Report and Recommendation of the President to the Board of Directors

Project Number: 54325-001 October 2020

Proposed Loan Olam International Limited and Olam Treasury Private Limited Olam COVID-19 Smallholder Farmer Livelihood Support Project (Viet Nam, Indonesia, and Papua New Guinea) This is an abbreviated version of the document, which excludes information that is subject to exceptions to disclosure set forth in ADB's Access to Information Policy.

CURRENCY EQUIVALENTS (as of 5 October 2020)

Currency unit – Singapore dollar/s (S$)

S$1.00 = $0.7340 $1.00 = S$1.362

ABBREVIATIONS

ADB – Asian Development Bank COVID-19 – coronavirus disease DMC – developing member country EBRD – European Bank for Reconstruction and Development FAO – Food and Agriculture Organization of the United Nations GDP – gross domestic product OIL – Olam International Limited Olam – Olam International Limited and its subsidiaries OTPL – Olam Treasury Private Limited PNG – Papua New Guinea TA – technical assistance

NOTE

In this report, “$” refers to United States dollars.

Vice-President Ashok Lavasa, Private Sector Operations and Public–Private Partnerships

Director General Michael Barrow, Private Sector Operations Department (PSOD) Director Christopher Thieme, Deputy Director General, Office of the Director

General (OPSD), PSOD Team leader Juhyun Jeong, Investment Specialist, OPSD, PSOD Project advisor Martin Lemoine, Principal Investment Specialist, OPSD, PSOD Team members Genevieve Abel, Principal Transaction Support Specialist, Private

Sector Transaction Support Division (PSTS), PSOD Christian Abeleda, Associate Project Analyst, PSTS, PSOD Salman Ahmed, Investment Specialist, Portfolio Management Division,

PSOD Pierre Bailet, Principal Counsel, Office of the General Counsel Edwin David, Senior Investment Officer, OPSD, PSOD Sheila Estacion, Senior Operations Assistant, OPSD, PSOD Dennis Eucogco, Senior Guarantees and Syndications Specialist,

Office of the Director General-Guarantees and Syndications Unit, PSOD

Anthea Alka Gabriel, Project Analyst, Office of the Director General-Risk Analytics Unit, PSOD

Manfred Kiefer, Senior Economist, PSTS, PSOD Melissa Manguiat, Senior Safeguards Officer, PSTS, PSOD Amanda Satterly, Senior Social Development Specialist (Gender and

Development), PSTS, PSOD Abhishek Singh, Principal Safeguards Specialist, PSTS, PSOD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

PROJECT AT A GLANCE

I. THE PROPOSAL 1

II. THE PROJECT 1

A. Project Identification and Description 1 B. Development Impact, Outcomes, and Outputs 5 C. Alignment with ADB Strategy and Operations 5 D. Project Cost and Financing Plan 6 E. Implementation Arrangements 6 F. Projected Financial and Economic Performance 6 G. Unique Features 6

III. THE PROPOSED ADB ASSISTANCE 7

A. The Assistance 7 B. Value Added by ADB Assistance 7 C. Risks 7

IV. POLICY COMPLIANCE 7

A. Safeguards and Social Dimensions 7 B. Anticorruption Policy 8 C. Investment Limitations 8 D. Assurances 9

V. RECOMMENDATION 9

APPENDIXES

1. Design and Monitoring Framework 10

2. List of Linked Documents 12

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed loan of up to $93,750,000 to Olam International Limited (OIL) and to Olam Treasury Private Limited (OTPL) in United States dollars for the Olam COVID-19 Smallholder Farmer Livelihood Support Project in Viet Nam, Indonesia, and Papua New Guinea (PNG).1 2. The project will support smallholder farmers from whom OIL and its subsidiaries (Olam) directly source raw materials in the project countries. Disruptions to agricultural supply chains caused by the coronavirus disease (COVID-19) pandemic have impacted smallholder farmers as local markets close down and smaller traders cease buying. The impact of COVID-19 on livelihoods of female farmers is disproportionately harsh, given their limited access to land, credit, and inputs. Olam’s role as a sustainable buyer of agricultural products at scale will provide timely support to smallholder farmers’ livelihoods, particularly for female farmers.

