ENVIRONMENTALLY AND SOCIALLY SUSTAINABLE DEVELOPMENT STUDIES AND MONOGRAPHS SERIES 12 Work in progress 13 8 for public discussion Oct. Iqq'+ Rural Development From Vision to Action 44~~~~~ * - ; ' Kz ¢ -L 1 w ,', '#ffi! *. sio * ;~~~~~~2 .1 A 4 _S f , ~~~~~~~~~~4 * tA-s A iScu or StI-4ttt'v ESSD Proceedings Series - 1 Culture and Development in Africa: Proceedings of an International Conference (Also in French) 2 Valuing the Environment: Proceedings of the First Annual International Conference on Environmentally Sustainable Development 3 Overcoming Global Hunger: Proceedings of a Conference on Actions to Reduce Hunger Worldwide 4 Traditional Knowledge and Sustainable Development: Proceedings of a Conference 5 The Human Face of the Urban Environment: A Report to the Development Community 6 The Human Face of the Urban Environment: Proceedings of the Second Annual World Bank Conference on Environmentally Sustainable Development 7 The Business of Sustainable Cities: Public-Private Partnershipsfor Creative Technical and Institutional Solutions 8 Enabling Sustainable Community Development 9 Sustainable Financing Mechanismsfor Coral Reef Conservation: Proceedings of a Workshop 10 Effective Financing of Environmentally Sustainable Development: Proceedings of the Third Annual World Bank Conference on Environmentally Sustainable Development 11 Servicing Innovative Financing of Environmentally Sustainable Development 12 Ethics and Spiritual Values: Promoting Environmentally Sustainable Development 13 The Self and the Other: Sustainability and Self-Empowerment 14 Meeting the Challenges of Population, Environment, and Resources: The Costs of Inaction 15 Rural Well-Being: From Vision to Action ESSD Studies and Monographs (formerly Occasional Paper) Series 1 The Contribution of People's Participation: Evidencefrom 121 Rural Water Supply Projects 2 Making Development Sustainable: From Concepts to Action 3 Sociology, Anthropology, and Development: An Annotated Bibliography of World Bank Publications 1975-1993 4 The World Bank's Strategyfor Reducing Poverty and Hunger: A Report to the Development Community 5 Sustainability and the Wealth of Nations: First Steps in an Ongoing Journey 6 Social Organization and Development Anthropology: The 1995 Malinowski Award Lecture 7 Confronting Crisis: A Summary of Household Responses to Poverty and Vulnerability in Four Poor Urban Communities (Also in French and Spanish) 8 Confronting Crisis: A Comparative Study of Household Responses to Poverty and Vulnerability in Four Poor Urban Communities 9 Guidelinesfor Integrated Coastal Zone Management (continued on the inside back cover) ENVIRONMENTALLY AND SOCIALLY SUSTAINABLE DEVELOPMENT STUDIES AND MONOGRAPHS SERIES 12 Rural Development From Vision to Action A Sector Strategy The World Bank Washington, D.C. Copyright X 1997 The Intemnational Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing October 1997 This report has been prepared by the staff of the World Bank and endorsed by the Board of Executive Directors. Cover photograph by Wendy S. Ayres. Children in rural Fiji rest after hunting crabs. Library of Congress Cataloging-in-Publication Data Rural development: from vision to action / World Bank Group. p. cm. - (Envirornmentally and socially sustainable development studies and monographs series ; no. 12) "The preparation team was led by Alex McCalla, and included Wendy S. Ayres ... [et al.]." ISBN 0-8213-3966-4 1. Rural development. 2. Rural development-Developing countries. 3. Sustainable development. 4. Sustainable development-Developing countries. 5. Rural development-International cooperation. I. McCalla, Alex F., 1937- . II. Ayres, Wendy S. III. World Bank Group. IV. Series. HT391.R869 1997 307.1'412'091724-dc2l 97-17433 CIP The text and the cover are printed on recycled paper, with a flood aqueous coating on the cover. Contents Acknowledgments vi Foreword vii Abbreviations and Acronyms x Executive Summary 1 Chapter 1 The Context 21 Chapter 2 If Rural Development Is So Important, Why Is It Not Happening? 29 Chapter 3 Formulating Country Strategies and Building Consensus 40 Chapter 4 Improving the Existing Portfolio 52 Chapter 5 Using the Intemational Arena to Generate Greater Commitment 57 Chapter 6 Areas of Concentration and Future Directions 66 Appendices A Focus Programs by Region 93 B Regional Summaries 114 C The International Finance Corporation's Vision for Agribusiness 146 D The Role of the Economic Development Institute's Training Strategy in Agriculture and Natural Resources 150 Bibliography 157 Boxes 1 The vision of the World Bank Group for rural development 4 2 Strategic checklist for rural development 8 1.1 Recent grain price increase: long-term trend or short-term spike? 