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Pacific Region

The Pacific Region covers a very large area with countries in varying degrees of development and standards of living. The remoteness of the islands has made development more difficult. The Region has resources, immense in the case of Papua New Guinea, rather more limited minerals and oil in the remainder. The islands all have forestry and large fishing zones which can be and are leased to raise revenues. The islands also have up to 4 billion coconuts per annum. The citizens also grow tubers, including kava, for consumption and there is some cocoa and coffee and in the Solomon Islands and PNG oil palm.
 
Beautiful remote islands naturally also attract tourism but the remoteness also limits tourism because it is expensive for all but tourists from Australia and New Zealand. Moreover, lack of investment capital has led to most for the tourism developments to be foreign owned and thus profits are expatriated.
 
There is also some livestock mainly financed and managed by foreigners for the export market. Together with tourism, livestock and trading has also led to a significant and growing expatriate population. The islands are in fact loosing their individuality due to emigration and immigration. The Region is becoming globalised in a very fundamental way. There are a lot of "cute" village scaled projects which have little hope of survival but go down well with the tourists and retired expatriate investors.
 
Agribusiness takes mainly the form of processing and export of crude commodities which face a long term decline in real prices, volatility in earnings and low returns. The trade in copra is thus a major activity. The only exception being very small scale attempts to develop agricultural production to service the tourists. Although this attracts a lot of attention particularly from donor administrators, the ability of local producers to produce and deliver in good condition what the tourists want to eat is limited. Tourism is a globalised business with most tourists wanting to eat what they get at home which is not always what can be grown locally. Nevertheless it attracts donors and aid programmes but has not led to any significant gains. Fiji has developed agriculture for exports and the local market and stands out as an exception but they lack cold chains and the infrastructure to take the development much further.
 
Despite donors providing technical assistance over a long period of time, nothing much has changed on the ground. Endless repetitive expensive workshops are held on planning, better farming, information systems, post harvest handling, SME development etc. but are attended mostly by administrators and are more a way of life than a means for development. Few farmers attend but are substituted by farmer representatives who are again largely administrators.   
 
NEW REGIONAL COCONUT INITIATIVE
The Ambassadors representing the Pacific Islands at the European Community in Brussels took a joint initiative to seek funding for a regional project to develop Pacific capacity to produce high value coconut products.
 
This initiative is only for pilot plants and would affect only 60 million out of 4 billion coconuts in the region. However, even this limited development could set in motion fundamental forces that would bring about far reaching changes.
 
 
The first Mission to the Region has ended successfully in October/November 2011 and identified what should go where. Pilots were recommended for 5 countries (Fiji, Papua New Guinea, Samoa, Solomon Islands and Vanuatu. There was a formal presentation to the Ambassadors from the Pacific Region to ACP but was also attended by Ambassadors from the Caribbean as well as DEVCO. The findings of the first Mission were accepted in December 2011 and Mr Chand instructed to complete full feasibility study analysis on the projects being recommended. The study was indeed completed in March 2012. A long silence followed during which all contemplated what was being proposed but none appeared to know what to do about it.
 
An investment in developing a commodity sector of 40 million Euros in grants and the possibility of loan capital and investment from others makes this the largest single investment in soft commodities in the Pacific Region. If undertaken wisely it would alter perceptions and expectations in a way that gold from the fabled mines cannot.
 
The target is to ensure farmers benefit and they will. Not with a 1,000 pages of studies and moribund resolutions but actual investment and exports with success measured in cash (a rather accuarate objectively verifiable indicator).
 
 
The Ambassadors for Vanuatu and Samoa to Brussels persisted and following a technical mission in March 2013, ACP has decided to proceed with the projevct, which already had approval from the Pacific Ambassadors Committee, and has requested for funds to be released. However, there have been last minute differences due to the EU office in Suva and SPC insisting that the project should consist of technical assistance only with no expenditure on plant and machinery. That is their normal project with most money allocated being spent on admin, travel, workshops, and studies and over decades little or no actual development on the ground.

The Caribbean has decided on letting EU guide them on seeking investment instead of requesting direct help for reasons that are not clear. Not much is likely to result in the form of investment in processing although there may be a limited public promotion of the need to replant.
 
Vinay Chand in front of the Rabaul Caldera in March 2011

Clearly the plant in Rabaul will have to take precautions against volcanic ash.

Production of crops in the Pacific is mainly for subsistence except when outsiders have intervened to promote production of crops like sugar, oil palm and coconuts to meet specific market demands. Sugar has been cultivated particularly in Fiji which dominates island production but is a mere one-tenth of that of Australia. Even production in Fiji is under threat from migration of sugar farmers.
 
In tonnage, sugar cane is the leading crop, followed by coconuts and oil palm as well as traditional crops like bananas, fruits and roots, tubers, taro and yams. However, in terms of land allocated, coconuts are by very far the most important crop. The Pacific islands can safely be considered a coconut based crop system. The area is far more important than production since it indicates that nearly all farmers in the region are affected by coconuts and any progress with coconut development is likely to have the largest impact. You simply cannot develop the pacific without touching coconuts and anyone who is trying is operating at the periphery and fooling themselves.
 
