it has impacted over 60,000 farmers and their families.

3.2. Cambodia Post Bank

7. Cambodia Post Bank is a local bank in Cambodia established in 2013. Its shareholders consist of Canadia Investment Holding Plc (55%), the holding company of Canadia Bank which is one of the leading local banks in Cambodia, Fullerton Financial Holding (40%), a subsidiary of Singapore’s sovereign wealth fund Temasek, and Cambodia Post (5%). Cambodia Post Bank focuses on micro-small and medium-sized enterprises and rural finance. In particular, it targets to provide loans to Cambodians without bank accounts by setting up branches near post offices. Cambodia Post Bank has been identified as the partner financial institution since it has presence in Battambang Province where Akay’s model farm and the prospective contract farmers are located, and has expressed very keen interest in working with

7 Due to the Cambodian legal requirement of local majority ownership of land, the 717 ha farm land in Battambang is owned by

another Akay Cambodia. Akay Flavours and Aromatics Cambodia Pvt Ltd and Akay Cambodia will enter into an arms-length land lease agreement as a condition subsequent to ADB’s investment in convertible debentures.


Akay and ADB as the outgrower model is fully consistent with their strategy to target customers without bank accounts and access to other bank branches.

3.3. Project implementation

8. The project will be developed in two phases. Phase I of the project, starting in 2015, focuses on the Akay group’s expansion in both India and Cambodia and does not utilize PPCR funds. In the second phase of the project, starting in 2016, PPCR funds will be used for activities in Cambodia. Both phases were approved by the ADB board in September 2014. However, the implementation of Phase II will be subject to: (i) PPCR Sub-Committee approval of this proposal and (ii) ADB’s satisfaction on the progress of Phase I implementation. Following PPCR Sub-Committee approval, phase II will need endorsement by ADB’s private sector Investment Committee to proceed, which is scheduled for Q3/4, 2015. The project is expected to reach completion by 2030. 9. The individual components of the financing package are presented below according to phase. PPCR components (phase II) are highlighted in italics. Phase I - Akay will invest in the following

subprojects (up to $10.4 million) Phase II, - Akay will invest in the following

subprojects (up to $23.4 million) a) India - scale up of production at a newly

commissioned steam sterilization plant in Kerala to generate ground spices free from contamination ($3.5 million).

b) India - scale up of research and development activities and expansion of the existing nutraceuticals production plant in Kerala ($3.8 million).

c) Cambodia - investment on the model farm in Battambang such as expansion of organic black pepper cultivation, and to fund working capital ($3.1 million).

a) Cambodia - demonstration of rainwater harvesting ponds and drip irrigation networks for Akay’s model farm in Battambang ($1 million in PPCR funding).

b) Cambodia - provision of a credit facility to local farmers to invest in climate-resilient farming inputs such as rainwater harvesting and drip irrigation hardware and/or additional agricultural inputs such as high quality seeds, plants, fertilizers and pesticides ($4 million in PPCR funding).

c) Cambodia – investment in infrastructure and provision of technical assistance for establishment of an outgrower scheme ($6.1 million)

d) Cambodia – development of an oleoresin extraction plant in Sihanoukville to process spices for export ($6.9 million).

e) India – development of a processing plant and a marketing and distribution network for seasonings products ($5.4 million).

10. For the PPCR funds, $1 million would be lent to Akay Flavours Cambodia for costs relating to the construction of rainwater harvesting ponds, and the purchase and installation of drip irrigation hardware. To date, the model farm has piloted 34 rainwater harvesting ponds with a combined capacity of 43,000 m3. Under the project, these will be expanded to give an increased capacity of 121,000 m3, and an additional 37 new rainwater harvesting ponds will be built. In total, this will provide approximately 231,000 m3 of rainwater harvesting capacity for the 717 hectare model farm, which will make it self-sufficient in terms of water requirements. Further information on the model farm including ponds and a map is provided in Appendix 4. 11. The model farm has piloted sprinkler irrigation on 23 hectares of land, and is currently engaging with drip irrigation technology providers from India and the Middle East regarding the introduction of drip irrigation to the model farm. Drip irrigation has not yet been piloted on the model farm. However


lessons from other countries indicate that this technology has strong potential in the Cambodian context. Estimates for the cost of construction of ponds and installation of drip irrigation hardware combined vary between $1,700 and $2,500 per hectare, depending on the type of crops to be grown. With potential funding of $1 million, Akay Flavours Cambodia has put together a financial plan based on rainwater harvesting ponds and drip irrigation for a total of 536 hectares of black pepper, turmeric, cocoa, dragon fruit and rubber. 12. PPCR funds of $4 million will be lent to Cambodia Post Bank to be used to extend a line of credit to local farmers participating in the outgrower scheme to construct ponds and to purchase and install drip irrigation hardware. Funds may also be used for other agricultural inputs such as high quality seeds, plants, fertilizers and pesticides. Once the local farmers are trained at the model farm on starting-up organic spice farming using climate-resilient technologies, Akay will refer them to Cambodia Post Bank. Cambodia Post Bank will extend credit for initial investments at concessional terms by taking advantage of the PPCR facility. Cambodia Post Bank will be responsible for the administration of funds, including (i) assessment of the creditworthiness of individual farmers, (ii) management of individual loan agreements, and (iii) handling payments. Please refer to appendix 4 for further information on the model farm including ponds and a map. 13. In addition to the PPCR funds that focus on climate-resilient investment in the model farm and the credit facility to the outgrower farmers through Cambodia Post Bank, Agence Française de Développement (AFD) will provide a loan to Akay Flavours Cambodia to support the outgrower model. The AFD assistance will include infrastructure such as storage and drying yards in the model farm and collection centers, and technical assistance to train the outgrower farmers, and therefore is highly complementary with the project. AFD will also finance development of an oleoresin extraction plant in Sihanoukville by Akay Flavours Cambodia to process spices for export which will include spices produced by the outgrowers. 14. Furthermore, technical assistance for the construction, installation, operation and maintenance of ponds and drip irrigation networks, and for other agricultural inputs will be provided to farmers by Akay Flavours Cambodia through the learning and demonstration facilities developed at the model farm. The project can also enjoy synergies with and assistance from current ADB agri-business and natural resource management technical assistance programs being implemented in Cambodia8. The program of technical assistance will aim to strengthen cooperation and capacity at the regional level to integrate climate resilience into national and appropriate regional development planning and processes in Cambodia. Through outreach to stakeholders and sharing of lessons learned, the TA aims to enhance learning on integration of climate resilience into development, at the country, regional and international levels. 4. Financing structure