II. THE PROJECT A. Project Identification and Description

1. Project Identification 3. COVID-19 impact on smallholder farmers. Smallholder farmers in Asia and the Pacific are facing a disproportionate impact on their livelihoods because of the COVID-19 pandemic and the ensuing economic slowdown. 2 Smallholder farmers are experiencing a decline in their purchasing power, increasing amounts of food loss, falling prices, and other disturbances caused mainly by the disruption of agricultural supply chains. With low average incomes even before the pandemic, smallholder farmers are now enduring worsening conditions. Local agricultural supply chain disruptions coupled with economic contraction stemming from COVID-19 have drastically reduced farmers’ sales volumes and prices because of market closures and the shrinking number of and demand from traders. Prolonged lockdowns could worsen the financial burden of farmers as loan payment due dates approach, payments are missed, or loans grow. The impact will be most severe on smallholder farmers with little savings from harvests and returns from earlier sales.3 4. Agriculture key to fight poverty during the pandemic. Extreme poverty remains a largely rural phenomenon, with two-thirds of the global extremely poor living in rural areas.4 COVID-19 could push 34 million more people into extreme poverty by the end of 2020 and an additional 130 million by 2030.5 More than half of the extremely poor are in Asia and the Pacific, where agriculture is characterized by unorganized, small-scale farming. 6 Most smallholder farmers are not included in formal value chains and face challenges that include lack of access to finance and quality inputs, low yields, lack of storage and market infrastructure, limited local

1 In descending order of proportion of total project size. 2 Food and Agriculture Organization of the United Nations (FAO). 2020. COVID-19 and Rural Poverty: Supporting and

Protecting the Rural Poor in Times of Pandemic. Rome. 3 Asian Development Bank (ADB). 2020. Food Security in Asia and the Pacific amid the COVID-19 Pandemic. Manila. 4 FAO. 2017. Ending Poverty and Hunger by Investing in Agriculture and Rural Areas. Rome. 5 United Nations Department of Economic and Social Affairs. 2020. World Economic Situation and Prospects as of

Mid-2020. New York. 6 Agriculture is the largest sector in Asia and the Pacific, accounting for 37% of total employment.

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value addition, and dependence on brokers (footnote 2). As most of the rural poor are smallholder farmers,7 supporting agriculture is critical to avoid increased poverty levels. 5. Viet Nam. Agriculture has made significant progress, but smallholder farmers have been left behind. Agriculture contributes about 14% of gross domestic product (GDP) and employs 37% of the labor force. Yet, in the Central Highlands, one of the main agricultural regions, where 71% of the population are smallholder farmers, the poverty rate is 22%—more than twice the nationwide rate.8 The difficulties that smallholder farmers in the Central Highlands are facing because of droughts since early 2020 (e.g., extremely low water levels in rivers) have been exacerbated by supply chain disruptions stemming from the pandemic. Gender inequalities in agriculture, food, and nutrition security are visible in women’s disproportionate levels of unpaid labor and their lack of access to resources (e.g., land, finance, technology, training, and markets) and agricultural extension services.9 6. Indonesia. Most food crop producers are landless or cultivate small landholdings. The farmers earn low incomes and fall into and out of poverty, contributing to the rural poverty rate of 14%, which is significantly higher than the 8% urban poverty rate. In the second quarter of 2020, GDP contracted by 5.3% year-on-year and the poverty rate is projected to increase from 9.5% in 2019 to 10.7%–11.6% in 2020. 10 Diminishing demand from coffee retail outlets in Java, compounded by supply chain disruptions because of the pandemic, has eroded the income of cocoa and coffee farmers, leaving them vulnerable to food insecurity.11 Women are involved in all agricultural activities. However, despite serving as the backbone of one of the most economically important sectors, women in agriculture are marginalized and often have little access to financial resources, knowledge, and technology to improve their crop yields and livelihoods (footnote 11). 7. Papua New Guinea. Most smallholder farmers are poor. Most farming households can be characterized as low-input, low-output producers. Of people living in rural areas, 91% are poor.12 Agriculture accounts for one-third of GDP, with 75% of the population relying on agriculture for their main livelihood. Half the population rely on coffee and cocoa as the main cash crops. The pandemic has compounded the stress in food systems from African swine fever and fall armyworm, which might undermine food security and nutrition, particularly for the rural population.13 Persistent institutional and governance challenges in conjunction with discriminatory cultural norms mean gender disparities persist, with women lacking equitable access to key agricultural and rural resources and services, knowledge, and markets, despite their prominent role in subsistence food production, agricultural value chains, and rural livelihoods.14 8. Gender inequality. While aggregate data show that women comprise about 43% of the agricultural labor force in developing countries, the proportion of women directly engaged in the commercial supply of farmed produce is estimated to be significantly lower because of their lack of secure control over land, labor, or other inputs required to guarantee the delivery of sufficient quantity and quality. 15 Despite their significant involvement in farming, because of cultural attitudes, discrimination, and lack of recognition of their role, women have limited access to

