THE WORLD BANK Papua New Guinea 93393 Smallholder Agriculture Development Project Improving community participation in local development while increasing revenue flow The project aims to increase from the already established local oil palm production industry. smallholder oil palm productivity while also improving local Background governance through greater The agricultural sector of Papua New Guinea contributes one-quarter of the country’s gross domestic community oversight, and increase product (GDP), which drives much of the rural sector economy. Palm oil is the dominant contributor to the overall economic activity in the country’s agricultural foreign exchange earnings, representing 43.2 percent of agricultural export values in project areas. 2008. In 2005, when this project was first considered, oil palm was identified as the best vehicle for an investment project to improve rural livelihoods. Considering the environmental issues associated with the This will translate into higher development of new oil palm areas, the International Development Association limited its support to incomes for smallholder oil palm smallholders in already existing oil palm schemes, with a focus on improving productivity and rural access producers and have a positive roads in the scheme areas. impact on the livelihoods of others in the project areas. Papua New Guinea’s palm oil industry, while representing only one percent of global production, contributes substantially to rural incomes in the country. At current prices, oil palm provides smallholders with very favorable returns on their land and labor (K2,793/ha and K130/day worked), compared to other cash crops such as cocoa (K1,136/ha and K21/day worked) and coffee (K2,058/ha and K13/day worked). The industry is second only to the public service in terms of formal employment, with around 16,000 people working for the six milling companies. Approximately 18,500 smallholders supply the mills with fruit. Location: The project will initially take place in Oro province and West New Britain provinces. Approval Date: 18 December 2007 Closing Date: 31 December 2012 Total Project Cost: US$68.8 million Designed to be implemented in Oro and West New Britain provinces over five years, SADP has garnered strong demand and support from oil palm smallholders in the project areas. Donors: World Bank (International Development Association)— About the Project US$27.5 million The Papua New Guinea Smallholder Agriculture Development Project (SADP) aims to increase, in a Government of Papua New sustainable manner, the level of involvement of targeted communities in their local development through Guinea—US$7.4 million measures aimed at increasing oil palm revenue and local participation. Provincial Governments of Oro and West New Britain—US$10.7 million The SADP has three components: (a) smallholder productivity enhancement including: the infill planting of PNG Sustainable Development new smallholder village oil palm along existing access roads; upgrading of provincial access roads and Program—US$10.2 million establishment of sustainable financing for road maintenance; and strengthening of oil palm extension Smallholders—US$7.3 million services; (b) local governance and community participation which supports the improved provision of local Palm Oil Milling Companies— services and infrastructure through participatory processes; and (c) project management and institutional US$5.7 million support for the Oil Palm Industry Corporation (OPIC), the implementing agency; and for the smallholder sector, through training, research and studies. Implementing Agency: Oil Palm Industry Corporation The SADP is designed to continue to provide economic benefits to the local population while avoiding deforestation and risks to critical habitats. Environmental and social sustainability has become a priority Contact: World Bank for the oil palm industry in Papua New Guinea; most of the industry is currently certified under the Task Team Leader Roundtable on Sustainable Palm Oil (RSPO). Mona Sur The majority of project funds (70 percent) will be invested in reconstructing existing rural roads. Better Senior Agriculture Economist roads improve access to critical social services and markets for all smallholders —not just those involved in msur@worldbank.org oil palm—enabling them to engage in a wider range of income earning activities, diversify their incomes and reduce poverty. www.worldbank.org/pg