15. ADB is supporting the Akay group’s operations across the spice value chain through a combination of funding sources. The total project cost (Phase I and Phase II) is estimated at $33.8 million and will be financed with $13.5 million from ADB (up to $10 million in convertible debentures and $3.5 million in loans), $10.0 million from Agence Française de Développement (AFD), $5.0 million from the Strategic Climate Fund’s Pilot Program for Climate Resilience, $3.8 million from commercial banks, and $1.5 million from Akay’s internally generated cash. ADB structured the financing package to address Akay’s capital needs, and is using convertible debentures to provide long term growth capital to the company while limiting debt service obligations while the asset base is being expanded. PPCR funds of $5 million are expected to leverage funds of $28.8 million, giving a leverage ratio of almost one to six. A summary of financing is presented in Table 1 and Table 2 below.

8 For example: http://www.adb.org/projects/44474-012/main, http://www.adb.org/projects/39542-022/main


Table 1 - Project Cost Summarya

Item Amount Share

($ million) (%) Fixed assets 10.5 31.1 Contingency 1.3 3.8 Marketing and research & development expenditures 4.7 13.9 Working capital 13.3 39.3 Credit facility to contract farmers 4.0 11.8 Total 33.8 100.0 a This summary provides a breakdown by cost category. The breakdown between Phase I and Phase II, India and Cambodia, and each subproject is provided in section 3.3 of this proposal (page 7). Source: Akay Flavours & Aromatics Pvt Ltd; Asian Development Bank estimates.

Table 2 - Financing Plan Item Amount Share ($ million) (%) Loans Asian Development Bank (ADB) 3.5 10.4 Agence Française de Développement (AFD) 10.0 29.6 Pilot Program for Climate Resilience 5.0 14.8 Commercial banks (working capital loans) 3.8 11.2 Compulsory convertible debentures Asian Development Bank 10.0 29.6 Equity Akay (internally generated cash) 1.5 4.4 Total 33.8 100.0 Source: Akay Flavours & Aromatics Pvt Ltd; Asian Development Bank estimates. 5. Consistency with PPCR objectives

5.1. Consistency with the Cambodia SPCR9

16. The project aligns with the objectives of Cambodia’s endorsed Strategic Program for Climate Resilience and focuses on two of its main aims for promoting climate-resilient agriculture. These are: (i) improving rainwater harvesting systems and enhancing the resilience of community water supply, and (ii) enhancing the resilience of small scale agriculture through the introduction of drought/flood tolerant crop varieties and small scale irrigation. The project directly addresses three of the key vulnerabilities identified within the SPCR, namely (i) food and water insecurity, (ii) exposure of communities, especially women and children, to disaster risks, and (iii) involuntary migration exacerbated by climate change. It is expected that the project will improve food and water security, shield communities from crop failure related disaster risks, and reduce involuntary migration by providing viable local small-scale commercial farming opportunities.

5.1. Innovation

17. The “outgrower” business model is innovative as it is both financially compelling, and able to provide a range of benefits to local farmers and their communities, project developer’s and the local environment. Local farmers benefit primarily through increased income-generating potential from growing high-value crops rather than rice, corn and cassava. It also increases their income security, firstly

9 https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/Cambodia%20SPCR.pdf


from increased climate resilience and less risk of crop failure from drought, and secondly by being able to secure favorable returns on their investments by having direct access to appropriate capacity building, technology and viable markets (local, regional and global) for their end product. Farmers appear to be attracted to having a reliable offtaker for their produce, and under “fair” pricing schemes being planned for the outgrower model roll-out in Cambodia, farmers are offered market prices comparable with other countries in the region. They may also elect to sell to third party buyers if they are unhappy with prices being offered by Akay Flavours Cambodia. In India, contractual relationships with farmers have been good and roughly 80-85% of trained farmers have chosen to sell produce directly to Akay. 18. From the project developer’s perspective, the business model is attractive as it provides the benefit of being able to scale up operations in fertile agricultural regions without having to acquire large portions of land. The developers are also able to focus their efforts on developing a larger share of international markets for the benefit of both the company and the local farmers involved in the outgrower scheme. The environment benefits from the adoption of improved agricultural practices and alleviation of pressure on ecosystems, particularly during droughts, from reduced river, lake and groundwater extraction. 19. Through demonstrating drip irrigation and rainwater harvesting, the business model has strong potential to make tangible improvements to the agricultural sector in Cambodia. It introduces powerful new potential through its education and outreach elements – features that are new to agribusiness projects in Cambodia. Using this business model, developers can influence agricultural practices across large areas and multiply production figures for efficiently produced, low environmental impact, climate-resilient, high-value agri-products. By providing financing to this project, PPCR would be helping to de-risk and to “mainstream” a business model that provides benefits to local communities, agri-business developers and the environment.