7 FAO. 2014. The State of Food and Agriculture: Innovation in Family Farming. Rome. 8 Sector Overview (accessible from the list of linked documents in Appendix 2). 9 FAO. 2019. Country Gender Assessment of Agriculture and the Rural Sector in Viet Nam. Ha Noi. 10 World Bank. 2020. Indonesia Economic Prospects: the Long Road to Recovery. Washington, DC. 11 FAO. 2019. Country Gender Assessment of Agriculture and the Rural Sector in Indonesia. Jakarta. 12 ADB. 2015. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila. 13 ADB. 2020. Food Security in Asia and the Pacific amid the COVID-19 Pandemic. Manila. 14 FAO. 2019. Country Gender Assessment of Agriculture and the Rural Sector in Papua New Guinea. Port Moresby. 15 FAO. 2011. The Role of Women in Agriculture. ESA Working Paper. No. 11-02. Rome.

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training. On average, female farmers receive only 5% of all agricultural extension services.16 COVID-19 threatens to expose and exacerbate gender differences. Expected to care for out-of-school children or sick relatives, female farmers are more likely to bear the brunt of additional domestic responsibilities. With less savings because of reduced remittances, women will be unable to weather income losses from the effects of COVID-19 and will likely struggle to buy the seeds and fertilizers needed for the following planting season. Women who are widowed because of COVID-19 risk disinheritance, as women’s property rights are often conditional on marriage.17 9. When women farmers have better access to technical training and the necessary inputs, they are more likely to adopt good agricultural practices and improve their productivity. If women farmers simply had the same access as men to productive resources, their agricultural yields would increase by 20%–30% (footnote 18). Another major barrier to increasing female farmer productivity is lack of female extension agents, with women unfortunately representing just 15% of the world’s agents (footnote 18). Female farmers trained by female extension officers receive more extension services, learn more, and apply more best practices than those trained by male extension officers.18 10. Project selection. Olam is a global agribusiness that has a unique business model of sourcing directly from smallholder farmers. The Asian Development Bank (ADB) has an existing relationship with Olam, with loans in 2018 to OIL and Café Outspan Vietnam Limited,19 OIL’s instant coffee plant in Viet Nam. ADB is providing technical assistance (TA) to Olam to train 20,000 smallholder coffee farmers across Indonesia, PNG, Timor-Leste, and Viet Nam.20 Olam seeks to continue to support over 100,000 smallholder farmers from whom it directly procures raw materials and requested ADB to assist its business in the project countries that need more working capital because of the COVID-19 crisis.

2. Project Design 11. The project will help sustain the livelihoods of smallholder farmers impacted by COVID-19 in Viet Nam, Indonesia, and PNG by providing working capital financing to OIL and OTPL to increase raw material procurement from farmers. 12. Preserving smallholder farmer livelihoods in the COVID-19 context. The project will provide working capital financing to OIL and OTPL for smallholder farmer supply in Viet Nam (coffee, cashews, and pepper); Indonesia (coffee and cocoa); and PNG (coffee and cocoa). Working capital needs include higher inventory because of increased procurement of crops to build buffer inventory to cope with supply chain disruptions.21 The increase in advances to farmers and receivables from farmers and small traders will be financed, as well. The project will augment the direct benefits to smallholder farmers by leveraging existing Olam sustainability programs that

