A Key to Market Access

In Timor Leste’s Baucau district, public-private partnerships revitalized the struggling candle-nut industry. RECOFTC’S Madankumar Janakiraman explains how.

When local people have access to forests, they have a variety of benefits. In many cases, these benefits are at the subsistence level. Using forest products can keep rural people from chronic hunger and extreme poverty. However, the commercial benefits have been slower to follow. To generate real income for communities living in and around forests and to secure their livelihoods, we must look for ways and measures to improve market access for their forest products. Public-private partnerships have a unique ability to improve market access because they have the means to address a range of different constraints.

A case-in-point is a small enterprise collecting and processing a non-timber forest product in Timor Leste, which I encountered in 2009. The candle-nut tree is a large tree that produces an oil-bearing fruit. It grows essentially everywhere in Timor Leste and requires minimal care and management. When Timor Leste was under Indonesian rule, the tree provided income for a large number of rural women and their households, who sold the nuts to local processors. But after independence in 1999, the industry began to struggle because it had been totally dependent on Indonesian markets.

When the Timor Leste producers were working with Indonesian buyers, they extracted oil from candle nuts to be used primarily for cooking in Indonesia. The lack of Indonesian market access left Timor Leste’s candle-nut industry with just a couple of options: either market a better quality product to give it a market advantage, or find a new market.

The University of Hawaii’s Soil Management Collaborative Research Support Program, German Technical Cooperation (GTZ, now German International Cooperation), and Timor Leste’s Ministry of Agriculture, Forests and Fisheries collaborated to find a solution. The university drew attention to the fact that in Hawaii, candle nut oil is used as an ingredient in beauty products. Here, the three collaborators saw an opportunity to fill up the niche market. The partnership decided to build up a local enterprise to extract and export candle-nut oil for use in Hawaiian beauty products.

Then the process of finding a market partner began. With support from GTZ and the Timor Leste government ministry, the university was able to find an interested buyer in Oils of Aloha, a candle-nut oil refinery in Hawaii that caters to the cosmetic industry. Oils of Aloha was facing exorbitant costs in producing oil from locally harvested nuts on one hand, and poor quality of oil from Indonesia on the other. The company saw an opportunity to improve their business, as well. It agreed to be the sole and complete buyer of candle-nut oil produced in Timor Leste, but only if the price was competitive and the quality was comparable to the oil produced in Hawaii.

The university and GTZ facilitated a thorough feasibility study in Timor Leste’s Baucau district, and Oils of Aloha conducted a biochemical analysis. Both studies showed that a candle-nut oil extracting enterprise run by a local entrepreneur (who was an existing GTZ client) would meet the needs of the oil company. Oils of Aloha was ready to invest in the venture.

The feasibility analysis also showed that the enterprise could potentially provide stable income to hundreds of women involved in the collection and cracking of candlenuts because it would buy nuts in bulk at specified intervals. A local bank provided the initial capital for equipment and building. The bank was able to see the potential success of the venture because of the private interest from the oil company and support from the partnership.

Alone, the financial support would not have been enough to launch the initiative. Local actors also needed to build their business and production skills. So the partnership successfully appealed to the United States Aid for International Development (USAID) for a grant to fund a yearlong training program.

The candle-nut enterprise was officially established in 2005. When I was in Timor Leste four years later, the enterprise was functioning extremely efficiently, producing more than a barrel of oil per day and buying supplies from hundreds of local candle-nut collectors.

In this case, a committed local entrepreneur and an effective private-public partnership identified a local product with market demand and facilitated access to capital, training, and technology. The result was a sustainable, small non-timber forest product enterprise. This venture has generated local revenues and provided stable and sustained income for many rural households involved in nut collection.

There are various aspects and constraints to be addressed for improving market access for local forest products, including market-oriented production; access to capital, capacities, and technology; conducive laws and regulations; access to market information; etc. But soundly formed public-private partnerships, based on market demands and local entrepreneurship, can be very successful in addressing key aspects and contributing to significantly improving market access.

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  1. Timor Leste: A Key to Market Access | Forest Carbon Asia

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