5.2. Inclusivity

20. Through a current technical assistance program being implemented in the region, ADB commissioned a poverty impact assessment for the project (TA-8550 REG: Inclusive Business Support)10. The study concluded that the sub-projects will contribute to a reduction in rural poverty in Cambodia and India by including farmers in formal agriculture value chains. To quantify the impact on project beneficiaries, the study used three income benchmarks: less than $1.25, less than $2, and less than $3. The study found that 27% of prospective farmers who will be impacted by the projects (given opportunities to earn higher farm revenues and higher household incomes) currently fall under the approximated extreme poverty line of $1.3/day, 48% under $1.96/day, and 76% under $3.26/day. The likely poverty alleviation impacts of the project are demonstrated through the incomes of permanent employees and season farm workers already employed by Akay Flavours Cambodia on its model farm, all of who earn daily incomes higher than ~$2/day. Only 4% of permanent employees, or 12 people, earned incomes lower than $3.26/day. 21. According to projections, annual incomes for contract farmers are expected to rise from $3,400 in 2015 to approximately $11,300 in 2021, a compound annual growth rate of 27%. These incomes are projected to increase from the sale of crops grown on the contract-farms. In the first two years of operation, farmers are expected to earn revenue from the sale of turmeric and coleus crop (est. $5,600/annum). Akay Flavours Cambodia will provide seeds free of cost to farmers for the duration of the project. From FY17 onwards, farmers will also be given the first batch of black pepper seeds free of cost, from which they are expected to earn additional revenue of $4,200/annum, bringing total revenue to $9,800/annum. Finally, in FY20, Akay will provide farmers seeds and technical training for planting

10 http://www.adb.org/projects/documents/inclusive-business-support-tar


rubber trees, which is expected to generate additional revenue of $3,750/annum from FY20 onwards. Farmers will need to incur the cost of labor, manure, composting, drip irrigation hardware and operating costs, amounting to approximately $2,200/annum ($3,800 for FY17-19 for drip irrigation). When the project is fully implemented, farmers are expected to see their incomes rise from $3,400/annum in FY15’, to approximately $11,300 in FY20.

5.3. Gender benefits

22. The project offers significant gender related benefits by promoting the role of women in the workforce; currently around 70% of workers on the model farm are women, and their knowledge and learning is promulgating through the local communities. The Akay group has taken an inclusive approach to addressing gender issues in its development activities and provides support services such as day-care for children at the model farm to better facilitate women’s participation in the workforce. As part of ADB’s TA-8550 REG: Inclusive Business Support, ADB commissioned a study on the projected gender impacts of the project (June 2014), and a Gender Action Plan was prepared in consultation with the Akay Flavours Cambodia (presented in Appendix 5). 23. Out of the 194 prospective contract farmers surveyed in Prey Thom Village, Battambang, Cambodia, 83 (43%) were women. Of these, roughly 63% were primary income earners for their households, meaning that potential gender impacts on them would have a direct impact on their households. For example, for every woman of the 52 primary earners impacted, approximately another 5 people (average household size in survey) in her home would feel effects of employment, income and social infrastructure changes. 92% of these women reported currently having somewhat-very unstable incomes. This presents a strong opportunity for Akay’s gender impact by capitalizing on gender-parity in the homes of farmers by improving income levels and stability. Thus in addition to the 52 primary income earners surveyed, 247 other men, women and children could be positively impacted by Akay’s gender-specific activities. Of relevance to financing arrangements for on-lending under this project, even though 93% of 83 prospective women contract-farmers in Battambang, Cambodia had joint control over household expense with their spouse (and 6% had direct control over it), none had a bank account in their name. Thus, although women generally have joint control over household expenses, loans are most likely to be issued under the name of the bank account holder.

5.4. Sustainability

24. The project is sustainable both in terms of its implementation arrangements and its financing. With regard to ground-level operations, the developer has established a business model based on engaging with local communities and building strong links to pursue shared, long-term goals of increased economic growth, inclusive social benefits, and environmental sustainability. It is a good example of south-south cooperation and involves the exchange of resources, technology, and knowledge between Cambodia and India. Akay has already established a successful outgrower model in India, where they source chili peppers from over 1,400 farmers, and will bring this experience to Cambodia. They have also introduced drip irrigation to 1,300 hectares of land used to grow chili and turmeric in India. From 2009, Akay has worked closely with the village communities who now support the model form as a driving force for developing the local farming district. The development of a model farm and the provision of training have yielded mutual benefits for both local farmers and Akay, and this initiative has built strong support from the local farming communities. This has manifested itself also in the fact that village elders are encouraging young farmers to work with Akay in order to learn farming techniques. 25. The project is financially sustainable, mainly due to the short payback period for drip irrigation and rainwater harvesting systems. The capital outlay is estimated at approximately $2,000 per hectare (for ponds and drip irrigation combined), and for outgrowers under likely assumptions and scenarios, the