16 FAO. 2011. The State of Food and Agriculture 2010–11. Rome. A survey of 97 countries. 17 UN Women. 2020. Unlocking the Lockdown: The Gendered Effects of COVID-19 on Achieving the SDGs in Asia and

the Pacific. Bangkok. 18 B.A.N. Lahai, P. Goldey, and G.E. Jones. 2000. The Gender of the Extension Agent and Farmers' Access to and

Participation in Agricultural Extension in Nigeria. The Journal of Agricultural Education and Extension. 6. pp. 223–233.

19 ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Loans to Olam International Limited, Café Outspan Vietnam Limited, and PT Dharmapala Usaha Sukses for the Agricultural Value Chain Development Project in Viet Nam, Indonesia, Timor-Leste, and Papua New Guinea. Manila.

20 ADB. 2017. Technical Assistance to Olam International Limited for the Inclusive, Sustainable, and Connected Coffee Value Chain Project. Manila.

21 While smallholder farmers are not contractually bound to sell their crops to Olam, it is able to pay more than smaller traders, who are often the alternative purchasers of farmers’ crops.

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provide agricultural extension services, training, and livelihood support to smallholder farmers.22 The ongoing TA will complement the project by providing capacity-building support to about 13,500 smallholder farmers in the project countries.23 The TA is helping smallholder coffee farmers, particularly women, improve productivity and the quality of their crops and obtain certification.24 The TA supports the rollout of the Olam Farmer Information System, which uses mobile technology to survey and register farms and can be particularly helpful during the pandemic, allowing Olam to map hotspots where farmers might be most vulnerable. 13. Smoothing supply chain disruptions. Despite COVID-19–related disruptions, Olam, to sustain its business, will increase its procurement of crops from farmers, provide more advances to farmers, and increase its receivables from farmers and small traders. These activities will support smallholder farmers by providing stable offtake for their production. [Redacted] While the cash conversion cycle (number of working capital days) is expected to return to pre–COVID-19 levels by 2022, the expected growth will create additional working capital needs, which justifies the medium-term financing solution. 14. [Redacted] While banks will continue to provide working capital, commercial banks have been reducing their exposure to commodities globally, including in Asia, because of the COVID-19 pandemic, leaving a “funding hole” for crucial parts of the global food supply chain.25 This gap will be bridged by the project. Uninterrupted funding to the food system must be ensured through integrated agribusiness companies such as Olam that source directly from smallholder farmers. Olam’s continued operations in the project countries will help keep food supply chains secure and functioning and mitigate the pandemic’s impact on vulnerable groups, particularly for more than 100,000 smallholder farmers from whom OIam directly sources raw materials. 15. Gender mainstreaming. The project aims to help bridge persistent gender gaps through a gender action plan, which includes increasing the proportion of female farmers that Olam sources from, making Olam’s farmer training programs more gender inclusive, and exploring more gender equality in farmer payment mechanisms. A strong gender element for the project will help mitigate the disproportionate impact that the pandemic has on female farmers.

3. Borrowers 16. The borrowers are OIL, a public limited company incorporated in Singapore, and OTPL, OIL’s dedicated treasury company. OIL is a leading agribusiness company with presence in 70 countries. It differentiates itself by focusing on niche commodities and businesses, buying from growers and village-level agents at the farm gate, and providing value-added solutions and services to customers (e.g., traceability guarantees). 26 Temasek Holdings, the Singapore sovereign wealth fund, became the majority shareholder of OIL in 2014, owning 53.4%. Mitsubishi Corporation took a 20.0% equity stake in OIL in 2015. OIL’s management team has a 6.5% ownership in the company. The 13-member board includes two executive directors, one Temasek nominee, two Mitsubishi nominees, and eight independent directors.

