The ADB has approved a US$25 million loan to help protect and improve the standard of living of rural people in the Fiji Islands whose livelihoods are at risk in the impending restructuring of the sugar industry.

The project targets about 8,000 sugarcane farmers, as well as cutters, mill workers, landowners and indigenous Fijians, including women, in the sugarcane belt areas and nearby rural and peri-urban areas of the Western and Northern divisions on the main islands of Viti Levu and Vanua Levu.

The project will support viable alternatives to improve income by promoting agricultural diversification, strengthen agricultural services, and develop effective public-private sector partnerships in commercial agriculture.

Sugar industry

In addition, the project will improve about 600 kilometres of farm access roads to provide farming communities access to markets.
For more than 20 years, the sugar industry in Fiji has benefited from prices that have been as much as triple world prices, insulating growers from the need to improve their efficiency and productivity. Indications, however, suggest that the price of sugar will slide down toward world prices in the longer term.

This situation is exacerbated by the expiry of some 10,300 farm leases over the next 25 years. This could all result in hardship for experienced farmers leaving the sugar industry and new farmers entering with limited capital and experience.

"To protect the already poor groups from further income reductions, diversified higher-value farming systems must be promoted and off-farm livelihood opportunities to supplement or replace agricultural incomes must be provided," says Robert Siy, Jr., Director for ADB's Pacific Operations Division 2.

"Diversified agriculture offers household incomes that are both well above the poverty level and substantially higher than current household incomes."

The project will also encourage people to engage in off-farm livelihoods by promoting the development of small and micro-enterprises and supporting vocational training. At the same time, it will strengthen rural financial services offered by microfinance institutions (MFIs) and promote sustainable MFIs in areas poorly served by commercial banks.

Japan Special Fund

A $600,000 technical assistance (TA) grant from the Japan Special Fund, financed by the Government of Japan, accompanies the loan to help strengthen commercial agriculture development to ensure that appropriate policies, institutions, and capacities are in place at project completion to sustain the performance of the private agriculture sector. The Government will contribute $275,000 toward the TA's total cost of $875,000.

ADB's loan covers around half of the estimated total project cost of $49.8 million. It comes from ADB's ordinary capital resources, carrying a 25-year term including a grace period of five years. Interest will be determined in accordance with ADB's LIBOR-based lending facility.

The Government will contribute $8.7 million toward the total project cost, the Fiji Development Bank $8.8 million, and other beneficiaries will contribute the remaining $7.3 million.
The Ministry of Agriculture, Sugar and Land Resettlement is the executing agency for the project, which is due for completion in December 2010.