August 1, 2011 — With rising food costs dominating the development world’s agenda, IFC’s strategic focus on increasing farm productivity is more critical than ever.
A second round of investment in KoYo Ecological Agrotech, an environmentally-friendly fertilizer producer, is contributing to an agricultural revival in Sichuan province, a poor region in China that was decimated by a powerful earthquake three years ago.
IFC’s new $7 million equity investment lets the company move forward with its ambitious $55 million fertilizer plant expansion plan in a region that is heavily reliant on agriculture for food and livelihoods.
Rana Karadsheh-Haddad, Principal Investment Officer in the Manufacturing, Agribusiness, and Services (MAS) Department, says IFC’s first investment in Koyo was an important part of IFC’s Sichuan Earthquake Recovery Program. The $20 million A loan, and $10 million equity was made in 2009 to support the construction of the first phase of the plant.
Shannon Atkeson, MAS Portfolio Manager in East Asia, adds that the initial investment “created a strong relationship with the company and found a suitable partner to pursue our China strategy of improving agricultural intensity and sustainability.”
KoYo’s plans include increasing urea production capacity at its Sichuan plant to match its ammonia capacity, and installing a 40,000 ton-per-year melamine production unit. The plant is powered by natural gas, a cleaner and more energy-efficient fuel source than the coal-fired plants that are typical across China.
Koyo is reaching out to local farmers, with the goal of educating them on how proper fertilizer use – and avoidance of over- or under-application – can help accelerate the absorption of nutrients and increase crop output by as much as 15 percent.
“This project is well aligned with a number of IFC’s strategic priorities, including improving agricultural productivity to address the global food crisis, creating sustainable livelihoods in frontier regions, and encouraging the private sector in developing countries to focus on climate change,” says Sergio Pimenta, IFC Director for Manufacturing, Agribusiness/ and Services in Asia.
“It is a strong example of how our MAS staff worked together to build a relationship that turned a one-time deal into a long-term partnership for significant development impact,” he adds.
Compiled by Carmen Powell, Manufacturing, Agribusiness, and Services/Global Communications Practice Group