22 Olam assists smallholder farmers through the Olam Livelihood Charter, which assures customers that their product

is sustainable and traceable and helps rural communities. 23 As part of the TA, 6,000 smallholder coffee farmers will be trained in Indonesia, 4,000 in PNG, and 3,500 in Viet Nam. 24 ADB. 2017. Technical Assistance to Olam International Limited for the Inclusive, Sustainable, and Connected Coffee

Value Chain Project. Manila. 25 R. Foroohar. 2020. The Next Subprime Crisis Could Be in Food. Financial Times. 13 September. 26 Olam’s AtSource platform is a sustainable and traceable sourcing solution that provides information to Olam’s

manufacturing and retail customers on the environmental and social footprint of products.

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17. ADB conducted integrity due diligence on OIL and OTPL, their shareholders, managers, and significant contracting entities.27 They do not appear to constitute a significant or potentially significant integrity risk, as no unresolved or substantiated adverse media or other relevant information is related to them. Tax integrity due diligence was required only because of material related party transactions in the investment. 28 The independent auditors of OIL and OTPL confirmed that these transactions were conducted at arm’s length, and details about them are reported in OIL’s annual financial statements, which are reviewed by the Singapore Stock Exchange. ADB’s review of OIL and OTPL does not give ADB cause to believe that they are being used for money laundering, terrorism financing, tax secrecy, tax evasion, or tax fraud. B. Development Impact, Outcomes, and Outputs 18. Impact. The project is aligned with the following impact: adverse social and economic impact of the COVID-19 pandemic reduced, especially for farmers. Aligned with ADB’s Comprehensive Response to COVID-19,29 the project will help preserve the income of farmers by allowing Olam to continuously procure raw materials from them even during the pandemic. The project is aligned with the target of the Sustainable Development Goals of ensuring sustainable food production systems, and implementing resilient agricultural practices that increase productivity and production and strengthen capacity for adaptation to other disasters such as those caused by the pandemic (Target 2.4).30 19. Outcomes. The project will have the following outcome: Olam’s trading and processing operations improved and farmers’ livelihoods sustained. 20. Outputs. The project’s outputs are procured raw materials increased, coffee farmer training programs designed to increase gender equality, and gender equality of benefit sharing within smallholder households improved. C. Alignment with ADB Strategy and Operations 21. Consistency with ADB strategy and country strategy. The project is aligned with ADB’s Strategy 2030, which calls for ADB to “scale up its financing for agribusiness” and “promote gender equality in at least 75% of the number of ADB’s committed operations by 2030.”31 The project is aligned with the Operational Plan for Private Sector Operations, 2019–2024, which calls for working with tier-1 agribusiness companies because of their potential to have widespread impact, including as partners in the TA.32 The project is consistent with ADB’s country partnership strategies for Viet Nam,33 Indonesia,34 and PNG.35

27 ADB. 2003. Enhancing the Asian Development Bank's Role in Combating Money Laundering and the Financing of

Terrorism. Manila. 28 ADB. 2016. Anticorruption Policy: Enhancing the Role of the Asian Development Bank in Relation to Tax Integrity.

Manila. 29 ADB. 2020. ADB’s Comprehensive Response to the COVID-19 Pandemic. Manila. 30 United Nations. Sustainable Development Knowledge Platform. https://sustainabledevelopment.un.org. 31 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila. 32 ADB. 2019. Operational Plan for Private Sector Operations, 2019–2024. Manila. 33 ADB. 2016. Country Partnership Strategy: Viet Nam, 2016-2020—Fostering More Inclusive and Environmentally

Sustainable Growth. Manila. 34 ADB. 2020. Country Partnership Strategy: Indonesia 2016—Emerging Stronger. Manila. 35 ADB. 2015. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila.

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22. Consistency with sector strategy and relevant ADB operations. The project is consistent with Strategy 2030’s operational plans for priority 1 (addressing remaining poverty and reducing inequalities) by preserving the livelihoods of smallholder farmers during the COVID-19 pandemic; priority 2 (accelerating progress in gender equality) to protect women workers and farmers; and priority 5 (promoting rural development and food security, 2019–2024), which calls for the integration of farmers, agribusinesses, and consumers into efficient and sustainable value chains.36 As a regional project benefiting three developing member countries, it is consistent with the operational plan for priority 7 (fostering regional cooperation and integration) as it supports nonsovereign lending for cross-border operations for agriculture value chains.37 The project is part of ADB’s Comprehensive Response to the COVID-19 Pandemic.38 D. Project Cost and Financing Plan [Redacted] E. Implementation Arrangements 23. Table 3 summarizes the implementation arrangements.39

