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Ministry of Foreign Affairs of Denmark Department for Green Growth CONCEPT NOTE Danish Agribusiness Fund (DAF) Co-financed and Managed by IFU 10 November 2014 File No. 2014-18978 1 Contents 1 Introduction ........................................................
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  1 Ministry of Foreign Affairs of Denmark Department for Green Growth CONCEPT NOTE Danish Agribusiness Fund (DAF) Co-financed and Managed by IFU 10 November 2014 File No. 2014-18978  2 Contents 1   Introduction .................................................................................................................................................... 3   1.1   Strategic questions to guide the discussion. ....................................................................................... 3   1.2   Summary of conclusions regarding the envisaged support. ............................................................. 3   2   Conclusions from preparatory analyses justifying the envisaged support ............................................. 4   2.1    Justification of the envisaged support ................................................................................................. 4   2.2   Key experiences and results of previous support to consider for future support. ....................... 5   2.3   Danish and national strategies for supporting agribusiness ............................................................. 6   3   Preliminary overview of envisaged support................................................................................................ 7   3.1   Objectives of DAF ................................................................................................................................ 7   3.2    Theory of change ................................................................................................................................... 7   3.3   Management and administration of DAF .......................................................................................... 8   3.4    Area and types of investments ............................................................................................................. 9   3.5   Preliminary budget ................................................................................................................................. 9   3.6   Risks ....................................................................................................................................................... 10   3.7    Annex 1: Process Action Plan (PAP) for DAF ............................................................................... 11   3.8    Annex 2: Results Framework ............................................................................................................. 13   3.9    Annex 3: Assessment of Programmatic and Institutional Risks ................................................... 14   3.10    Annex 4: HRBA/Gender Screening Note ....................................................................................... 17   3.11    Annex 5: Climate Change and Green Growth Screening Note .................................................... 21   3.12    Annex 6: Assessment according to the budget support principles (this annex is not applicable for this programme) ......................................................................................................................................... 25    3 1   Introduction 1.1    Strategic questions to guide the discussion.     The intention of the proposed Danish Agribusiness Fund is to support Danish enterprises and Danish interests 1  in order to ensure sustainable and economically viable projects in developing countries. At the same time, the DAF aims at enhancing good investment- and market opportunities for Danish enterprises within agribusiness and food production related industries and services. Is the proposed DAF framework an effective vehicle for this purpose?     The DAF is proposed to give priority to projects that enhance value chain development, i.e. will have a direct or indirect impact on other players in the value chain, notably also on small-holders and SMEs that may be too small for a direct DAF-investment. Is it justified and realistic to include such a priority?     The proposal suggests that investments in all DAC countries can be supported. Should a percentage of the investments from the DAF be restricted to fewer (poorer) countries, i.a. Danida’s contribution to the fund ? 1.2    Summary of conclusions regarding the envisaged support.  As part of the Government’s Strategy for Export Promotion and Economic Diplomacy launched in June 2014, an Agribusiness Facility “Danish Agribusiness Fund (DAF)” 2  should be established. To establish the DAF, an amount of DKK 89 million is allocated in the 2015 Finance Bill and IFU is expected to contribute with a similar amount from own sources.  According to the Finance Bill, the DAF shall be administered by IFU on the basis of the experience from e.g. managing the Fund for Central and Eastern Europe (IØ-fonden) and the Danish Climate Investment Fund (KIF). The DAF will contribute to the creation of profitable and sustainable projects within agricultural production and food processing in developing countries. In parallel, the DAF is envisaged to enhance good investment- and market opportunities for Danish enterprises within agribusiness and food production related industries and services. On this basis, IFU and Danida have initiated the process of establishing the DAF. Main features of the proposed DAF include the following:     The objective of DAF is to contribute to sustainable economic growth in developing countries by enhancing profitable and sustainable investments within agricultural production, food processing and related industries;     The DAF is expected to mobilize additional funds from private and institutional resources, so the total fund is expected to be about DKK 750-800 million; 1  Danish interest is defined as Danish economic interest stemming from either direct equity investment and / or delivery of technology and / or know-how and / or management in a project 2   In Danish ”Landbrugsinvesteringsfonden (LIF)”    4    Projects will be supported in partnerships with Danish enterprises and commercial interests;    Investments in projects with clear developmental effects, such as smallholder inclusion, employment, training and education, environmental sustainability and food safety will be prioritized;     The success of DAF will be measured using indicators such as: expected and actual employment, direct as well as indirect (i.e. smallholders and SMEs upstream and downstream), generation of additional financing from other sources (mobilisation factor), CSR- and financial performance;     The DAF will be managed by IFU according to similar principles applying for the IØ-fonden and the Danish Climate Invest Fund (KIF).  A Process Action Plan showing the tentative planning schedule for formulation and approving the DAF initiative is provided in Annex 1. 2   Conclusions from preparatory analyses justifying the envisaged support 2.1     Justification of the envisaged support Global food security is on top of the development agenda. The challenge of doubling the food supply to feed more than 9.6 billion people in 2050 is a daunting task in an era of increasing food demand and limitations in supply. Moreover, it is inconceivable to provide food security  worldwide without involving small-scale farmers, who in many African and Asian countries account for approx. 80% of the farmland and provide up to 80% of the food products in these countries.  Almost 2 billion people, or approximately 1/3 of the World’s population, are working within agriculture today. According to World Resources Institute (WRI) half the globe’s arable land is used for agriculture. Agriculture is responsible for almost 25% of the emissions of green gasses and for almost 70% of the consumption of drinking water. An increase in food production by 70% over the next 40 years will consequently be a delicate balance. It will be necessary to secure food for 9.6 billion people in a manner, which will create jobs and assist in reducing poverty without putting more pressure on the environment. Danish agriculture and Danish companies are among the leading in the world with regard to efficient use of resources. According to statistics of Danish Agriculture and Food Council, Danish food production has increased by 18% over the last 20 years. Danish agriculture and food processing companies can contribute on an important scale to secure efficient and environmental friendly growth in the food production and processing in developing countries. IFU has significant experience with management of similar funds, e.g. the IØ and the KIF funds. Hence, IFU’s administrative structure makes it feasible and cost efficient to establish a
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