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Solomon Islands
 
 
Coconuts are the most important crop in the Solomon Islands. The country produces more than 600 million coconuts per annum, probably nearer 800 million. But many of the nuts are inaccessible and are left on the ground and some of them nearly impossible to pick up. Official production figures of around 220 million nuts are based on copra processing.
 
 
NEWS
 
 
I had reported some 3 years ago that it looks as though the long lasting dispute that has kept the former Unilever Brothers Plantation in Yandina in the Great Russell Islands, is being resolved. This opens up exciting possibilities of exploiting the coconut and forestry resources of Yandina again. Something that will bring much needed prosperity to the islands as well as the country. Unfortunately, things have not been resolved and appear, in fact, to have gone backwards. To an outsider, it is entirely unclear as to who owns the plantations although it is clear that the farmers control them.
 
The legal system and enforcement of laws in the Solomon Islands discourages new investment. Parliament does not appear to be supreme and changers all the time. There is a key question that has to be answered - suppose I want to buy Yandina and I may want to, despite the issue of control, who do I go to and how much do I have to pay? Is the liquidator in charge or the Government? or RIPEL, whoever that is.
 
In my opinion the matters should be clarified and then speedily resolved in order to open up one of the largest agribusiness assets in the country for development. No more than 48 hours will be required once the Government is truly decided.
 
With a population of only 500,000, the country is endowed with ample resources for a truly rich life. It does not have it at present with a per capita income only slightly over US$ 500, it remains poor in financial terms but rich in quality of life in most of the country.
 
 
Logging has been the main export and is still undertaken with too few controls and a lot of destruction of the environment. It is quite common to see where the loggers have been, areas are totally cleared and left without any replanting or tydying up. There are regulations in place to stop this but do not appear to have been enforced. In more recent times, forestry products are becoming more managed with teak and canarium and fuscia. The Solomon Islands is apparently ideal for growing teak. But, fisheries play a major role, as does gold with agriculture accounting for the most number of people working.
 
 
 
The hectares devoted to the main crops is indicated in the chart above. Although coconuts remain the principal crop in area terms, three times as prominent as the next crop, cocoa beans have grown in importance and the income from palm oil has increased very impressively. Both, cocoa beans and palm kernel earn more dollars from exports than does copra. Small farmers often have just one crop, coconuts but an increasing number now also grow cocoa. Unfortunately, cocoa is now under threat from a disease making its way through the region from Papua New Guinea.
 
 
Cocoa beans are the most important crop being exported in value terms, followed by palm kernels and copra. With higher values by weight than copra, cocoa and palm kernels obtain better freight value. Production of both has been and is growing rapidly. In particular, the PNG owned investment in oil palm has been steadily increasing in importance. Any major development of the coconut sector would place coconuts at the head of the crop export and import substitution list.
 
 
The problem with copra is that although the Solomon Islands exported over 40,000 tons of copra, the local price is calculated based on the prices in the Philippines minus freight minus trader margin. If the prices are:
 
 
Coconut Oil, FOB Manila US$ 800
Copra equivalent US$ 600
Freight Honiara-Manila US$ 120
Traders Margin US$ 100
FOB Honiara US$ 380
 
 
The above leads to a local nut price of 2 Solomon Island cents per nut which makes the coconuts among the lowest priced in the world. Copra is produced only because it is the only source of cash for those who undertake it.
 
 
{click Value Chain Analysis page to see the copra chain from the Solomon Islands, one of the few chains on copra available}
 
 
The copra cannot be expressed as oil and exported to global markets because shipping companies serving the country charge for a barrel without regard to what is in that barrel. Any oil produced has to be used within the country and the sprinkling of soap factories amongst the islands is a testament to exactly that. Coconut oil used to be exported in bulk for decades by Unliever Plantations in Yandina but one of the economic tragedies has been an impasse over these old plantations betweem farmers, farm workers, Patrick Wong and the Government. It would be fairly simple to resolve the issues but they are caught up in a morass of legal actions with few judgements enforceable.
 
