Coffee task force (Production Sub-committee under VCCB) WEF meeting, Hanoi April 14 th, 2015

MARD PUBLICPRIVATEPARTNERSHIP WASI NAEC Secretariat:

Oct Nov 2010 Aligned the PPP strategy and set up a plan to conduct pilot projects Jan Apr 2011 Approval of MARD on pilot projects Build technical model, farmer group model, multi-stakeholders approach Jul Dec 2011 Scale up strategy: Program “Extensionist attach to demo plot” Approval of MARD on the first scale up 50 demo plots/farmer groups Dec 2014 Result of 71 demo pilots, develop 2 COOPs. Upgrade to Production Subcommittee under VCCB April 2015 Set up 51 demo pilots & 3 COOPs. Linking farmers/COOPs/coffee value chain with financing institutions by collaborating with Agri-Finance Working Group WHERE WE ARE

Disseminating good farming practices  Farmer group model  NSC  Value chain  51 demos in 2015/16 Consolidating PPP Coop  PPP Coop model with satellite farmer groups  3 Coops in 2015  Trading tons of coffee  Trading 600 tons of the input agricultural materials Cooperation with Agri finance WG  Transaction model: Coop-bank-company  Micro finance solutions EXPAND THE PPP MODEL, TEST FARMERS FINANCING SOLUTIONS, MONITORING GROUP and COFFEE COORDINATING BOARD “Make Vietnam the recognized reference of Robusta” AGREED 2015 STRATEGY

Pillar I: PPP & Control demos grow by years

Pillar I: Steady Higher Yield by Years +5% +11% +13% Average yield of 4 years: +10% higher

Pillar I: Good Practice with Better bean size Summary of 71 demos in 4 Provinces Improve ripenning and bean size

Summary of 71 demos in 4 Provinces (Dak Lak, Dak Nong, Gia Lai, Lâm Đồng) CategoryPPPControlDifference Yield (ton/ha) (13%) Profit (USD) 6,6215, (14%) CFP (kgCO2eq/ton green bean) 6611, (- 55%) Pillar I: Not only Good farming practice with Better Profitability … * Unit area: Ha * Increased profit: USD/ha ( + 14 %) …But also significant reduce the amount of chemical fertilizer usage: PPP: kg/ha Control: 2,240kg/ ha

Pillar I : Reduced 55% of gas emission follow Yara fertilizer application 6 demos PPP program: 304 kg N/ha 5.2 t g.b./ha Control program: 484 kg N/ha 4.8 t.g.b/ha From : Yara Research Center, Haninghof, Germany kg CO2eq/t green bean 661 1,487

Pillar I: Demos are showing encouraging results Mr Nguyen Duy Thanh, Dak R’lap, Daknong Extensionnist Mr Doan Van Huan, Lam Ha, LamDong Farmer leader « less fruit drops this year » « homegenous flowering & fruit set » « bigger cherries » « Expected Yield : > 4 T/ha » « saving labour cost, no need to burry the fertilizer» « better fertilizer solubility » « greener leaves, longer branches » « expected Yield : 4,5 T/ha»

Pillar I: PPP Good farming practice TraditionalPPPPIC/Investment VarietiesOld tree, less than 3 tons/ha TR4 (yield 7.3 tons/ha), TR12 (4.3 tons/ha) Nestle – WASI Cooperation IrrigationOver-irrigation (1300l/tree) Based on the tree & farm conditions ( up to 40% water saving (439l/tree) Sponsor by Nestle - IWMI – SDC Organic fertilizer Almost no compostPromote on-farm composting from coffee husk (1.5 tons/ha) Nestle recommendation IDH/NSC curriculum Chemical fertilizer Unbalanced nutrition and high amounts of fertilizers Balanced nutrition based on soil & leaf analysis and more efficient fertilizers ( -15 %) Yara recommendation CPMPesticides with doubtfull quality Using fungicide to avoid berry drop Syngenta recommendation Carbon footprint Min. 1,5 T CO2 per ton green bean Min. 0,7 T CO2 per ton green bean (- 55%) Yara research Yield & farmers profit (per Ha) 3.9 T 5,813 USD 4.4 T ( + 13%) 6,621 USD (+ 809 USD) Nestle – Yara – Syngenta – IDH and partners Farmer grouping Individual farmersFarmer group, TOT training. Upgrade to Coop Nestle – Yara – Syngenta – IDH and partners

Pillar II: Operating Model of PPP Farmer Group Technical Group DARD/PAEC “Extensionist” Farmer Group Leader Farmer Relationship: Management support Relationship: Technical support Tech support, organization and management support 12

Pillar II: Operating Model of PPP Coop Input company Farmer Group Coffee buying company Management Board MOU Coop’s warehouse Large quantity Wholesale price List of farmers Buy input List of farmers Sell coffee MOU Large quantity Price with premium Wholesale model – From input to output Payment Delivery 13

Pillar II: PPP Coop – The flower model Satellite group CENTRAL COOP Satellite group -1 Central coop for each province (legal entity) -PPP farmer groups will play the role of satellite mini coop -Order for buying input, selling output will be sent to central coop => central Coop will achieve the volume target of companies to enjoy the wholesale price, then, share the benefit to satellite

Pillar III: Opportunity to Collaborate with Agri-Finance TF FARMER GROUPINPUT COMPANY Small loanBorrow small loans at certain crop stages Marketing & SaleSell in large quantity via bank transfer Deposit/savingOpen bank account for farmers Overdraw/loanInput investment to get higher yield COOPCOFFEE BUYING COMPANY Medium loan, risk management Farmer organization in coop Marketing & salesParticipate in farmer group/coop meetings Loan/Payment service Buying inputs, selling coffee, improve cash flow Risk managementPre-screen borrowing farmers 15

Pillar III: Coffee Crop Cycle and Financial Needs  Coffee farmer don’t need financing all the time. The need of money varies based on the development of coffee trees:  For 1ha coffee farm, farmer will need 5 mio VND in July and 8 mio in Sep. Around 70% coffee farmer will need small loans (350K out of 500K farmer household) New crop Jan March Blossom May Form cherry July Sept Develop size of bean Develop size of cherry Dec End of Crop Farmer don’t need to be financed Need to be financed 50% Need to be financed 100% 16

Pillar III: Tri-Parties Meeting 17 -Tri- parties meeting between BIDV – IFC – Coffee Task Force on April 14 -Discuss to build a pilot finance solution for PPP farmer group, PPP coop and the link for whole value chain of 6 stakeholders (nha nuoc – nha nong – nha bang – nha doanh nghiep – nha khoa hoc – nha chung nhan) (government – farmer – bank – company – researcher – certify organization)

NEXT STEPS Disseminate good farming practice to boost the production of sustainable coffee: Need support and alignment from public sector (National Curriculum & NAEC) Pilot PPP cooperatives - Connect PPP farmer groups into central coop: Need the support of public sector (Local meeting between authorities, traders, banks, coop and companies to support PPP coop model) Pilot the micro financing model with Agri-finance task force Cooperate with Growth Asia – WEF.

Thank you