payback period is around 3 years. Once local financial institutions and microfinance institutions are able to see a successful track record of deployment of such systems stemming from this program, they are likely to become more comfortable with the risks involved in such transactions, and additional financing for replication and scale up is likely to be more readily available. 26. The model farm has received strong support from the Akay group, both in terms of advisory and material support. The Akay Group now operates six processing plants with a total capacity of 32,000 MT, and with financing from AFD, is planning to establish a processing and extraction plant in Cambodia for further value addition (mainly grinding and steam sterilization of spices, oleoresins, natural food colors and essential oils). The new plant will increase the sustainability of the project as Akay Flavours Cambodia will have a strengthened supply chain in terms of processing, and farmers will have better certainty regarding the long-term offtake of their produce. 27. The model farm initiative has been critical in developing the government’s understanding and appreciation of the value of developing high value crops for local and international markets. Akay Cambodia’s initiative will benefit from a new road that the government recently started developing from Samlot district in Battambang Province to the new Cambodian sea port being built in Kok Kong, at the Gulf of Thailand. This new road touches the boundary of the model farm. It is believed that once this trade route road is developed fully in 2-3 years, it will significantly boost the agricultural exports from this area. Local farmers have already seen the value of their land appreciate as a result of increased access to transportation routes and interest in the new farming methods.

5.5. Replication and Scale Up

28. ADB anticipates that replication and scale-up will be achieved in large part through the successful demonstration of an agribusiness model that provides high returns to investors, generates a wide range of benefits for local communities and the environment, is resilient to potential future impacts of climate change and does not require significant upfront investment for purchasing land. ADB anticipates that if successful in achieving these multiple objectives, the project will attract considerable interest among agribusiness developers in Cambodia, India and the broader region. ADB will provide technical assistance to the project to facilitate the production of knowledge products and lessons learned for dissemination to the larger audience of stakeholders (e.g. project developers, governments, policy makers, financial institutions, investment funds, agricultural service providers, regulators, academia, civil society, and development partners). This will be provided through ADB’s current technical assistance programs in Cambodia (for example 44474-012: Capacity Building for the Efficient Utilization of Biomass for Bioenergy and Food Security in the Greater Mekong Subregion11, and 39542-022: Implementing the Greater Mekong Sub-region Core Agriculture Support Program (Phase 2)12). 29. With regard to the enabling environment in Cambodia, due to the value of the agricultural sector to Cambodia, the regulatory environment is relatively conducive to growth and the addition of new private sector agri-businesses. As part of ASEAN, Cambodia is a tax free environment for export oriented agri-business products, and Cambodia also has limited restrictions on the import and export of foreign currencies, which offers benefits for export oriented trade. However, during scoping for this project, ADB observed that scale up for agri-businesses in Cambodia is currently limited by the high cost (or unavailability) of financing agri-business projects involving micro-finance due to perceived high risks and the absence of a proven track record. For example, micro-finance institutions typically charge interest rates of roughly 20% on small loans to farmers, and the uptake on these loans is not high. ADB anticipates that by engaging with local financial institutions to demonstrate that financing an innovative,

11 http://www.adb.org/projects/44474-012/main 12 http://www.adb.org/projects/39542-022/main


high-value agribusiness model can yield a reasonable return, local financial institutions will be encouraged to provide more affordable financing to facilitate greater private sector led development in this area. 30. In addition to these two elements, the project will explore opportunities for knowledge dissemination and capacity building among private sector companies, financial institutions, the local government, regulators, policy makers and other stakeholders. The model farm is central to this work and provides a practical demonstration tool for Akay Cambodia to encourage farmers and other developers to become actively involved in contract farming initiatives. Bearing in mind that Akay Flavours Cambodia is relatively exposed to a range of first-mover, political and market risks, they are keen to share their knowledge, invest in local communities (their workforce), build a support network, and assist in creating a robust long-term investment and operational environment for high-value contract farming. They have a strong history in Cambodia of engaging with local authorities through the development of the model farm since 2009, and in addition to their normal farmer training and mentoring activities, plan on holding a series of workshops and site visits over the course of the project aimed at the broader audience of stakeholders. Akay’s similar initiatives in India have provided a strong base for developing the business, and encouraging replication in the sector, and ADB anticipates a similar impact in Cambodia. 31. It is also worth noting the project has already attracted interest as “An Environmentally Sustainable Business Model” through the World Bank and United Nations Conference on Trade and Development’s April 2014 report, The Practice of Responsible Investment Principles in Larger-Scale Agricultural Investments - Implications for corporate performance and impact on local communities13. ADB anticipates that several other knowledge products will be generated from this project over coming years. As part of its outreach efforts, the Akay model farm has also established an in-field training program with the Department of Agriculture at Battambang University. The program requires agriculture students in graduate programs to work on the model farm as trainees for minimum three months as part of their curriculum.

5.6. Potential Risks and Mitigation

32. Fair pricing for local farmers. Akay Cambodia is initiating discussions with local farmer associations (encompassing roughly 100-150 farmers) to formulate agreements on pricing for the off-take of produce. In general, fair pricing for each product comes from pre-defined publicly available data sources. For chili contract farming in India, rates are available online from the government-controlled APMC market in Guntur, Andhra Pradesh. In Cambodia, for spices like turmeric there is currently no market with publicly available prices and therefore farmers will be offered fixed price contracts. For black pepper, Akay will most likely link to Vietnamese-listed prices. During price negotiations, farmers that have been trained on the model farm are not obliged to sell to Akay Flavours Cambodia, and may elect to sell to alternative buyers. However, in India, contractual relationships with farmers have been good and roughly 80-85% of trained farmers have chosen to sell produce directly to Akay. 33. Credit risk of local farmers. Local farmers do not have significant financial resources or assets, which presents a credit risk to the project. However, rainwater harvesting and drip irrigation systems are cost effective for an average farm, with a payback period of approximately 3 years, and agricultural output from the “climate-proofed” farms (along with Akay Flavours Cambodia as an offtaker) is expected to generate sufficient income for farmers to make repayments. The credit risk of outgrowers would be examined more carefully on an individual basis by Cambodia Post Bank.