24 2.1 The IFC has sharply improved its agribusiness operations 31 2.2 Reforming agriculture: the World Bank goes to market 35 liii iv Rural Development: From Vision to Action 2.3 Gender makes a difference 36 2.4 Agricultural extension 37 2.5 Key issues for national agricultural research systems in the future 38 3.1 Sector investment programs 42 3.2 Conference on Poverty and Hunger: a popular coalition for action 45 4.1 Improving project quality 54 5.1 A successful alliance: Consultative Group on International Agricultural Research 58 5.2 FAO and the World Bank: an important alliance 59 5.3 Helping countries take advantage of the WTO agricultural trade framework 61 5.4 Instruments to help countries cope with food shortages and world price spikes 62 6.1 Is it better to focus on food crops or export crops? 68 6.2 The Consultative Group to Assist the Poorest: a microfinance program 71 6.3 Village credit funds in Albania 72 6.4 Issues in setting research priorities 73 6.5 The decentralized approach to extension 74 6.6 The environment is key to raising incomes for 1.2 million people in the Loess Plateau in China 77 6.7 Aquaculture: providing food and income for displaced farmers 79 6.8 River basin management and smallholder irrigation improvement project in Tanzania 80 6.9 Mexico's success in decentralizing irrigation spreads worldwide 81 6.10 Demand-driven rural investment funds 83 6.11 Land policy in Russia 84 6.12 Award-winning Africa Road Maintenance Initiative 86 Table 3.1 Diversity of regional issues 50 Appendix tables B.1 Regional differences 114 B.2 Intraregional differences (Latin America and Caribbean example) 115 B.3 Africa Region: Rural Development Action Plan Priority Actions 119 B.4 Actions taken to improve performance of rural development projects 124 B.5 Bank strategies for countries in different stages of reform 128 B.6 Middle East and North Africa: matrix of issues and action 136 B.7 Implications for the Bank 138 B.8 Action matrix 143 Figures 1.1 In the developing world rural populations will exceed urban populations for another twenty years 22 1.2 Agricultural growth and economic growth in low-income developing countries, 1965-89 22 1.3 Area expansion is disappearing as a source of growth 25 2.1 World Bank staff, lending, and economic and sector work in agriculture and rural development, various years 32 Contents v Appendix figures B.1 Progress implementation strategy 127 D.1 Lending and learning in the year 2000 152 Matrices 3.1 Improving strategy formulation and consensus building 51 4.1 Improving the existing rural development portfolio 56 5.1 Using the international arena to increase commitment to agricultural growth and rural development 64 5.2 High-profile initiatives in coordination with other actors 65 Acknowledgments T his strategy was prepared with the ac- tributions were made by many other staff too tive participation of rural development numerous to list. and agriculture staff from all parts of the The capable assistance of Alicia Hetzner and World Bank Group. The Board of Executive Virginia Hitchcock with editing, and Gaudencio Directors of the Bank Group endorsed the Dizon with desktopping, is gratefully acknowl- strategy in the spring of 1997. The report was edged. prepared by a team led by Alex F. McCalla, The overall supportand gtidanceof CaioKoch- Director, Rural Development Department, and Weser, Managing Director, Operations, Policies, comprising Wendy Ayres, Hans Binswanger, and Programs, and lsmail Serageldin, Vice Presi- Arturo Cornejo, Sanjiva Cooke, Douglas Fomo, dent for Environmentally and Socially Sustain- Dean Housden, and David Steeds. Major con- able Development, are greatly appreciated. vi Foreword R educing poverty and eliminating products. These improvements not orly will hunger are among the most fundamen- raise the incomes of the rural poor but also will tal challenges we face. Today more benefit the urban poor by bringing down the than 1.3 billion people are compelled to live on price of food. We must improve the efficiency less than one dollar a day. More than 800 mil- of land, water, and chemical use if we are to lion people are going hungry, because they feed the world's population, expected to ex- cannot afford to buy the food they and their ceed eight billion by 2025, without destroying families need. And the numbers of poor and the environment. hungry people will surely continue to grow This rural sector strategy outlines the steps unless action is taken now. the Bank and its partners must take to spur Reducing poverty and ending hunger re- rural development. Key elements of the strat- quire focused attention on the rural economy. egy include: Nearly three out of four of the world's poor * Taking a broad rural focus, as opposed to a and hungry people live in rural areas. Al- narrow agricultural sector focus. The rural though the absolute numbers and the propor- sector strategy focuses on the entire rural tion of poor people living in cities are expected productive system. Water resource alloca- to grow rapidly, the majority of poor will con- tion and comprehensive watershed man- tinue to live in the countryside until well into agement incorporate irrigation and the next century. drainage. The management of natural re- Rural people also play a critical role in pro- sources in sustainable production systems