Fresh coconuts are an important element in the subsistence farming that dominates. Their commercial use is traditionally as copra but due to freight rates the value of the copra is low. Converting to coconut oil for export is only marginally better. The emphasis on diversification in part is to reduce dependence on imports and also to generate a higher value export.
 
One form of diversification, namely planting more oil palm, should be undertaken with care bearing in mind what the impact will be on environment and society. The Chinese are seeking to supply their edible needs and plant oil palm in the Pacific. They are doing exactly what the earlier colonial masters did, namely, treat the region as a supplier of primary commodities. Malaysian interests acting out of PNG have already done the same in PNG and in the Solomon Islands. China has offered support to the Solomons in Yandina and to Vanuatu for a plantation in Santo.
 
In terms of area planted, coconuts dwarf all other crops. This is not because they were at some time favoured or have been planned to be so, but rather, coconuts are an ideal crop in the Pacific and there is no perfect substitute even if some think that Oil Palm could be one. Coconuts fit the culture as well as the physical environment well. There have been programmes for some time to develop roots and fruits and vegetables. Kava, in particular attracted attention. Oil palm is also a relatively recent development. Where possible, oil palm can yield good returns and this has attracted FDI to the Region.
 
 

In terms of global coconut production, Asia dominates production, followed by South America and the Pacific in roughly equal proportions.

Coconut Production by Region.

millions

Asia

56,706

Pacific

3,600

Africa

2132

South America

3,829

Central America

1,856

Caribbean

690

More land in the Pacific, by far, is used for coconuts than any other crop. Second comes taro, cassava and potatoes, nearly all for domestic consumption. After tubers come cocoa beans, fruits, oil palm, coffee and sugar. To summarise, half the cultivated land mass in the Pacific is accounted for by coconuts. The Pacific Region accounts for slightly over 3.6 billion coconuts per annum. It also has a surplus of coconuts for export.

Coconuts are the major resource base that the region has and yet, their use has lagged behind centuries and the export part remains rooted in exporting copra and coconut oil at prices that are so low that the farmer price is less than one-quarter the global average. The average Pacific FOB price for copra is at around US$ 200 per ton when it is $400 at world market rates. Oil can only be exported in bulk since a barrell of coconut oil costs the same to freight as a barrell of petroleum.

Developments that are revolutionising the industry globally such as US$10 million invested in developing husk products, $10 million into tender coconut water in Brazil and continuing increase in coconut milk production have not made inroads in the Pacific. A total rethink is required.

Coffee and products actually earn more in export earnings than do coconut products, mainly because coffee in crude form is far more valuable than copra. Yet the largest potential for growth, coconuts can be an engine for growth and due to the scale of importance in the region, any development of the sub-sector would have a major impact and it is not possible to have a major impact without developing coconuts.

Papua New Guinea is by a long way the leading producer in the region. Despite past plans and intentions to develop into high value products, PNG has not done so. The Solomon Islands and Vanatu follow next in importance. The Solomon Islands are developing a coconut strategy under the ACP all Commodities programme. Vanuatu has had assistance from the European Commission in the form of a pilot plant to use coconut oil for electricity and has 9 more pilots being implemented. Samoa has suffered a collapse in the only substantial medium value canned milk plant and continues to feed half the coconuts to pigs.

In addition to the above 1.3 billion coconuts are simply not harvested. The traditional oil and copra still account for over a billion nuts as well as 400 million fed to pigs. The commercial value, leaving out most of those consumed fresh is around:

·US$ 14 million of copra

·US$ 30 million of oil

·US$ 3 million as animal feed

·US$ 2 million for milk and

·US$ 36 million fresh consumption

a total commercial value of US$ 123 million or an average value per coconut grown of around 3.4 US cents per coconut. That value pales into insignificance when contrasted with the rising cost of imports and even when compared to exports of US$ 57 million for coconut products to higher value crops such as palm oil at US$ 240 million exports, coffee at US$ 138 million and cocoa U$ 96 million.

The low commercial value of coconuts has led to severe neglect and some replacement with oil palm, coffee and cocoa, which are seen as the engines of growth. Even minority crops such as rubber, tubers, fruits and vegetables were given priority over coconuts at the regional workshop on the EU/ACP All Commodities programme.

The low value ascribed to coconuts by the Governments in the Pacific is mirrored by that of donor and aid organisations. Both have even ignored the environmental arguments and endorsed oil palm instead. Coconuts have unique features that have enabled the palms to last for centuries. Most of the solutions that have attracted the authorities such as horticulture to supply tourism are too marginal to be able to be an engine for growth.