13 http://unctad.org/en/PublicationsLibrary/wb_unctad_2014_en.pdf. The report refers to the Akay model farm in two instances:

(i) Box 4.6 on page 31: "Benefits of Improved Road Access"; and Box 6.1 on page 43: "An Environmentally Sustainable Business Model".


34. Execution risk. In executing its expansion plan, the Akay group is exposed to risks of delay and cost overrun. These risks will be mitigated through turnkey equipment and construction contracts for each project component and the phasing of the financing. The project is also exposed to typical operational risks associated with any processing or manufacturing project such as mechanical problems of equipment or power outages. ADB’s commercial and technical consultant assessed Akay’s capacity in handling these risks and found it to be satisfactory. 35. Market risk. Akay is exposed to market risks, including general economic conditions and competition, both locally and internationally. However, high-value spice segments are expected to continue to grow at rates of around 10% a year.14 The company relies on established relationships with a large base of strong corporate clients. ADB’s commercial and technical consultant reviewed Akay’s business plan and proposed a conservative business forecast that was used to conduct the financial analysis, valuation, and credit rating. 36. Technology risk and O&M. Rainwater harvesting ponds are technologically simple, and pilots on the model farm have shown that local soil properties and hydrology lend themselves well to retaining water in standing ponds. Drip irrigation technology is mature and commercially available in many developed and developing countries, and is not anticipated to present significant obstacles in Cambodia. However, small irrigation networks need to be properly installed and suitably maintained to ensure even distribution of water, and the prevention of blockages. To prevent potential problems, Akay Flavours Cambodia will engage the technology supplier to adequately train local staff in correct procedures for installation, operation and maintenance. Through facilities at on the model farm, Akay Flavours Cambodia will ensure outgrowers are correctly trained to be able to install systems on surrounding farms. 37. Foreign currency risk. Since the ADB and PPCR loans will be denominated in US dollars, the Akay group will be exposed to foreign currency risk. However, the company will benefit from a natural hedge as about 90% of its revenue is derived from exports, which generate revenue in US dollars. Furthermore, the Cambodian economy is highly dollarized, and Cambodia Post Bank is not highly exposed to foreign currency risk since over 95% of its lending portfolio is in US dollars. 38. Soft systems (information, marketing, education and capacity building). In addition to the model farm, Akay Flavours Cambodia’s outreach program to outgrowers will be essential for the successful implementation of the project. Many of the local farmers lack basic education, and literacy rates are not high. Therefore soft systems will need to be tailored such that farmers are sufficiently informed and equipped to install and maintain ponds and drip irrigation systems on their individual farms. Akay Flavours Cambodia will have a strong incentive to make sure soft systems are effective as they are dependent on the eventual produce from farms.

5.7. Anticorruption

39. The Akay group was advised of ADB’s policy on implementing best international practice relating to combating corruption, money laundering, and the financing of terrorism. ADB will ensure that the finance and investment documentation includes appropriate provisions prohibiting corruption, money laundering, and the financing of terrorism, and remedies for ADB in the event of noncompliance.

14 Demand for high-value spice products is driven by: (i) the growth of the packaged food industry and the quick service

restaurant industry, (ii) enforcement of stricter food safety and quality standards in all markets, and (iii) the demand for natural, tasty, and healthy food from the growing urban middle class around the world.


6. Coordination with other ADB activities

40. To date, ADB has provided assistance to Cambodia of approximately 1.5 billion, mostly through public sector financing, with approximately 25% of funds being allocated to agriculture, natural resource and rural development projects. The following figure shows the breakdown of assistance by project type and current status.

Figure 1 - Breakdown of ADB assistance to Cambodia as of July 2014

41. Within the agriculture, natural resource and rural development sectors, there are several projects that share common objectives and in some cases provide complimentary support in Battambang Province. Through the implementation of this project, ADB’s private sector operations department will coordinate with public sector regional departments and other relevant staff to ensure programs work together and complement each other. These include the current ADB projects in Cambodia listed below: 42037-012: TA to enhance the productivity and environmental conservation in the Tonle Sap Basin

through the pilot demonstration of productive, profitable and biosecure technologies 41054-012: Grant for building community capacity for poverty reduction initiatives in the Tonle

Sap basin 37287-013: Grant and loan for the formulation of development plans and implementation of small

scale infrastructure to enhance rural incomes and thereby relieve pressures on the natural resource base of the Tonle Sap Basin.

34380-013: Loan for Agriculture Sector Development facilitating policy and institutional sector reforms to ensure a favorable environment for market-based agricultural growth.

34207-013: Loan to reduce poverty through accelerated rural development by establishing physical infrastructure, improving socioeconomic conditions, and enhancing rural livelihood in northwestern Cambodia including Battambang Province.

34207-012: TA to assist the Royal Government of Cambodia in designing and preparing an investment project aimed at increasing the absorptive capacity, enhancing the socioeconomic development and securing the sustainable livelihood of rural communities in which demobilized soldiers and their families are reinserted and reintegrated, including Battambang Province.