 
However, the Solomon Islands imports a great deal of petroleum and it is the largest single expense for the country. The diesel may sell on the local market at US$ 800 per ton or more, making it very tempting to disreagrd the food argument and mix filtered coconut oil with diesel either in mini electricity plants or for vehicles. There would have to be a machanism for ensuring that buyers pay a price for coconut oil related to diesel and not edible oils. This is not happening so far mainly due to the lack of mechanisms that assure good returns down the value chain. Moreover, while the long terms trend in prices of exports of commodities has been declining over a long period of time, that of petroleum has been rising.
Malaita
The islands have to pay high costs for petroleum and that leads to expensive electricity, which in any case is confined to urban centres. True throughout the Pacific. This energy constraint impedes all development. This explains the desire to develop renewable energy. While solar power and biofuels are not yet commercially viable in industrialised countries, they are viable in remote island communities.
The distribution of copra production by province has been as follows:
Copra Production in tons
WestChoiIsabCentGuadMalaMakirTemoTotal
19996,830 2,450 1,892 1,123 2,569 4,637 2,239 1,502 23,242
20005,211 2,501 1,597 1,179 1,677 4,797 1,749 834 19,545
2001213 88 51 426 326 313 157 45 1,619
2002220 16 100 617 211 265 112 14 1,555
20032,475 890 230 5,651 3,314 3,012 1,001 950 17,523
20043,506 1,233 870 3,883 7,572 3,560 1,748 294 22,666
20054,060 1,072 1,770 5,440 7,314 3,782 1,992 730 26,160
20063,325 915 1,437 4,460 5,970 3,140 1,520 500 21,267
20075,858 1,519 1,213 4,413 7,959 3,844 2,494 604 27,904
20088,299 2,658 1,482 5,931 10,140 6,268 3,691 501 38,970
Total39,997 13,342 10,642 33,123 47,052 33,618 16,703 5,974
Guadalcanal, Western and Malaita are the leading copra producing provinces. The figures need adjusting to take into account some movement of copra to Guadalcanal from the provinces that is not recorded officially.
 
 
Vinay Chand has been a consultant for a UN Agency led coconut strategy development programme funded under an EC programme that Vinay helped to originally design, but our participation will end after another weeks work to be spread over 5 months. There are no plans on our part for us to be involved further. For the purposes of the project under preparation, three leading copra producing provinces have been nominated for pilot systems. That is why the workshops in 2009 were held there.
 
 
Malaita
 
 

Malaita Province is one of the largest provinces of the Solomon Islands. It is named for its largest island, Malaita (also known as "Big Malaita" or "Maramapaina"). Other islands include South Malaita Island (also called "Small Malaita" or "Maramasike"), Sikaiana Island, and Ontong Java Atoll. The provincial capital and largest urban center is Auki, located on Big Malaita. The population of the province is 122,620 (1999). The area of the province in 4,225km².

On a trip to the island of Maliata, a 'dream development' became a vision. In the northern part of the island there is a farmers association of 7 estates of coconuts run under the steawardship of the very charasmetic Rev Michael, with between them over 2,500 ha of high density palntings of coconuts producing more than 20 million coconuts, cared for and processed on a communal basis. That presents the possibility of developing coconuts on a community basis.
 
 
One of the perennial questions that has to be resolved in developing coconuts in small island states is that of returns. There are small under sourced processing units, often either set up by expats who have settled on the islands or with the assistance of expats. But they pay the same price for coconuts that is paid by copra buyers.
 
 
All such programmes can lead to Government planning bodies. In the Philippines there is a Coconut Development Authority as is the case of many other major producing countries. It is far easier to concentrate on setting up structures that can appear bottom up but inevitably end up dependent on Government or donor finance which trasforms them into top down structures that are finance dependent. Not so different from NGOs that are often set up by development programmes and last as long as the aid programme that led to their creation. Whether it leads to actual development on the ground is to us the key issue. In most coconut producing countries, the Government bodies have not been at the forefront of developments. However, Government support is of political importance.
 