One billion coconuts, roughly the number being used for copra and oil in the Pacific, are worth the following at FOB value in the region in US$:

One billion coconuts, roughly the number being used for copra and oil in the Pacific, are worth the following at FOB value in the region in US$:

 

Main Development Options

  • Production of coconut oil from copra.
Copra exports at an average $200 per ton leading to a very poor coconut price. The idea behind banning copra exports, now being resorted to by some Governments, is also to encourage emplyment and value addition within the country.
Some are attracted by the logic of producing oil on the islands and aggregating it in the capital for bulk container exports. One problem is that inter-island shipping rates are very high for barrels of oil. another obstacle would be that there needs to be someone with the working capital to finance such an operation. Finally, they would have to compete with copra buyers.
  • Use of the coconut oil as a diesel substitute.
If good quality copra were produced using the waste heat from husk or shell burning or biogas, the copra could be used for expelling oil and the oil as a diesel additive in fuel for vehicles to reduce the huge import cost of diesel. Using the oil in vehicles, if kept to below 20% of the fuel, could be undertaken without modification of engines.
The concept that is popular throughout the Pacific and indeed elsewhere if one of using coconut oil for fuel in the generation of electricity. In Vanuatu, the EC has established one plant on Santos that uses oil as fuel for generation of electricity and finance exists for a number of pilot units. If coconut oil is used as the sole fuel for engines, the latter have to be modified.
  • High value products like coconut milk or tender coconut water.
There is currently a seismic change in the demand for coconut food products globally. Brazil has led the way with coconut water and even Hollywood personalities are reported to be investing $10 million on increasing production.
Coconut milk has established markets throughgout the world. The main reason for considering tender coconut water and milk is that the export price would be up to ten times that for copra.
Some, particularly administrators from development agencies, fear that production of food grade products is impossible in backward countries. They generally dont apply their false logic to fruits and vegetables but apply it to coconuts due to the depth of their ignorance and laziness in not informing themselves better. Their mistake is that there is nothing backward about the Pacific. It is possible to design plants that are fairly small. Also it is fairly routine to design them to be food grade. Yet, this ill informed prejudice holds the development process back. The administrators do not realise that they are actually having a negative impact on development and are anti poor.
  • Virgin coconut oil.
Pacific coconuts has encouraged production of coconut virgin oil throughout the Pacific and there are others in India, Philippines and elsewhere also producing. The reason lies in the internet marketing of virgin oil at very high prices. The pacific producers do not get much more than $1,500 per ton but it is the retail prices that are firing the enthusiasm. Retail prices are often as high as $20,000-40,000 per ton but are sold in small quantities.
However, production is mainly small scaleand the world market only about 3,000 tons. Production is growing everywhere there are coconuts.
  • Use of husks
  • as biomass to burn to generate heat and electricity
  • or to be used for coir and peat extraction and processing
  • use of the heat for drying copra
  • and for desalination.
  •  

    A number of village systems could together own coconut oil mills. The alternative is for private entrepreneurs to own them and there are some who have established small units. Again, everything depends on prices paid to farmers and to copra processors. The advantage of community ownership is that it avoids jealousies and resentment. It also assures supply.
    Coconut husks are used most often to extract coir fibre with peat. Once the coir and peat are extracted, peat can be exported in blocks while coir has to normally be further processed. Husks are at present wasted often left under the palms. They always serve a residual function as mulch and there are those who argue that they should be left there as they enrich the biomass in the soil.
    However, if husks were to be burnt and steam generated, it would provide a basis for decentralised rural electrification paying a fraction of the electricity prices being charged in the country. The waste heat could be used to dry copra and/or to desalinate water.
    The alternative would be to extract coir fibre but it is likely to secure poor prices due to freight rates. A more attractive alternative is to process the coir into needlefelt or stitched blanket pads. These find use in furniture upholstery as geotextiles.
    • Production of coconut shell charcoal.
    Coconut shell charcoal can be produced very simply in disused oil drums or through kilns. It is possible to burn shells and use the heat generated while recovering the resulting charcoal but may not be advisable in light of the plan to use husks for the purpose. Charcoal is most often traded for activation as a commodity but higher value uses are possible. Shells have a high BTU and are idea for generation of heat and electricity.
    Nothing could be simpler than small scale production of coconut shell charcoal. Disused oil drums or substitutes can easily be adapted for the purpose or a kiln can be built. The cost of production is minimal.
    The problem is that the export of briquetted charcoal would be at the world market price, say in Manila, of, say, US$ 140 per ton minus freight of say $100, leaving a gross trading margin of $40. Farmers would not undertake the activity without being paid, so the gross profit is likely to be around $20. That price level is worth exploiting only with very large volumes as used to be the case on Santos in Vanuatu where one traderwas exporting 1,000 tons a decade ago. Even in his case, he wanted to activate the charcoal instead of exporting it as bulk.
    Much higher prices can be obtained for the charcoal, say $600 per ton but it requires an advanced marketing operation.
    • Activated Carbon

    Activated carbon has long been considered in the pacific. A facility to do so would generate a ready market for all charcoal in the region. However, traditionally shells from 60 million nuts are considered necessary to justify an activation plant. This has changed since India and China are offering plants that can be viable at a far lower level.

    However, no comparisson has been made of the diferent technologies and coconuts shell carbon earns a far lower premium over other carbons than it used to.

    In the past there has been a feasibility study for production on Santo and results were very encouraging with IFC acting as sponsor.

    A lot depends on controlling the activation process to yield a maximum of premium grades that the market requires. Also a lot depends on the value chain since coconut producers know almost nothing about the margins.

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