ADB Loan Signed to Help Develop Alternative Livelihoods for Fiji's Farmers

SUVA, FIJI ISLANDS - ADB and the Fiji Government today signed a US$25 million loan to help protect and improve the standard of living of rural people in the Fiji Islands whose livelihoods are at risk in the impending restructuring of the sugar industry.

The signing ceremony took place at the Ministry of Finance and Planning in Suva between J. Kubobola, Minister for Finance and Planning, and Sirpa Jarvenpaa, Regional Director, ADB South Pacific Subregional Office.

The Project, approved by ADB in March 2005, targets about 8,000 sugarcane farmers, as well as cutters, mill workers, landowners, and indigenous Fijians including women in the sugarcane belt areas and nearby rural and peri-urban areas of the Western and Northern divisions on the main islands of Viti Levu and Vanua Levu.

Ms. Jarvenpaa indicated that "the project will support viable alternatives to improve income by promoting agricultural diversification, strengthening agricultural services, and developing effective public-private sector partnerships in commercial agriculture."

In addition, it will improve about 600 kilometers of farm roads to provide farming communities access to markets.

Mr. Kubobola stressed that "farmers' skills development and securing market access will be a main project focus."

For more than 20 years, the sugar industry in Fiji Islands has benefited from prices that have been as much as triple world prices, insulating growers from the need to improve their efficiency and productivity. Indications, however, suggest that the price of sugar will slide down toward world prices in the longer term.

This situation is exacerbated by the expiry of some 10,300 farm leases over the next 25 years. This could all result in hardship for experienced farmers leaving the sugar industry and new farmers entering with limited capital and experience.

The Project will help protect the already poor groups from further income reductions, promote diversified higher-value farming systems, and provide off-farm livelihood opportunities to supplement or replace agricultural incomes.

Diversified agriculture offers farm households opportunities for substantially higher than current household incomes.

The project will also encourage people to engage in off-farm livelihoods by promoting the development of small and micro-enterprises and supporting vocational training. At the same time, it will strengthen rural financial services offered by microfinance institutions (MFIs) and develop sustainable MFIs in areas poorly served by commercial banks.

ADB's loan covers around half of the estimated total project cost of $49.8 million. It comes from ADB's ordinary capital resources, carrying a 25-year term including a grace period of five years. Interest will be determined in accordance with ADB's LIBOR-based lending facility.

The Government will contribute $8.7 million toward the total project cost, the Fiji Development Bank $8.8 million, and other beneficiaries will contribute the remaining $7.3 million. The Project will be due for completion in December 2010.

A $600,000 technical assistance (TA) grant from the Japan Special Fund, financed by the Government of Japan, accompanies the loan to help strengthen commercial agriculture development to ensure that appropriate policies, institutions, and capacities are in place at project completion to sustain the performance of the private agriculture sector. The Government will contribute $275,000 toward the TA's total cost of $875,000.

The Ministry of Agriculture, Sugar and Land Resettlement is the executing agency for the Project. A high level National Steering Committee will oversee, monitor, and coordinate Project implementation. Two divisional Project coordination Committees and project implementation units will also be established in Lautoka and Labasa.

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