OVERVIEW OF THE FREIGHT SUBSIDY PROGRAM
The Cocoa freight subsidy program is one of the programs initiated by the Cocoa Board of Papua New Guinea (CCBPNG) to assist remote cocoa growers who are having difficulties with the escalating freight costs. This program is a new project the board has initiated. What would be addressed here are diseconomies of scale, poor market accessibility which then resulted in high transaction costs over the years.
The program commended in August 2013 and results obtained has indicated a successful turn outs in terms of farmer benefits and national income generated through the program. The project in itself proved very successful and attainable with its results showing positive progressions. Since the program is now rolled out into all cocoa growing provinces, more and more bags are coming out of those targeted rural isolated areas in volumes.
The cocoa freight subsidy program is also viewed as a marketing program to provide a pull effect on production. Production of cocoa in some of the remote areas is high however due to poor market accessibility and poor infrastructures cocoa farmers are unable to transport their cocoa bags to the market to sell.
A number of service providers have been identified and engaged in the cocoa growing provinces of East New Britain(ENBP), West Sepik(WSP) and East Sepik(ESP), Madang, West New Britain(WNBP) and Bougainville to facilitate the program. The main task of the service providers is to facilitate the mobilization of cocoa bags from farmers to a main storage area where they are stored for quality checks and shipment. The board have facilitated a number of singed Memorandum of Agreements (MOAs) with a number of the service providers. Upon signing of MOAs a seed funding is remitted to their account to implement and facilitate the freighting of cocoa from the remote areas they operate in to the nearest pick up points or straight to the nearest market.
The overall objective for the Cocoa Freight Subsidy Project is to promote the cocoa activity as the premier and sustainable income earning opportunity for remote area farmers. In total, there are six (6) key items comprising the development objective of the freight program:
- To increase production volume;
- To improve quality;
- To achieve higher income earning potential;
- To secure, improve, and increase small holder and block holding supply chain;
- To improve socio-economic livelihoods of cocoa farmers;
- To and strike a balance between profitability and sustainability for the cocoa farmer, the cocoa industry, and the economy-country as a whole
Almost all cocoa growing provinces are now engaged and introduced with the freight subsidy project accept for Manus, Milne Bay and Popondetta. WNBP is heavily implementing the project from the Kandrian area and Gloucester LLG. West New Britain farmers from Kandrian inland and Coastal Local Level Government(LLG) are now transporting their cocoa bags from the south coast route to Rabaul to access better markets.
ENBP had started the implementation of the project by supporting freight Cost for over 1000 individual farmers and farmer groups in the Lasul Baining, Pomio areas and Open Bay LLG. Due to the closure of Lutheran shipping most cocoa farmers from those areas including Wasu Siassi and Finchafen in Morobe province have been transporting their cocoa produce in out-board motors. New Ireland has started to roll out the freight support project implementation however parts of Lihir and Anir has to be considered, as many cocoa are being shipped only from the West Coast while a smaller amount is taken from Namatanai LLG in the East Coast.
SERVICE PROVIDERS ENGAGED BY COCOA BOARD TO FREIGHT COCOA BAGS
Since engaging the private service providers to implement the freighting program Cocoa Board have signed Memorandum Of Agreement(MOA) with several private service providers across all cocoa growing provinces. Basically the idea behind that is to use their transporting capacity to move cocoa bags in numbers and volumes to the market from their rural locations. The approach taken was to front load them with seed funding for ease of payment and timely turn outs at rural districts. Hence most service providers are from those rural targeted districts and Local Level Government(LLG).
MEMORANDUM OF AGREEMENTS (MOAs)
The signing of the MOAs by the Private Service Providers is by way an agreement with an attached terms of reference specifically tying them to freighting and providing market conducive to the stranded cocoa bags and the rural farmers in the rural outlying areas which is targeted by the program.
As a matter of fact the MOA agreement as tied with the seed funding advance payment proves very successful as service providers are now drawing down at their own and concentrating on freighting cocoa bags at their own pace and time daily. The MOAs are bound for review as in the event that the service provider fails to comply with any requirements of Cocoa Board the agreement will be terminated and forfeited. The Terms Of Reference(TOR) accompanying the agreements outlines all that Cocoa Board requires from the service provider.