tecting the environment. Agriculture is the treats agriculture, forestry, and livestock world's biggest user of land and water re- as part of a larger system. Human capital sources. Agriculture both contributes to envi- development, infrastructure, and social ronmental degradation and suffers as a result development are integrated into rural de- of it. Excess use of fertilizers and pesticides pol- velopment strategies and programs. lutes the water and destroys biodiversity, and * Involving the entire World Bank Group in pro- unmanaged deforestation eliminates critical moting rural development. Coordination habitats and ruins watersheds. Meanwhile, among the different actors must be greatly water pollution and erosion reduce the produc- improved to ensure that efforts are neither tivity of farms and fisheries. duplicated nor hampered. We must raise the productivity of poor peo- * Working with partner countries and the ple in agricultural areas and ensure that they broader international community to integrate have the capacity to market and distribute their rural development in overall country develop- vii Foreword viii ment strategies. The rural sector strategy * Addressing old issues in new ways. The Bank stresses the formulation of country assis- Group has acquired considerable knowl- tance strategies as critical to building con- edge about what works and what does not. sensus both within the Bank Group and We will implement more widely the prom- among stakeholders in countries. ising new approaches. For example, we * Addressing long-ignored issues. We must not will involve stakeholders in the develop- be timid on issues such as land reform, and ment and execution of projects through all we must greatly increase our commitment stages, deliver rural financial services to to food and nutrition policy. Gender equity the poor using new approaches, and pro- will be an important aspect of many of mote sustainable resource use through these issues. community-based management. James D. Wolfensohn President World Bank Group Abbreviations and Acronyms AGSECAL Agriculture Sector Adjustment ESCAP Economic and Social Commission Loan for Asia and the Pacific AKS agricultural knowledge system ESD Environmentally Sustainable APRP annual portfolio review process Development ARND agriculture, natural resource man- ESSD Environmentally and Socially agement, and rural development Sustainable Development Vice ASIP Agricultural Sector Investment Presidency (formerly ESD) Program ESDAR Environmentally Sustainable AST Asia Technical Department Development Agricultural CAP Common Agricultural Policy Research and Extension Group CAS Country Assistance Strategy ESP Education and Social Policy CBD community-based development Department CEM country economic memorandum ESW economic and sector work CFS Cofinancing and Financial Advi- EU European Union sory Services E)(T External Affairs Vice Presidency CGAP Consultative Group to Assist the FAO Food and Agriculture Organization Poorest of the United Nations CGIAR Consultative Group on Interna- FAOCP Food and Agriculture Organiza- tional Agricultural Research tion Cooperative Programme CIMMYT International Center for Maize FSD Financial Sector Development and Wheat Improvement Department COD country operations department G7 Group of Seven Nations CVP central vice presidency GAP Gender Analysis and Policy Group DEC Development Economics and GATT General Agreement on Tariffs and Chief Economist Trade DMT departmental management team GDP gross domestic product DRIF demand-driven rural investment GEF Global Environinent Facility fund GNP gross national product EAP East Asia and the Pacific Region GWP Global Water Partnership ECA Europe and Central Asia Region HDD Human Development Department EDI Economic Development Institute IARC International Agricultural Research EMT ECA/MNA Regions Technical Centers (of the CGLAR) Department IBRD International Bank for Reconstruc- ERL economic recovery loan tion and Development ix x Rural Development: From Vision to Action ICRAP International Center for Research PHN Population, Health, and Nutrition in Agroforestry Department IDA International Development PHRD Policy and Human Resource Association Development Fund EEC International Economics Department PRD Policy Research Department IENTI Industry and Energy Department, PSD Private Sector Development Telecommunications and Vice Presidency Informatics PSP Poverty and Social Policy IFAD International Fund for Agricul- Department tural Development QAG Quality Assessment Group WC International Finance Corporation RDV Rural Development Department IFDC International Fertilizer Develop- (formerly Agriculture and Natural ment Center Resources Department, or AGR) IFPRI International Food Policy RMr regional management team Research Institute RUTA Regional Unit for Technical IDF International Monetary Fund Assistance IRRm International Rice Research Institute RVP regional vice president ISNAR International Service for National SAR staff appraisal report Agricultural Research