Table 3: Summary of Implementation Arrangements Aspects Arrangements

Regulatory framework

Olam International Limited and its subsidiaries (Olam) are subject to the general laws regulating private sector enterprises in the countries where they operate, and, as an agribusiness company, benefits from incentives in Singapore, Viet Nam, Indonesia, and Papua New Guinea. Olam is subject to international trade laws, including import duties.

Management Olam’s key members of management each have more than 15 years of experience in agribusiness. Sunny Verghese, chief executive officer, has 30 years of experience in agribusiness and has been recognized with various awards. Olam’s management team has a 6.5% ownership stake in the company.

Implementation period

November 2020–November 2021

Operations arrangements

The project will rely on Olam for its operation and maintenance. Olam sources its raw materials from smallholder farmers, farmer cooperatives, and local buying agents. Olam is involved primarily in processing, inland and marine logistics, and trading in its supply chains. It also has manufacturing facilities for certain products. Olam has established strong relationships with customers in destination markets, many of which are well-known food multi-nationals.

Performance monitoring

Olam will report at least annually on key performance indicators, including financial, safeguard, gender, and development indicators, and output and outcome targets.

Sources: Asian Development Bank and Olam International Limited.

F. Projected Financial and Economic Performance [Redacted] G. Unique Features

24. The project will support the preservation of livelihoods of more than 100,000 smallholder farmers in Viet Nam, Indonesia, and PNG from whom Olam directly sources products. The project

36 ADB. 2019. Strategy 2030 Operational Plan for Priority 5: Promoting Rural Development and Food Security, 2019–

2024. Manila. 37 ADB. 2019. Strategy 2030 Operational Plan for Priority 7: Fostering Regional Cooperation and Integration, 2019–

2024. Manila. 38 ADB. 2020. ADB’s Comprehensive Response to the COVID-19 Pandemic. Manila. 39 United Nations. Sustainable Development Knowledge Platform. https://sustainabledevelopment.un.org.

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is classified as an inclusive business project because the smallholder farmers likely belong to the base of the income pyramid and are able to improve their livelihoods by engaging with Olam.40

III. THE PROPOSED ADB ASSISTANCE A. The Assistance 25. ADB proposes to provide a loan facility of up to $93.75 million to OIL and OTPL. The loan will be guaranteed by OIL. The use of loan proceeds will be earmarked for working capital in Viet Nam, Indonesia, and PNG. The facility will have a maturity of 3 years. B. Value Added by ADB Assistance

26. ADB assistance will add value in three areas: (i) Filling a market gap for commodity traders. Because of the COVID-19

pandemic, a few second-tier commodity traders have defaulted, 41 or have struggled to refinance their debt obligations as markets have become more volatile.42 While commercial banks are comfortable renewing existing lines to large commodity traders, increasing exposure has proven to be a challenge. ADB’s working capital loan will (a) deliver immediate support for incremental working capital needs of Olam for smallholder farmer supply, receivables, and farmer advances; and (b) step in to fill insufficient liquidity from commercial banks.

(ii) Gender mainstreaming. The strong gender element for the project in the COVID-19 context will help address the disproportionate impact that the pandemic is having on female farmers and women living in rural poverty. [Redacted]

C. Risks [Redacted]

IV. POLICY COMPLIANCE

A. Safeguards and Social Dimensions

27. ADB has categorized the loan in compliance with ADB’s Safeguard Policy Statement (2009) as follows: environment category C, involuntary resettlement category C, and indigenous peoples category C. ADB has undertaken due diligence and reviewed the project’s potential environmental and social impacts and the measures in the safeguard reports and plans to avoid, minimize, mitigate, and compensate for adverse impacts. The environmental and social measures and the institutional capacity and commitment of Olam to manage the project’s social and environmental impacts are deemed adequate. 28. The loan will be used to finance working capital for OIam’s raw material procurement in the project countries. The loan is a follow-on to the existing loan approved by the ADB Board of Directors in 2017 and aims to support response to or reduce adverse socioeconomic impacts of COVID-19 on smallholder farmers. ADB proceeds will not be utilized to finance any construction

40 ADB. 2017. Standard Explanatory Data Indicator Definitions. Manila. 41 Phoenix Commodities Private Limited (a global commodities trader based in Dubai) filed for bankruptcy in May 2020. 42 Philip Stafford. 2020. ED&F Man Agrees to Debt Restructuring in Eleventh-Hour Rescue. Financial Times. 10

September.