There are also provincial governments and districts who have signed the project MOAs with Cocoa Board of PNG. This include:
- West New Britain Provincial Government
- Aitape/Lumi District
- Milne Bay Provincial Government
There are also others who are willing to singed MOAs and have agreed to partner with Cocoa Board of PNG through the freight subsidy program. Signing will be done once every formalities are done. The district and provincial government include:
- Karamui Nomane District ( Simbu)
- Manus Provincial Government
HOW THE FREIGHT SUBSIDY PROGRAM WORKS
Upon signing of MOAs a seed funding is remitted to the service provider’s account to implement and facilitate the freighting of cocoa from the remote areas they operate in to the nearest pick up points or straight to the nearest market.The main task of the service providers is to facilitate the mobilization of cocoa bags from farmers to its storage sheds where they are stored for quality checks before they are transported or shipped to the main markets. Below is a simple diagram showing the systematic procedure of the freight subsidy program.
NUMBER OF COCOA BAGS FREIGHTED BY CALENDAR YEAR: 2013 – NOVEMBER 2016
|number of bags freighted||Volume(tonnes)||number of bags freighted||Volume(tonnes)||number of bags freighted||Volume(tonnes)||number of bags freighted||Volume(tonnes)||number of bags freighted||Volume(tonnes)|
|EAST NEW BRITAIN PROVINCE(ENBP)||4 061||254||17 796||1 112||4 836||302||2 608||163||29 301||1 831|
|WEST NEW BRITAIN PROVINCE(WNBP)||707||44||3 771||236||168||11||2 461||154||7 107||444|
|NEW IRELAND PROVINCE(NIP)||179||11||2 731||171||1 240||78||101||6||4 251||266|
|AUTONOMOUS REGION OF BOUGAINVILLE(AROB)||80||5||3 478||217||3 558||222|
|MOROBE||34 924||2 183||32 260||2 016||67 184||4 199|
|MADANG||8 269||516||17 875||1 117||11 702||731||37 846||2 365|
|EAST SEPIK PROVINCE(ESP)||526||33||1 126||70||1 652||103|
|SANDAUN PROVINCE||11 437||715||10 177||636||21 614||1 351|
NUMBER OF COCOA BAGS FREIGHTED BY PROVINCE
|PROVINCES/CENTRES||No. of bags freighted||Volume freighted(tonnes)||Total freight costs(kina)||Delivered-In-Store(DIS) price(kina/tonne)||Freight On Board(FOB) Price(kina/tonne)|
|ORO||74||4.63||2280||7 331||9 231|
|MADANG||37 871||2 366.94||921 744.83||7 735||9 231|
|EAST NEW BRITAIN PROVINCE(ENBP)||28 486.5||1 780.41||798 656.3||5 843||9 219|
|MOROBE||67 934||4 245.88||677 418.56||7 510||9 617|
|ALOTAU||3||0.19||269.7||7 331||9 231|
|WEST NEW BRITAIN PROVINCE(WNBP)||6 970||435.63||163 968.82||7 322||9 500|
|NEW IRELAND PROVINCE(NIP)||4 171||260.69||141 531.44||7 343||9 219|
|VANIMO||21 875||1 367.19||135 384||6 344||9 029|
|AUTONOMOUS REGION OF BOUGAINVILLE(AROB)||3 558||222.38||11 2640||7 630||9 500|
|WEWAK||1 652||103.25||4 410||6 344||9 029|
|Total||172 625.5||10 789.1||2 959 538.65|
|CHIMBU||31||1.94||1 235||7 735||9 231|
MONITORING & EVALUATION
Cocoa Board through its Economics and Freight Project section have carried out an impact assessment study on the freight project in mid-2016. Two teams were sent out to collect data through a survey to assess the impact the project has had on the livelihood of cocoa farmers in the very remote area of Papua New Guinea. Team 1 was sent to East and West Sepik including West New
Britain while Team 2 conducted interviews in Madang, Morobe and East New Britain. The data collected have already been analysed and the results will be published soon through a report in a journal. On the other hand, monitoring and evaluation is still continuing on a quarterly basis as the project moves into its 2016/17 cocoa year implementation roll-out.