44328-012: TA to enhance agricultural and rural economic productivity through increased efficiency of irrigation systems and improved management of water resources in uplands, areas away from the Tonle Sap lake, including Battambang Province.


44321-013: Loan and grant to address food security and rice commercialization including strengthening the rice value chain, improving the legal and regulatory framework in agricultural land management, improving access to credit by paddy producers, and enhancing paddy production and productivity through improved irrigation water use efficiency.

42. There are also several regional projects involving Cambodia that may provide opportunities for cooperation. These include the TA projects that will be used to provide technical assistance to the Akay project (44474-012: Capacity Building for the Efficient Utilization of Biomass for Bioenergy and Food Security in the Greater Mekong Subregion, and 39542-022: Implementing the Greater Mekong Subregion Core Agriculture Support Program (Phase 2) ).


APPENDICES

Appendix 1 – Rainwater harvesting and drip irrigation technologies 43. Rainwater harvesting for irrigation is cheap, avoids extraction of environmental flows and allows farmers to irrigate and grow crops year round. Drip irrigation technology fed through rainwater harvesting ponds offers significant economic and environmental advantages over traditional irrigation techniques15. Not only does it avoid dependency on large scale irrigation canals, but on-farm trials in Cambodia for vegetable growing show that drip irrigation can result in increases in water efficiency (95%) and increases in labor productivity (85%)16. Trials show that economic returns to labor can increase by 67%, and the integration of improved crop management methods such as combining fertilizer with drip irrigation, can increase both yields and water use efficiency. Overall, average labor use decreased 83% with drip irrigation, increased net returns by 153% and provided water savings of 48% compared with traditional practice. 44. Drip irrigation, also known as trickle irrigation, involves dripping water onto the soil at very low rates (2-20 litres/hour) from a system of small diameter plastic pipes fitted with outlets called emitters or drippers. Water is applied close to the plant’s base to irrigate only the part of the soil in which roots grow, unlike surface and sprinkler irrigation, which involves wetting the whole soil profile. With drip irrigation, water applications are more frequent (usually every 1-3 days) compared with other methods and this provides a more consistent level of moisture in the soil. 45. Properly designed, installed and operated, drip irrigation improves water conservation by reducing evaporation and deep drainage compared to flood irrigation methods or overhead sprinklers. Using drip irrigation, water can be more precisely applied to plants’ roots. In addition, drip irrigation can eliminate many diseases that are spread through water contact with the foliage. The advantages of drip irrigation include:

• High water application efficiency (evaporative loses are minimized) • Distribution is controllable through valves and drippers • Nutrient and fertilizer loss is minimized due to localized application and reduced leaching • Soil erosion is minimized • Weed growth is minimized • Foliage remains dry, reducing the risk of disease • Moisture within the root zone can be maintained at field capacity • Field leveling is not necessary • Fields with irregular shapes are easily accommodated • Recycled non-potable water can be safely used • Labor cost is less than other irrigation methods • Reduced energy costs from lower operating pressure compared with other types of

pressurized irrigation 46. Rainwater harvesting for agricultural purposes involves the use of any structure built to capture rain - ponds, tanks, or reservoirs. In this case it involves digging ponds in low-lying areas next to fields where water can collect (through engineered or natural drainage). Correctly designed and sized systems provide farmers with sufficient water to irrigate throughout the year. By conserving the monsoon rain that

15 Palada, M.C., Bhattarai, S.P., Roberts, M.S., Bhattarai, M., Baxter, N., Kimsan, R. and Wu, D.L. 2011. Improving Smallholder Dry Season Vegetable Production Through Increased Water Productivity With Low Cost Drip Irrigation Technology in Cambodia. Acta Hort. (International Society for Horticultural Science) 922:133-140. 16 Palada, M, Bhattarai, S, Roberts, M, Baxter, N, Bhattarai, M, Kimsan, R, Kan, S & Wu, D 2010, 'Increasing on-farm water productivity through farmer-participatory evaluation of affordable microirrigation vegetable-based technology in Cambodia', Journal of Applied Irrigation Science, vol. 49, no. 2, pp. 133-143.


falls during the wet season, farmers can increase the area they irrigate, grow crops in the dry season, support livestock and even recharge groundwater. Stored rainwater can also provide families with water for household needs. 47. The advantages of rainwater harvesting include:

Increased production – crops can be grown year round Increased reliability and reduced risk of crop failure from water shortages An economical alternative to groundwater and river water extraction Reduced environmental pressure from water extraction from rivers during critical summer

months, ensuring adequate water remains to support native ecosystems High water quality - rainwater is low in minerals and suitable for irrigating sensitive plants Rainwater is not regulated by water restrictions