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or operational facilities and are anticipated to have minimal or no environmental impacts. No land acquisition or impact on indigenous peoples is envisaged on account of ADB’s use of proceeds. 29. Olam has corporate environmental and social management systems, composed of policies, standards, and codes of practices that were assessed during the due diligence process of the existing loan and found to be compliant with regulatory requirements and international good industry practices. The systems were strengthened through the adoption of ADB’s Safeguard Policy Statement requirements in the expansion of Olam’s four existing facilities supported by ADB. Olam confirmed through the annual environmental and social monitoring reports submitted to ADB that no environmental and social noncompliance and grievances were recorded regarding any of the facilities and activities supported by ADB. The environmental and social performance of the existing loan and the institutional capacity of Olam to manage environmental and social issues linked to their operations are deemed satisfactory.

30. Olam implements the following sustainability policies for its supply chain: Living

Landscape Policy, Olam Supplier Code, Olam Livelihood Charter, and Olam Plantation Concessions and Farm Code. Their guiding principles set out all conditions of the agreement between Olam and suppliers and farmers, including those to eliminate unsustainable practices in land management and to ensure compliance with applicable International Labour Organization standards, national labor requirements, and industry standards. 31. Olam will continue to report regularly to ADB on its compliance with its Environmental and Social Monitoring System and abide by national laws and regulations. Olam will comply with national labor laws and, pursuant to ADB’s Social Protection Strategy (2001), take measures to comply with internationally recognized core labor standards.43 39. Effective gender mainstreaming. [Redacted] Olam has a human resource policy that includes provisions on prohibiting sexual harassment in the workplace; ensuring gender equality in recruitment, wages, and benefits; and providing child support for female employees. Olam has committed to implement measures to promote gender equality and/or women’s empowerment in its business activities following ADB’s Policy on Gender and Development (1998). Key aims of the gender action plan are to (i) increase the number of female farmers in Viet Nam, Indonesia, and PNG from whom Olam directly procures raw materials; (ii) increase the proportion of female farmers participating in the farmer training program; (iii) increase the proportion of female field coordinators delivering the farmer training program; (iv) train all field coordinators, who deliver the farmer training program, in gender-inclusive facilitation methods; and (v) undertake a pilot to determine the feasibility of a more gender-equitable crop payment scheme. Olam will submit periodic reports on the implementation of gender measures. B. Anticorruption Policy

40. OIL and OTPL were advised of ADB’s policy of implementing best international practice relating to combating corruption, money laundering, and the financing of terrorism. ADB will ensure that the investment documentation includes provisions prohibiting corruption, money laundering, and the financing of terrorism, and remedies for ADB in the event of noncompliance. C. Investment Limitations

[Redacted]

43 ADB. 2003. Social Protection. Manila (adopted in 2001).

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D. Assurances 41. Consistent with the Agreement Establishing the Asian Development Bank (the Charter),44 ADB will proceed with the proposed assistance upon establishing that the Government of Viet Nam, the Government of Indonesia, and the Government of Papua New Guinea have no objections to the proposed assistance to OIL and OTPL. ADB will enter into suitable finance documentation, in form and substance satisfactory to ADB, following approval of the proposed assistance by the ADB Board of Directors.

V. RECOMMENDATION 42. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank and recommend that the Board approve the loan of up to $93,750,000 to Olam International Limited and Olam Treasury Private Limited as co-borrowers for the Olam COVID-19 Smallholder Farmer Livelihood Support Project in Viet Nam, Indonesia, and Papua New Guinea, with such terms and conditions as are substantially in accordance with those set forth in this report, and as may be reported to the Board.