 
The fact that there are many more coconuts outside the area regulated by the association with more than 40 million coconuts being harvested for copra alone, implies an annual island production of more than 70 million coconuts.
 
 
Coconuts influence the lives of everybody on Malaita, directly or indirectly. At present, coconuts are not earning Malaita more than US$ 1.6 million. That is an important cash income in addition to logging, fisheries and cocoa. There is very little tourism. Coconut processing represents the only option for increasing incomes and standards of living by an appreciable extent.
 
 
Downstream processing of copra into oil has always invited attention and there is some small scale production of virgin coconut oil, probably not more than 200 tons every year. That could be increased to double that level but would not change the economy much. The problem lies in the small global market developed so far that is catered for by long and expensive value chains that result in retaively low factory gate prices and do not provide enough incentive for a larger development. Copra based oil cannot be exported because it is too low value when compared to the freight costs charged for barrells. A barrell of coconut oil attracts the same freight rate as a barrell of petroleum but is less than a quarter in equivalent value.
 
 
One possibility is to process coconut oil and then use it as a diesel substitute. This would increase the use value four times but may not increase price by that much. In any case, it would be good to use the copra currently earning US$ 1.6 million to substitute diesel worth US$ 6.4 million.
 

 

However, even larger increases in income are in prospect through production of milk and by-products. The potential added value is four times that from substituting diesel. A mix of all these solutions could change life in Malaita, particularly if the increased wealth was shared between the community. A real possibility given the existence of the farmers association in the north.
 
 
The long narrow strip by the sea consists of a track with dense coconut palm plantings on both sides of the track. The lagoon with the narrow strip and picturesque villages is obviously going to attract tourism in the near future. There are miles of near deserted beaches and coconuts that are not even collected with abundant marine resources close at hand. The Island Government is viewing these possibilities with relish. However, it has very limited resources of its own.
Malaita beach
 
Malaita has been a centre of civil strife in the past and the situation remains delicate as the report below illustrates:

 

 

There is very real prospect that Malaita will go it alone but danger that this may not be peacefully accomplished. Not enough has been done for the Province and it has suffered greatly during previous conflicts. There is still a window of opportunity for the international community to help develop the Province and restore or rather achieve an equilibrium that the Province could accept. The coconut project represents just such a way.

 

 

Some people, including officials of ITC, use the same facts to come to the opposite conclusion. They argue that helping Malaita develop coconuts would enable them to become independent due to the revenue they would get and persuaded an ad hoc coconut sector committee they had installed to support a rather vague meaningless strategy that sidelined Malaita. These sort of people are like King Canute, they think they can stop tides simply by ordering them to stop. Their logic has produced the current crisis. They are to blame for the alienation that people in Malaita and other provinces feel. You cannot keep Malaita poor just to stop them from thinking they can be independent.

 

 

If coconuts are not developed in the Province chances are that Malaita will go for independence.


 

Western Province

The Western Province is the largest of Solomon Islands nine Provinces with a total land mass of about 5,500sq km. It consists of the island of Shortlands, 420sq km, Kolombangara, 685sqkm, Vella Lavella, 670sq km, Gizo, 37sq km, New Georgia.
The combination of pristine lagoons, prime dive sites and lush forests has immense appeal to visitors. The many lagoons are a visual delight from the air and the combination of dark greens, white strips, light and dark blues is breathtaking. Often colloquially called the West, the Western province, which has now become the country's hub for tourism, was formerly the largest administrative area in the Solomons with its people describing themselves as westerners.
 
 
The coconuts are there in abundance but in our opinion the human and physical infrastructure are lacking. That will determine the form of development that can be considered. It would be particularly relevant is coconut oil can substitute diesel on boats and we have no reason to think that it cant.
 
