1. International Centre for Integrated Mountain Development Kathmandu, Nepal Improving Upstream VC Coordination – Case of Bay Leaves from Nepal Dyutiman Choudhary, HVP & VC, ICIMOD

2. Conceptual Framework Linking small producers to markets. Terms of engagement in value chains Integrating horizontal (poverty, environment and gender) and vertical elements in VC. Action Research – upgrading, action points and risks/rewards

3. The context High Value Product - export and market demand. Used as spice and traditional medicines. A major source of income for poor indigenous people. ICIMOD-FECOFUN action research initiative under a global programme.

4. Approach – Action Research

5. Interventions Baseline information collection Participatory Value Chain Mapping and Analysis Developing upgrading strategies Action planning and implementation Participatory Monitoring

6. Road head Traders / District level traders East (Udayapur, Terathum, Dhankuta, Morang), Central Makwanpur, Sindhuli, Rasua) West (Palpa, Salyan,Jajarkot, Pyuthan Kailali) NRS 10-12/KG Wholesale Traders East (Dharan, Gaighat, Lahan, Saptari-Kanchanpur, Kakarbhitta) Central (Gaur, Hetauda, Butwal, Ghorai, Tulsipur) West (Nepalganj, Attaria ( 2500 tons) NRS 20-24/KG Herbal Tea & Spices, TM in Kathmandu & local markets(200 tons ) NRS 25-28/KG Indian Traders Siliguri, Kolkata, Tanakpur Lucknow, Kanpur, Delhi (IRS 20-22/kg) 2150 T Local Fairs (Dhanusha & Gaur) 140- 150 tons NRS 38- 40/KG Cultivators/Collectors/CFUGs (NRS 4-7) Product manufacturers in Kathmandu (HPPCL) and private companies) NRS 4000/kg Ingredient in Sancho (A pain balm) and other products Spices/Medicinal Plants based Industries in India Export Market District Level Processors – Udayapur 250 T Existing Bay Leaf Market Channel in Nepal Retailers & wholesalers (Nepal) Distributors in North India Domestic Market

7. Bay Leaf value chain (Routa, VDC) (Udayapur, Nepal) Local/ District Trade Permit Buy Grade Store Pack Transport Sell Production Collection Cultivate Harvest Dry Bundle Transport Sell Wholesale & Export Permit Buy Store Quarantine Transport Import Quarantine Buying Value Addition Con- Sumption India Spices Leaves Re export Basic functions in the VC Nurseries Farmers/ collectors Exporters Indian Buyers Specific Inputs Seedlings Local & Wholesale traders Industries Consumers Actors in Bay Leaf value chain NRS 40NRS 20-24NRS 10-12 130055-7 400 T NRS 4-7 10-12

8. Major Issues Lack of capacities & information Lack of transparency and “arms length” market relationships. Unorganised production and lack of business platform Minimal value addition and low prices Destructive harvesting Lack of supporting policies

9. Upgrading Strategies Horizontal Coordination Vertical Contractualisation Process, Product and Volume upgrading

10. Coordination through Institutions Producers groups. Registration of apex body – cooperative. Appropriate representation of women. Mobilizing funds – shares. Quality Standards – market demand. Local certification Diversifying market access

11. Strengthening Institutions Training and capacity building Exposure trips to markets Establishing procedures for improving efficiency Arrangements for sustainability Empowerment – improved bargaining capacity; negotiations skills

12. Vertical Contractualisation Contract with buyers – ‘getting a better deal’ Interlocking contracts Learning from buyers Increased prices – from Rs 7/kg to Rs 16/kg in 2008 Further increased to Rs. 20/kg in 2009

13. Learnings Value chain interventions can lift economic status of producers Impact positively in gender relations and environment sustainability Value chain approach in HVP has potential for poverty reduction.

14. Thank you