Masatsugu Asakawa President

14 October 2020

44 ADB. 1966. Agreement Establishing the Asian Development Bank. Manila.

10 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Impacts the Project is Aligned with Sustainable Development Goal 2.4. By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production; that help maintain ecosystems; that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding, and other disasters; and that progressively improve land and soil qualitya Adverse social and economic impact of the COVID-19 pandemic reduced (ADB’s Comprehensive Response to the COVID-19 Pandemic)b

Results Chain Performance Indicators with Targets

and Baselines

Data Sources and/or Reporting

Mechanisms Risks

Outcomes Olam International Limited and its subsidiaries’ trading and processing operations improved and farmers’ livelihoods sustained

By 2022: a. Total annual sales of the

company’s operations in Viet Nam, Indonesia, and Papua New Guinea increased

b. Total annual export sales of food

and agricultural raw materials from Viet Nam, Indonesia, and Papua New Guinea increased

c. Total number of farmers in Viet

Nam, Indonesia, and Papua New Guinea from whom OIL directly procures raw materials increased

a.–c. OIL’s annual development effectiveness monitoring report

Regulatory risk that would restrict transport and export of agricultural products COVID-19 pandemic affects global supply and demand dynamics that affect volume and prices of agricultural products

Outputs 1. Procured raw

materials increased

2. Coffee farmer

training programs designed to increase gender equality

3. Gender equality of benefit sharing within smallholder

By 2021: 1a. Volume of agricultural raw

materials procured from farmers in Viet Nam, Indonesia, and Papua New Guinea increased

2a. At least 35% of farmer training

programd participants are female

2b. At least 20% of field coordinators delivering the farmer training programe are women

2c. At least 80% of the training

programe field coordinators are trained in gender-inclusive facilitation methodsf

3a. A pilot is undertaken to determine

the feasibility of a more gender-equitable crop payment scheme;

1.–3. OIL’s annual development effectiveness monitoring report

Capacity of sourcing and distribution network is reduced because of quarantine restrictions Securing the necessary risk mitigation measures as part of the financing is delayed

Appendix 1 11

Results Chain Performance Indicators with Targets

and Baselines

Data Sources and/or Reporting

Mechanisms Risks

households improved

for example, via payment into a joint bank account

Key Activities with Milestones

Outputs 1–3:

[Redacted]

Inputs ADB: $93.8 million loan

Assumptions for Partner Financing

Not applicable

ADB = Asian Development Bank, COVID-19 = coronavirus disease, OIL = Olam International Limited. Note: The farmer training program targets smallholder coffee farmers. Farmer extension workers are the field coordinators who train the smallholder coffee farmers. A farmer group is made up of about 20 smallholder coffee farmers. Each farmer group has a lead farmer and a co-lead farmer. a United Nations Department of Economic and Social Affairs. Sustainable Development. b ADB. 2020. ADB’s Comprehensive Response to the COVID-19 Pandemic. Manila. c [Redacted] d This target is in the previous gender action plan, but aims for 25% female participation in training programs. This

indicator increases the target to 35%. e As part of ADB’s ongoing technical assistance for smallholder coffee farmer training in Viet Nam, Indonesia, and

Papua New Guinea, 13,500 farmers in the countries will be trained (3,500 in Viet Nam, 6,000 in Indonesia, and 4,000 in Papua New Guinea). ADB. 2017. Technical Assistance Report to Olam International Limited for the Inclusive, Sustainable, and Connected Coffee Value Chain Project. Manila.

f For example, training field coordinators in techniques that help ensure that both women and men (i) are able to attend the farmer training; (ii) understand the information and learn from it; (iii) are able to share their needs and interests, learnings, and knowledge; and (iv) are valued and respected.

Source: Asian Development Bank.

12 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=54325-001-4

1. Sector Overview 2. Client Information 3. Details of Implementation Arrangements 4. Contribution to Strategy 2030 Operational Priorities 5. Financial Analysis 6. Economic Analysis 7. Country Economic Indicators 8. Summary Poverty Reduction and Social Strategy 9. Gender Action Plan