SG2000 Sasakawa Africa Association rr information technology Global 2000 LAC Latin America and the Caribbean SIL sector investment loan Region SOD sector operations department LEG Legal Department SPAAR Special Programme for African LLC Learning and Leadership Center Agricultural Research MALSIP Malawi Agriculture and Livestock SRISTI Society for Research and Initia- Investment Project tives for Sustainable Technology M&E monitoring and evaluation and Institutions MENA Middle East and North Africa SSPM sustainable soil productivity Region management MfGA Multilateral Investment Guaran- T&V training and visit tee Agency TWU Transportation, Water, and NARI National Agricultural Research Urban Development Department Institute UNCSD United Nations Commission on NARS national agricultural research Sustainable Development system UNCTAD United Nations Conference on NEAP national environmental action Trade and Development plan UNDP United Nations Development NGO nongovernmental organization Programme NRM natural resource management UNEP United Nations Environment O&M operations and maintenance Programme OD Operational Directive UR Uruguay Round ODA Overseas Development Association USAID United States Agency for Interna- OECD Organisation for Economic Co- tional Development operation and Development WDR World Development Report OED Operations Evaluation Department WFP World Food Programme OPR Operations Policy Department WTO World Trade Organization Executive Summary It is not difficult to make the case for greater 800 million people are hungry, and the num- World Bank Group involvement in im- bers may exceed one billion people by the proving the rural economy. The mandate year 2020. Many more are at risk of micro- of the World Bank Group is to help its clients nutrient deficiencies (vitamin A, iodine, and reduce poverty and improve living standards iron). The global population of underweight through sustainable, broad-based growth and children below five years of age is expected to investment in people. Sustainable rural devel- grow from 193 million today to 200 million by opment can make a powerful contribution to year 2020, with most of the deterioration in four critical goals: Africa. 1. Poverty reduction Despite urbanization, nearly three-quarters 2. Widely shared growth of the poor will continue to live in rural areas 3. Household, national, and global food well into the next century, so it is crucial to security address rural poverty now. The significant 4. Sustainable natural resource management. majority of the rural poor depend on agricul- The Bank's objectives of poverty reduction, ture for most of their meager livelihoods. widely shared growth, food security, and sus- Others depend on associated nonfarm activi- tainable natural resources management cannot ties. Many of the rural poor live in regions be met unless rural development in general, where arable land is scarce, agricultural poten- and a thriving agricultural economy in particu- tial is low, and drought, floods, and environ- lar, are nurtured and improved. This premise mental degradation are common. Of the nearly is at the core of the recommended strategy for one billion poor identified in 59 poverty pro- improving the rural economy. files completed by the Bank, 72 percent live in rural areas. Access to basic human needs- Four Equally Important Challenges education, potable water, health care, and sanitation-is far less available in rural areas. Four enormous challenges must be met: reduc- The problems of malnutrition, low life expec- ing poverty and hunger, raising economic tancy, and high infant mortality are more se- growth, increasing global food production, and vere in rural areas. halting natural resource degradation. Ensuring adequate growth of the world's food supplies is therefore not enough. It mat- Poverty and Hunger Must Be Reduced ters where agricultural production takes place and who receives the associated income. Only More than 1.3 billion people are compelled to if more rapid agricultural growth occurs in live on less than one dollar a day. More than countries with impoverished rural popula- 1 2 Rural Development: From Vision to Action tions, can rural farm and nonfarm incomes rise tural growth, particularly in the poorest coun- sufficiently to enable the rural poor to afford tries, is not likely without first addressing ag- more and better food. And only if the many riculture. An adequate linkage of the rural and millions of men and women smallholders are urban economies through the food marketing equipped to partidpate in agricultural growth system is essential to foster growth across the will rural poverty be reduced and wages for national economy and sustainable growth of unskilled labor rise in rural and urban areas. the rural economy. It is for this reason that the rural sector strategy calls for World Bank support for further policy Food Needs in Developing Countries Could and institutional changes in the international Nearly Double over the Next Thirty Years trading environment