Appendix 2 – Country context 48. Cambodia is one of the most disaster-prone countries in Southeast Asia and is affected by floods and droughts on a seasonal basis. It is ranked 8th highest on the World Risk Index for vulnerability to the impacts of climate change17. This vulnerability is linked to Cambodia’s characteristics as a post-civil war, least developed, predominantly agrarian state. Agriculture directly contributes to 32% of gross domestic product and employs 60% of the workforce, while 80% of the population depends on the sector for their livelihood. Weak adaptive capacity, poor infrastructure and limited institutions exacerbate the country’s vulnerability to climate variability and change, and there is a strong need to build resilience in the agricultural sector due to its critical role in supporting the country. Despite this situation, climate change problems in Cambodia are predominantly addressed through post-disaster relief operations after extreme weather events and there appears to be a lack of longer term planning and building of climate resilience18. 49. The economic value of Cambodia’s main agricultural region, the Tonle Sap Lake Floodplain, is arguably among the highest provided to a nation by a single ecosystem around the world. The Mekong river drains 86% of Cambodia and provides 60% of the water for the Tonle Sap plains. However, the Mekong River Basin is changing rapidly due to accelerating water infrastructure development (hydropower, irrigation, flood control, and water supply) and climate change, bringing considerable modifications to the flood pulse of the Tonle Sap Lake and the local hydrological balance. Changes in climate are also expected to increase the variability of rainfall in Cambodia, thus making irrigation even more important to agricultural production (monsoon rain accounts for between 80-90 percent of the country’s annual precipitation). Agriculture in Cambodia is dominated by smallholder rice farming, which absorbs 90% of total cultivated land, albeit often with very low yields and for subsistence farming only19. Thus there is a strong need to diversify Cambodian agriculture, especially towards high-value cash crops such as spices. 50. Notwithstanding these challenges, Cambodia has strong potential to become a large-scale producer of high value crops including spices due to its fertile soils and tropical monsoon climate. Farmers are experienced in basic small-scale farming practices, but lack access to productivity enhancing inputs such as seeds, water, technology, information and training. Furthermore, few have access to guaranteed and profitable markets for their output. The majority of local farmers in the project’s province are ex-soldiers who were allocated 2 hectares of land each by the government in an effort to turn “guns into ploughshares.” Farmers are typically poor, uneducated and depend only on rice, corn or cassava cultivation, which provides low levels of income and leaves farmers vulnerable to price volatility due to the low diversification of crops.

17 http://www.worldriskreport.com/ 18 United Nations Development Program, 2011. Promoting Climate Resilient Water Management and Agricultural Practices in Rural Cambodia, December 2011. 19 ADB. 2011. Country Partnership Strategy: Cambodia (2011–2013). Manila.


Appendix 3 – Market context 51. The market for rainwater harvesting and drip irrigation in Cambodia is very small, with little implementation of these technologies. Farms in Cambodia are typically rain fed for 7-8 months each year and experience rainwater shortages for 4-5 months during the dry season from January to April. The majority of rice production in Cambodia is based on rain fed lowland cropping systems, where rice is grown over the wet season, and fields are left to fallow over the dry season20. Traditional irrigation techniques depend primarily on low efficiency methods of furrow/surface irrigation21 and hand watering. 52. The existing irrigation infrastructure and practice in Cambodia is largely a legacy of the Khmer Rouge. During their rule in the late 1970s, a network of canals, ditches and dykes for furrow irrigation was built across the country with little regard to hydrology. The lack of topographic survey and poor construction standards of canals often meant that controlling flows was difficult and higher areas were often drained of water, leaving them prone to drought and crop failure. The canal network required constant attention for operation and maintenance. Now in 2014, irrigation practices have improved in some areas, and the canal network has become more functional. However, evaporative losses from this system are still high, which leads to low irrigation water efficiencies. Modern irrigation technologies, such as drip irrigation, offer significant benefits to farmers; on-farm trials in Cambodia for vegetable growing show that drip irrigation can result in 95% and 85% increases in water and labor productivity respectively22. Drip irrigation technology is well-proven and widely commercially available in developed and many developing countries/regions, for example in the People’s Republic of China23, Central Asia24, South Asia25, and Sub-Saharan Africa26. 53. Rainwater collection in Cambodia for purposes other than irrigation (mainly drinking water and sanitation) has been practiced by rural communities for many years as a way to survive the dry summer months27,28. Most people collect water from their roofs. However, rainwater collection at scale for irrigation purposes is not yet a concept that has been adopted by farmers. In 2006, the Cambodian government developed a National Adaptation Program of Action (NAPA) for Climate Change in 2006, which incorporated elements of improved rainwater harvesting facilities at the community level. However, currently very few farmers harvest rainwater to irrigate their crops.

20 Seng, V., Eastick, R., Fukai, S., Ouk, M., Men, S., Chan, S., Nget, S., 2008. Crop diversification in lowland rice cropping systems in Cambodia: effect of soil type on legume production. "Global Issues. Paddock Action." Edited by M. Unkovich. Proceedings of 14th Agronomy Conference 2008, 21-25 September 2008, Adelaide, South Australia. 21 Surface irrigation is defined as the group of application techniques where water is applied and distributed over the soil surface by gravity. It is by far the most common form of irrigation throughout the world and has been practiced in many areas virtually unchanged for thousands of years. 22 Palada, M, Bhattarai, S, Roberts, M, Baxter, N, Bhattarai, M, Kimsan, R, Kan, S & Wu, D 2010, 'Increasing on-farm water productivity through farmer-participatory evaluation of affordable microirrigation vegetable-based technology in Cambodia', Journal of Applied Irrigation Science, vol. 49, no. 2, pp. 133-143. 23 Ruoshui Wang, Shuqin Wan, Yaohu Kang, Chaoyin Dou, Assessment of secondary soil salinity prevention and economic benefit under different drip line placement and irrigation regime in northwest China, Agricultural Water Management, Volume 131, 1 January 2014, Pages 41-49, ISSN 0378-3774, http://dx.doi.org/10.1016/j.agwat.2013.09.011. 24 L.S. Pereira, P. Paredes, E.D. Сholpankulov, O.P. Inchenkova, P.R. Teodoro, M.G. Horst, Irrigation scheduling strategies for cotton to cope with water scarcity in the Fergana Valley, Central Asia, Agricultural Water Management, Volume 96, Issue 5, May 2009, Pages 723-735, ISSN 0378-3774, http://dx.doi.org/10.1016/j.agwat.2008.10.013. 25 Dennis Wichelns, Investing in small, private irrigation to increase production and enhance livelihoods, Agricultural Water Management, Volume 131, 1 January 2014, Pages 163-166, ISSN 0378-3774, http://dx.doi.org/10.1016/j.agwat.2013.09.003. 26 Louise Karlberg, Frits W.T. Penning de Vries, Exploring potentials and constraints of low-cost drip irrigation with saline water in sub-Saharan Africa, Physics and Chemistry of the Earth, Parts A/B/C, Volume 29, Issues 15–18, 2004, Pages 1035-1042, ISSN 1474-7065, http://dx.doi.org/10.1016/j.pce.2004.08.004. 27 http://www.cee.ntu.edu.sg/Temp/LIFE/cambodia_projects.html 28 http://www.rainwatercambodia.org/index.html