 
Gizo beach
 
 
Guadalcanal
 
 

Guadalcanal, where the country's capital Honiara is located, is the largest island in the Solomons group. Guadalcanal is 90 miles long and about 25 miles wide and scene of famous battles in the second world war. It has coral reefs on the south shores and mountains up to 8000 feet high in the interior. The Solomon Islands have been inhabited for thousands of years, initially by settlers from New Guinea. The islands were named by a Spanish explorer, Alvaro de Mendaña de Neira, who, on finding alluvial gold on Guadalcanal in 1568, believed he had found the biblical King Solomon's source of gold. For two hundred years after this, there were few visits to the island by Europeans. Then, in the 1800's the British took an interest in the islands. A trade in laborers began, with workers from the Solomon Islands being taken sometimes brutally to Fiji and Australia to work on sugar plantations.

 

 

Guadalcanal is reported to export 10,000 tons of copra per annum, equivalent to 50 million coconuts. The ones near Honiara are supplied for drinking and other fresh consumption. There is, to the north of the airport, a plantation that used to be part of the holdings of Unilever Brothers and is also being cleared from a legal dispute. The problem for the plantation is that it is near enough to the capital to be subject of speculation as to long term urbanisation.

 

 

Honiara is host to most of the major industrial investments in the country. The central energy utility and telephone company dominate.

 

 

Aside from the three provinces being considered under the EC funded programme, there is always the elephant in the room that is not mentioned in the form of Yandina.

 

 

Yandina

 

 

There is no more controversial issue in the Solomon Islands than that of Yandina. Unilever Plantations used to own a number of estates in the George and Russell Islands yielding up to 120 million coconuts per annum together with gathering some owned by others. Vinay Chand became first involved with the Solomon Islands in 1979 when he prepared proposals for Unilever to do what is being discussed now for the country as a whole. Coconut milk, coir and activated carbon production was considered favourably.

 

 

However, Unilever made a strategic decision to pull out of plantations in general but out of the coconut plantations in the Solomon Islands in particular. Although their operation was marginally profitable as oil producers, it did not fit in well with their corporate strategy. They did not want to own Yandina.

 

 

When Unilever sold the plantations a series of developments led to them being bought in a run down state for what is now contended to be a song by Patrick Wong, a trader in copra and coconut oil, who has been fighting a legal battle since to regain posession that he lost due to squatters taking over the planations. With the added civil strife in the country at that time, the issue had become intractable. A valuable resource was allowed to remain relatively staganant. There were continuing legal disputes and a variety of judgements by courts that are impossible to implement.

 

 

Sooner rather than later, and it looks as though the time is now, the issue will be resolved and it will become possible to consider a major Integrated Coconut Processing system that Unilever had considered favourably. It looks as though the Government of the Solomon Islands has agreed top settle with Patrick Wong on the Yandina Estates legal dispute for a reported $ 2.6 million. Meanwhile tens of millions of dollars of potential income and exports has been lost to the farmers and the country. The latest news is that the Government is on the verge of a settlement with Patrick Wong a payment for resolution of the legal dispute. Settlement appears around the corner.

It is important not to continue residual legal actions against the unions and the farmers because these will impede any development. Following settlement of the legal disputes, and payment of compensation, it will be necessary to rehabilitate the plantations, wharf, storage facilities and processing. There will be an attendant cost to doing this. While rehabilitation is a useful first step, Unilever had been considering higher value processing as a way of adding value and a long term strategy for Yandina will be essential.

 

 

The fastest production that could be organised is to start buying copra at viable prices, expressing oil and exporting. Having accomplished that, the next option is to consider integrated coconut processing including production of milk or tender coconut water, coir products and activated carbon. That is precisely what Unilever Plantations were considering before their decision to sell the plantation.

 

 

There will also have to be a new owner of Yandina and this new owner would have to repair relations with the farmers and workers of the region. They could be organised in a cooperative and for the cooperative to enter a joint venture with an investor. This suggestion is being already considered by the Government. There is always the danger of a large corporation buying Yandina for coconut oil and ending up paying workers and farmers very little thus re-igniting the old problems. The key problem is that any venture based on copra and oil would not have enough money for a peaceful and fruitful development. We have to move beyond that.

