Programme for Enterprise Competitiveness Example of an Intervention: The Thai Palm Oil Sub Sector...

Programme for Enterprise Competitiveness

Example of an Intervention:

The Thai Palm Oil Sub Sector

Thai-German Programme for Enterprise Competitiveness

GTZ page 1


Outline of Presentation

An Intro to the Palm Oil Sector in Thailand The GTZ’s Focus in this sector Within this focus, one intervention The intervention impact logic The structure of the intervention Sharing the cost of the interventionScaling up the intervention Some basic lessons from applying M4P

GTZ page 2


Oil Palm Trees


Oil Palm Crushing Mill


Loose Fruit

Fresh Oil Palm Fruit Bunches


Steam Processing the Fruit


Relevance of the Sector

Palm oil is the most competitive vegetable oil with a high growth potential

2nd most important cash crop in the southern part of Thailand More than 67,000 households involved in the plantation level The most important oil crop for Thailand in terms of domestic

consumption and self sufficiency All cultivation is on land already in agricultural use, so no cutting of

forests or destruction of animal habitats The ecological impact of the biomass (CO2 emissions) is minimal

as biomass is converted into methane and sold to grid

GTZ page 7


Basic Sector Information

In terms of global exports Malaysia accounts for 57% , Indonesia for 36% and Thailand for 17%.

Thai production costs are 12% higher in Thailand than Malaysia due to differences in plantation and crushing mill productivity.

Primary production is based mainly on 67.000 smallholders who generate 85% of the raw materials.

There are 50 crushing mills, located close to the electricity “grid”

GTZ page 8


page 9page 9GTZ

Where does T-G PEC focus its interventions?

Springfield Centre | Making markets workSpringfield Centre | Making markets work

SUPPORTING FUNCTIONS

RULES

LawsIn

form

al ru

les

&

norm

s

Standards

Regulations

Information

Bas

ic R

&

D

Soil and leaf analysis testing services in the palm oil value chain

Value chain

Advocacy

Skills developmen

tProduct

development

Analysis service

Grow Process

Soil and leaf analysis

- interconnected service market


Competitiveness Issues and Focus

GTZ page 11


Projects and Interventions:

GTZ page 12


Intervention Example:

Soil and Leaf Analysis Service

GTZ page 13


Leaf Analysis and Nutrient Recommendation Service

GTZ page 14

Relatively Low FFB Yield

Quality of Planting Material

ClimateImproper Use of Fertilizer

Farm Management Training Service

Leaf Analysis and Nutrient Recommendation Service

Higher Potential Outreach Higher Impact

The key to farm productivity


Choosing the right leaf


Constraints to the service Very low awareness and understanding of leaf analysis and nutrient

recommendations service and its benefit s (15-25% yield increase) which will result in a 26% increase in net income .

The service is not widely available and there is no commercial laboratory in the area.

Services from public laboratories are not widely available and the lead time is too long. They have no incentive to provide it on a commercial basis.

There is a crushing mill in the area that has already invested in the laboratory and willing to offer this service to their regular suppliers. However, the accuracy of the laboratory is not up to an acceptable standard.

GTZ page 16

Opportunities for the service


Harvesting Oil Palm

GTZ page 17


Intervention Impact Logic

GTZ page 18


Structuring the Intervention

GTZ page 19

Social Marketing(GTZ)

Direct Communication(Partner)

Training for Farmers(Partner)

Capability Assessment & Recommendation (GTZ)

Additional Investment and Implementation (Partner)

Delivering Accurate Recommendation

(Partner)

Capacity Building

Usage of the Service & RecommendationDemand Creation

The core service is delivered by the

partner


A Rehabilitated Lab at a Palm Oil Mill


Lab Operator

GTZ page 21


Typical Generic Fertilizer

GTZ page 22


Contributions (Euro)

GTZ Partner

1. Additional Investment in Equipment - 10,000

2. Laboratory Capability Improvement 4,000 10,000

3. Communication Program (demand stimulation) 24,000 8,000

4. Training of Farmers 600 12,000

5. Analysis and Recommendation Work - 12,000

Total Intervention Costs 28,600 52,000

% Contribution 35.5 % 65.5 %

page 23

In addition the initial investment costs to set up the lab were Euro140,000

From initial intervention focus to wide change

Market not working Market working better

Period of intervention

Multi-faceted actions to promote system change

Initial interventions

Overall market vision

Springfield Centre | Making markets workSpringfield Centre | Making markets work

Initial focus here ...

... eventually to have impact here


Soil and Leaf Analysis Service (Phase 1)

GTZ page 25

268 Farmers

Crushing Mill “A”

Crushing Mill “A” Lab ServiceLab Service

Analysis

Fees

Info



GTZ page 26

268 Farmers


Crushing Mill “A” Lab ServiceLab Service Crushing Mill

“B” Crushing Mill

“B”

40 Farmers

Analysis Analysis

Fees

FeesInfo

Info



GTZ page 27

268 Farmers





“C” Crushing Mill

“C” Lab ServiceLab Service

40 Farmers 410 Farmers

Analysis Analysis Analysis

Fees

Fees FeesInfo

Info Info



GTZ page 28

268 Farmers





“C” Crushing Mill

“C” Lab ServiceLab Service



Analysis Analysis Analysis Analysis Analysis

Fees

Fees FeesInfo

Info Info


Recent Progress on scaling up:

The original partner continues to expand the service in the same area without project evolvement

A copy cat mill has set up another service in another part of the country using the same lab technicians to develop the service

GTZ page 29

4 other crushing mills in different areas are interested to participate. Three of them have come to visit the Lab

The Government is talking about establishing a lab in Krabi

Key Results: Almost 900 small farmers are accessing the service This results in yield increases of about 20% Which leads to a net income increase of 26% for farmers The service is sustainable and is expanding


Conclusions: (key applications of M4P)

1. A focus on the lower end of the VC

2. Looked at their market transactions

3. Identified priority transactions

4. Examined how to restructure them

5. Worked with transaction partners to identify their short and long term interests

GTZ page 30


Conclusions: (key applications of M4P)

6. Repackaged interests in a sustainable way

7. Used a market system approach for scaling up

8. Facilitation tools used:– Understanding impact logic

– Demand side surveys

– Social marketing

– Making deals with leads firms

– Understanding transactions

– Anaysing incentives

GTZ page 31


Thank You

GTZ page 32

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