Model Business Plan for a Sterile lnsect Production Facility Joint FAO/IAEA Programme Nuclear Techniques in Food and Agriculture IAEA-MBP MODEL BUSINESS PLAN FOR A STERILE INSECT PRODUCTION FACILITY January 2008 The originating Section of this publication in the IAEA was: Insect Pest Control Section International Atomic Energy Agency Wagramer Strasse 5 P.O. Box 100 A-1400 Vienna, Austria MODEL BUSINESS PLAN FOR A STERILE INSECT PRODUCTION FACILITY IAEA, VIENNA, 2008 ISBN 978–92–0–110007–8 © IAEA, 2008 Printed by the IAEA in Austria January 2008 FOREWORD For over 50 years the sterile insect technique (SIT) is a pest control strategy which has been used for eradication, and more recently for suppression, containment and prevention, of unwanted insect pest populations. Examples of successful applications of SIT, almost always applied in conjunction with other control methods in an area-wide integrated approach, are available from around the world. The development and application of SIT has relied overwhelmingly on public or donor initiative and funding throughout its history, although the private sector has always been involved as participants, cooperators or partners in funding. The demand for SIT, and therefore the market for sterile insects, has increased in recent years. This increase coincides with the introduction of new pests through the expansion of global trade and, at the same time, widespread pressure to find alternatives to pesticides. Recent improvements in the technology supporting SIT facilitate its application and suggest lower costs can be achieved. The conditions are therefore met for a greater commercialization of the technique to bring it in line with other pest control approaches that are fully integrated into a market approach. Several challenges arise, however, in pursuing sterile insect production as a commercial venture, ranging from intellectual property protection to pricing of the product. Routine insurance requirements, for instance, are complicated by the biological aspects of the business. This report is aimed at facilitating private sector involvement in the production of sterile insects for use in pest control. It provides guidelines and tools to support the development of specific business plans for a new SIT venture. By providing an international perspective on such issues as initial capital costs and recurring operational expenditures for a sterile insect facility, it may be used to evaluate the feasibility of proceeding with the construction or expansion of a sterile insect production facility. Informed decisions will allow government planners and private investors alike to account for the opportunities and risks unique to SIT and to plan accordingly. The Joint FAO/IAEA Programme is grateful to M.M. Quinlan (Interconnect, London, United Kingdom) and J.D. Mumford, J.D. Knight and J.M. Stonehouse (Imperial College London, United Kingdom) for conducting the original study submitted in 2002 to the Department of Technical Cooperation through its Interregional Project INT/5/145, and for carrying out some revision for this publication. The on-site studies presented in the annexes were developed by these authors in conjunction with experts in each country. In this regard, the IAEA wishes to thank A. Larcher-Carvalho, A. Ait El Mekki, and M.H. Dhouibi for these additional contributions. The IAEA officer responsible for this publication was W. Enkerlin of the Joint FAO/IAEA Programme of Nuclear Techniques in Food and Agriculture. Please note that care should always be taken to update and verify specific market and financial information before investing in any activities. EDITORIAL NOTE The use of particular designations of countries or territories does not imply any judgement by the publisher, the IAEA, as to the legal status of such countries or territories, of their authorities and institutions or of the delimitation of their boundaries. The mention of names of specific companies or products (whether or not indicated as registered) does not imply any intention to infringe proprietary rights, nor should it be construed as an endorsement or recommendation on the part of the IAEA. CONTENTS Section 1 Summary ................................................................................................................. 1 Section 2 Introduction to the project ....................................................................................... 5 2.1 History of SIT and the FAO/IAEA collaboration ............................................. 5 2.2 Driving forces for change in current pest control practices .............................. 8 2.2.1 New demands for pest control ................................................................. 8 2.2.2 Advances in alternative methods of pest control..................................... 9 2.2.3 Growing concern about pesticides......................................................... 10 2.2.4 Increased awareness of the link between poverty, food production and the environment.............................................................................. 11 Section 3 Commercial issues for sterile insect production.................................................... 13 3.1 Role of private sector in SIT ........................................................................... 13 3.1.1 Owners of SIT services.......................................................................... 13 3.1.2 Cooperators in implementation.............................................................. 16 3.1.3 Private sources of financing public projects.......................................... 17 3.1.4 Private sector as a generator of development ........................................ 18 3.1.5 Conclusion............................................................................................. 18 3.2 Guidance on organization of a production business........................................ 19 3.2.1 Choices in structure of a business.......................................................... 19 3.2.2 Options for financing............................................................................. 20 3.2.3 Organizational structure......................................................................... 24 3.3 Factors to consider when choosing a production site...................................... 27 3.3.1 Country selection for production facilities ............................................ 27 3.3.2 Specific site selection ............................................................................ 29 3.3.3 Appraisal value ...................................................................................... 31 3.4 Protection of intellectual property................................................................... 33 3.4.1 Methods for intellectual property protection ......................................... 34 3.4.2 United Nations agencies and intellectual property ................................ 35 3.4.3 Future issues in intellectual property..................................................... 37 3.4.4 Special issues for e-commerce............................................................... 38 3.5 Insurance requirements and liability ............................................................... 39 3.5.1 Private insurance.................................................................................... 39 3.5.2 Liability.................................................................................................. 40 3.5.3 Enforcement of contractual agreements and arbitration........................ 40 3.5.4 Political risk insurance schemes ............................................................ 41 3.5.5 Costs of risk ........................................................................................... 42 3.6 Market considerations about technologies ...................................................... 43 3.6.1 The sterilization process ........................................................................ 43 3.6.2 Radiation versus other methods of sterilization..................................... 44 3.6.3 Other uses of nuclear technology for pest control ................................. 44 3.7 Other commercial considerations for marketing sterile insects ...................... 45 3.7.1 Selling a product or the results .............................................................. 45 3.7.2 Public relations and community support ............................................... 45 Section 4 Markets................................................................................................................. 55 4.1 Determining the market for sterile insects – Which pests can be controlled using SIT? .......................................................................... 55 4.1.1 Biological criteria .................................................................................. 55 4.1.2 Technological criteria ............................................................................ 56 4.1.3 Favourable socio-economic conditions ................................................. 58 4.1.4 Administrative capacity......................................................................... 58 4.2 The market for sterile fruit fly species ............................................................ 59 4.2.1 Medfly.................................................................................................... 59 4.2.2 Anastrepha spp....................................................................................... 66 4.2.3 Olive fly (Bactrocera