 

 

Availability of the former Unilever Brothers Plantations in Yandina opens the door to a new era. For one thing, there are more than 20 million coconuts available in the immediate environs of Yandina and if oil were produced from this number, it could be exported today at over US$ 3 million or used as biofuel at a siumilar saving. But there are more than 60 million coconuts available to Yandina and that makes it possible not only to consider coconut oil but also milk and even milk from 20 million coconuts could be exported at over US$ 10 million per annum. That means over the past 15 years a $150 million potential income has been lost.

 

 

If by-products were also processed in the shape of coir geotextiles or rubberised coir and activated carbon were produced from shells from 60 million coconuts, annual earnings would be very substantial indeed and over US$ 15 million could be earned from even 20 million coconuts per annum.

 

 

Vinay Chand is opposed to any solution to the old Lever Brothers venture that does not leave ownership and control of land with the farmers who have been occupying and working the land and decent returns to the workers. The support of a well organised and representative union will be essential. A solution must be seen to be in the interests of all parties concerned. No other solution is viable. We believe that a solution is possible that will bring the old plantations at least to the twentieth century while being fair to farmers and workers. Any other solution is a path to ruin!


 

Main Development Options
 
 
The main options being considered are:
 
 
  • Production
    of coconut oil from the copra being exported at present.
 
 
The Government has already given notice that copra exports must cease but few expect the deadline to be met. Nevertheless, it is an interesting ruling since copra exports at $400 per ton lead to a very poor coconut price indeed. The idea behind the ban was also to encourage emplyment and value addition within the country.
 
 
However, exports of coconut oil are viable only in bulk. Yandina could do it in the days of Unilever Plantations and others in the Pacific do export in bulk. It is doubtful that it could be done without the rehabilitation of Yandina. This now appears to be near certain and so the question of whether to ship oil or not is relevant again.
 
 
Some are attracted by the logic of producing oil on the islands and aggregating it in Honiara 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.
 
 
Of course, rehabilitation of Yandina offers the possibility again of an oil mill and direct bulk exports and this is indeed possible by the end of 2011. Yandina could begin by exporting 2,000-3,000 tons of coconut oil. If the price were to fall a great deal, the oil could be used for the energy utility in Honiara as biofuel.
 
  • Use of the coconut oil as a diesel substitute.
 
 
If good quality copra were being 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.
 
 
Two years ago ADB was planning a pilot plant on a remore island and bids were being prepared for the project. During this process an Australian group was negotiating with the Utility in Honiara the possibility of producing oil at Yandina and using it to power the national plant. This option now appears worth considering again.
 
 
  • 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. 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.
 
 

A major constraint lies in the lack of SMEs having critical mass. In that situation, the only SMEs that tend to invest are in effect foreign owned and controlled SMEs that leads to a very unequal relationship between indigenous entrepreneurs and workers and foreign owners and exporters. Donors and international aid agencies run the danger of being caught in a trap where they favour SMEs but where this leads to a new era of foreign exploitation. Despite their poverty, the islanders are good targets for exploitation.
 
 
The key lies in also developing processing of high value coconut products such as milk. Such a process would again be ideally owned by a Farmers Association although it could be an entrepreneur. Within the context of Fa Pacific culture, it would be safer and better for it to be owned by the community.
 
 
I am told by a good friend from Honiara that culturally the Pacific Islanders are willing to wait and wait and wait. That is why outsiders are able to exploit them and why the efforts to develop often end up as dead ends. Many of those who intervene, most of them in fact, understand this and use the cultural induced inertness to their own advantages.
 
 
And yet, at the same time, the Pacific needs to develop its resources if it not to become a backwater with some cute resorts and where citizens who want a better life are forced to emigrate to New Zealand or Australia to drive taxis and other poorly paid unskilled professions. This realisation is growing among opinion leaders but has not yet reached a decisive stage.
 
The tragedy is that development partners who could easily help resolve issues and get development moving, prefer to donate resources in the form of lectures called Technical assistance. If you are poor and heavily in debt, they want to lecture to you how you should learn to save, base decisions on information and do what they tell you to do.