Green Prosperity Facility SUSTAINABLE COCOA PARTNERSHIP

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1 Green Prosperity Facility SUSTAINABLE COCOA PARTNERSHIP Version July 2014

2 Green Prosperity facility SUSTAINABLE COCOA PARTNERSHIP Partnership Grants Green Prosperity Facility SUSTAINABLE COCOA PARTNERSHIP Partnerships to Promote a Sustainable Cocoa Industry and Improved Smallholder Incomes in Indonesia What is the Sustainable Cocoa Partnership? The Sustainable Cocoa Partnership is a Sustainable Value Chain Development (SVCD) initiative funded under the Partnership Grant component of the Green Prosperity Facility (GP Facility), part of the larger Green Prosperity Project (GP Project) aimed at reducing poverty in Indonesia through low carbon development projects that lead to economic growth in the targeted communities and districts. 2 This initiative is aimed at supporting the development of a sustainable cocoa industry in Indonesia and improved smallholders incomes where smallholders and processors benefit equitably. It is anticipated that the Sustainable Cocoa Partnership will achieve this by: Leveraging significant private sector resources and access to marketing channels from partners with a shared interested in ensuring Indonesia as a long-term sustainable source of cocoa in the global market; Increasing cocoa production in order to maintain Indonesia s market position in response to growing demand; Improving and optimizing smallholder yields that will result in increased incomes; Promoting prices to producers that reflect improvements in quality and sustainability; and Contributing, either directly or indirectly, to the reduction of greenhouse gas emissions and/or improved carbon sequestration.

3 Millenium Challenge Account - Indonesia Reducing Poverty through Economic Growth Why cocoa? In Indonesia, cocoa is cultivated by an estimated 1 million smallholders on approximately 1.8 million hectares of land. This makes cocoa an important cash crop, and a key economic driver, in some of the GP Project s targeted provinces, especially Sulawesi. The Indonesian cocoa harvest makes up 11% of global production, ranking third largest after Cote d Ivoire and Ghana in a world market where demand has exceeded supply in recent years. Indonesian cocoa yields are lower than they could be, the country having lost 30% of its production capacity over the past seven years. This decrease in productivity is primarily due to pest and disease infestations, and aging trees. Additionally, the reduced interest of young farmers in working long term in the cocoa sector puts sustainability of cocoa production at further risk. As incomes decline, farmers do not have either the incentive or the resources to make the investments needed to sustain, much less increase, yields. Often, farmers are transitioning to alternative crops that are more profitable, but have negative long-term environmental impacts. 3 In this context, the GP Facility has prioritized investing in supporting the cocoa value chain, improving yields and smallholder s incomes. The growing worldwide demand for cocoa is an opportunity that should be actively pursued. So, the GP Facility is making its first call for Expression of Interest (EOI) under the Partnership Grant s SVCD category.

4 Green Prosperity facility SUSTAINABLE COCOA PARTNERSHIP 4 What Sustainable Cocoa Partnerships can be funded by the SVCD initiative of GP Facility? Given its focus on smallholders and sustainability, Sustainable Cocoa Partnerships must have at their core the needs and circumstances of smallholder producers and the essence of a partnership approach: cooperation, shared responsibility, and support all along the value chain, focusing on the weak links that will have the most impact on improving incomes and sustainability issues. A typical Sustainable Cocoa Partnership might include some combination of improved planting material and husbandry practices, sustainable levels of chemical inputs, technical assistance and training, equitable and efficient market links, and investments in supply and post-harvest enterprises to address any capacity or efficiency needs and the gap that exists between smallholder yields and industry norms. Application of best practices and lessons learned from similar projects in the region, a focus on innovative approaches that are replicable, and a significant and appropriate level of matching resources from private sector partners and/or consortia will also be critical elements in awarding Partnership Grants. Where can the projects be implemented? Is there a geographic focus? Working in the 24 districts within 10 targeted provinces is a priority for MCA-Indonesia given they have already been through the district selection and MoU processes. If the success of the project and the ability to leverage significant private sector matching funds depends on a portion of a project s activities occurring in an adjacent district within the 10 targeted provinces, such a project may be considered by MCA-Indonesia.

5 Millenium Challenge Account - Indonesia Reducing Poverty through Economic Growth Provinsi Kabupaten 1. Jambi (1) Merangin, (2) Muaro Jambi, (3) Kerinci, (4) TanjungJabungTimur 2. West Sulawesi (5) Mamuju, (6) Mamasa 3. West Nusa Tenggara (7) Lombok Tengah, (8) Lombok Timur, (9) Lombok Utara 4. East Nusa Tenggara (10) Sumba Timur, (11) Sumba Barat, (12) Sumba Tengah, (13), Sumba Barat Daya 5. West Sumatra (14) Solok Selatan*, (15) Pesisir Selatan* 6. South Sulawesi (16) Luwu Utara*, (17) Luwu Timur* 7. Southeast Sulawesi (18) Kolaka Utara*, (19) Kolaka* 1. Jambi (20) Kapuas Hulu*, (21) Sintang* 2. West Sulawesi (22) Malinau* 3. West Nusa Tenggara (23) Mahakam Ulu*, (24) Berau* * MoU s and further assessment in-process What funding level and matching requirements does MCA- Indonesia have for Sustainable Cocoa Partnerships? 5 To support Sustainable Cocoa Partnership, MCA-Indonesia anticipates awarding grants in the US $1 million to US $10 million range per Partnership project. The potential Partnerships must leverage private sector resources at a ratio of at least 1:1, i.e. the potential Partnerships must at least match the amount of grant to be provided by MCA-Indonesia. Co-funding from potential Partnerships is expected to be provided in the form of cash or documented direct payments to cover agreed costs as specified in any eventual Partnership Agreement. In-kind contributions are also welcomed, but shall not count toward meeting the minimum necessary 1:1 co-funding requirement.

6 Green Prosperity facility SUSTAINABLE COCOA PARTNERSHIP 6 Who can be a partner in the Sustainable Cocoa Partnership? MCA-Indonesia seeks to partner with entities that share the Sustainable Cocoa Partnership s objectives, have a proven track record in managing/implementing cocoa value chain development projects, and, most importantly, are willing and committed to pool resources and co-fund the partnership with MCA-Indonesia. These entities can be legally registered private companies/ corporations, banks or financial institutions, NGOs and foundations, trade/professional associations. International entities must have an established or a representative office in Indonesia. I m interested. How do I become a partner? MCA-Indonesia has just announced a Call for Expression of Interest (EOI) for the Sustainable Cocoa Partnership. Interested organizations and consortia wishing to partner with MCA- Indonesia in Sustainable Cocoa Partnership should submit an EOI and a Concept Note outlining their proposed project to MCA-Indonesia by mail or via (gp@mca-indonesia.go.id), no later than August 15, Details, requirements, as well as template of the EOI/Concept Note are available and can be downloaded from MCA- Indonesia s website and the GP Portal. MCA-Indonesia will review all submitted EOIs and may select those potential Partnerships that pass the minimum requirements to develop and submit full proposals. Only those that respond to the EOI and whose submissions satisfy the minimum requirements shall be considered for invitation to submit a full Partnership proposal.

7 Millenium Challenge Account - Indonesia Reducing Poverty through Economic Growth 7

8 Millennium Challenge Account - Indonesia MR 21 Building, 11th Floor, Jl. Menteng Raya No. 21, Jakarta Tel Fax: info@mca-indonesia.go.id