Appendix 4 – Further information on the model farm 54. Akay Cambodia commenced operations in 2009 after the developers bought 630 hectares of land from local owners in Prey Thom village. During 2009 to 2011, the main activities conducted on the farm were de-mining, land clearing and preparation for planting. Nurseries and some trail plots were also established. As the area had been heavily mined during the Khmer Rouge period, the company sought the services of a UN-backed mine detection team at Battambang and cleared the entire farm area of unexploded ordinances. 55. The strategy adopted for the model farm is a mixed crop pattern to build resilience to fluctuations in prices and production levels from varying climatic (and other) conditions. A minimum of five different crops are cultivated on the farm at a time29. Agricultural techniques such as crop rotation, tillage, cover crops, and the use of natural fertilizers and pesticides are being employed to improve yields and minimize the environmental impacts of farming. The Spices cultivated include short-term and inter-crops (which take 8-10 months to provide yield) and long term spices (which take 3-5 years to provide yield). Rubber (considered a long term cash crop) has been planted around the farm along with teak trees as a wind-break and also to protect the certified organic production areas from outside contamination. 56. Through its long term cultivation plan, Akay Flavours Cambodia plans to maximize the environmental sustainability of its operations. The model farm is planning to plant 1 million trees in the next 5 years and has already completed the planting of 100,000 new trees as part of its land rehabilitation program. The plan is to promote tree planting to the surrounding farms by supplying saplings of various trees to farmers.

Figure 2 - Map of existing ponds (for expansion) and planned new ponds

29 The current cropping pattern is 100 hectares of an Indocert certified spice farm, 100 hectares of Cocoa intercropped with fruit trees (Litchi, Dragon fruit, Mangostene, Mangoes and Coconut), 500 hectares of Rubber intercropped with rotating crops such Turmeric, Ginger (spices), Coleus Forskolin and Kiryat (herbs). In addition a nursery for seed and saplings development, livestock management, training center for farmers, warehouses and staff accommodation has been set up on 20 hectares.


Appendix 5 –Gender Action Plan

Outputs Actions and Indicators Timeline Responsible

Agency Investment projects successfully completed

1. Increased women participation in new contract farming - Battambang, Cambodia

Women will comprise 70% of farm workers (permanent and seasonal) At least 1,000 out of 2,000 (50%) of new contract farmers in Samlot, Battambang, Cambodia will be women Women farmers to have equal access to drip-water irrigation system, energy supply, wind mills and other farm technology set up by Akay

2015-2018 Akay Cambodia

Team

2. Increased women participation in new contract farming - India

At least 1,500 out of 3,000 (50%) of new contract farmers in India will be women. Offer new training to women on operation of machinery and processes in extraction plants

2015-2018 Akay India Team

3. Improved facilities and opportunities for women farmers / workers engaged in Akay farms

Creation of women-run community in Tadas, Karnataka where women can stand on their own feet with their earnings from the job offered in Akay processing plant or through contract farming of chilly. Establish child-care center for working mothers at Cambodia model farm. Reserve/allocate free housing facilities for women farm workers in Cambodia. Establish women groups in India and Cambodia and assist them in engaging in productive activities

2015-2018 Akay Cambodia and India Team

4. Enhanced capacity of Akay to target and service women farmers

Human resources allocated, nodal person/ gender specialist (one each in Cambodia and India) to support and guide implementation and monitoring of gender measures. Appoint staff and volunteers to conduct gender awareness and information programs in community

2015 Akay

Management

5. Capacity building and training programs targeting women farmers/ workers implemented

Provide training to 100 women workers in Akay farm and 800 women contract farmers in Cambodia. Training sessions to include (i) organic farming, (ii) best use of farm implements and (iii) farm machinery Conduct of quarterly meetings with women farmers to disseminate new agricultural information and upcoming agricultural trainings and consult on other concerns.

2015-2018 Akay Cambodia

Team

6. Improved financial Inclusion and

Around 100 women workers in Akay farm and 800 women contract farmers in

2015-2018 Akay Cambodia and India Team


management Cambodia will be assisted to have credit access. Around 2500 women contract farmers in India will be assisted to have credit access Help facilitate women get access to banks, open and operate a bank account Conduct training/orientation to women on financial management mechanisms, household expense budgeting, methods of saving and other opportunities for income generating activities Identifying and advertising opportunities of productive investment of savings; starting cooperatives, small scale businesses and investing in local infrastructure

7. Improved monitoring and reporting on implementation of gender measures

Sex-disaggregated database (on farmers and workers deployment, benefits and improvement to socioeconomic conditions), maintained and reported.

2015 Akay

Management

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