for agriculture and other supportive international actions, and for con- Everyone agrees that the world's population centrating development activities on the small- will exceed 8 billion people by 2025, an increase holder economy. Without an open trading of 2.5 billion in the next 30 years. Much, but environment and access to Organisation for not all, of the increase will occur in developing Economic Co-operation and Development country cities, where urban populations will (OECD) country markets, developing coun- more than triple. Most agree that, given mod- tries cannot benefit fully from producing those erate income growth, food needs in developing goods in which they have a comparative ad- countries could nearly double. The challenge vantage. In addition countries with rapidly to world agriculture is enormous. At the coun- growing populations that are not effectively try level this demands well-functioning, using their agricultural potential must improve efficient private sector food markets and agri- their rural development and poverty reduction business systems. But, this area is underdevel- policies and performance. oped in most developing economies. Future increases in food supplies must come pri- Economic Growth Must Be Fostered marily from rising biological yields, rather than from area expansion and more irrigation. Why? No country has had a sustained impact on re- Because land and water are becoming increas- ducing poverty without continuing positive ingly scarce. Most new lands brought under economic growth. For most developing coun- cultivation are marginal and ecologically frag- tries agricultural growth is essential to eco- ile, and cannot make up for the land being nomic growth. Very few low-income countries removed from cultivation each year because of have achieved rapid nonagricultural growth urbanization and land degradation. The without corresponding rapid agricultural sources of water that can be developed cost- growth. Most of the developing countries that effectively for irrigation are nearly exhausted, grew rapidly during the 1980s experienced and irrigation water will increasingly need to rapid agricultural growth in the preceding be reallocated for municipal and industrial use. years. For example, China's remarkable annual Therefore, production on existing land will economic growth rate of 9.5 percent during the need to nearly double. 1980s and 1990s was preceded by rural and The challenge is worldwide, and both tech- agricultural policy reforms in the late 1970s nological and political in nature. The techno- and early 1980s. Indonesia and Thailand also logical challenge is enormous, requiring the experienced strong agricultural growth prior development of new, high-productivity, envi- to the period of high nonagricultural growth, ronmentally sustainable production systems. It which continues today. Agricultural growth is not more of the same. Private firms must be stimulates economic growth in nonagricultural induced to develop and apply much of the new sectors, which results in increased employment technology required. However, there are large and reduced poverty. Sustained nonagricul- areas of technology development that are of Executive Summary 3 little interest to the private sector, including development is needed and warranted as a subsistence crops or truly public goods, such prudent investment that will provide them as some aspects of natural resources manage- with significant benefits. ment. It is here that public sector finance is critical-at international, national, and lo- Environmental Degradation Must Be Reversed cal levels. Yet, in many countries, research capacity and funding are stagnating or even Hundreds of millions of private farmers, dedining. large and small, men and women, are the The political challenge has received much stewards of the vast majority of the globe's less attention: all major regions of the world renewable natural resources. They recognize must contribute to cost-effective and sustain- the importance of maintaining and enhanc- able food supply growth, induding Eastern ing their productivity, and have shown that and Central Europe, Africa, and Latin America, they can do so, given proper incentives. But which are not doing their share today. The the resources are severely undervalued by in- challenge can be met only if international and appropriate accounting methods, policies, domestic policies, institutional frameworks, and institutional frameworks. Of the world's and public expenditure patterns are conducive fresh water used by people, agriculture uses to cost-effective and sustainable agricultural more than 70 percent for irrigation. Unsus- development. Otherwise, the required tech- tainable agricultural practices are major con- nologies will not be developed and adopted, tributors to non-point source pollution. the supportive infrastructure will not be built Deforestation remains a critical issue, with 25 and maintained, land and water will not be hectares of forest being lost every minute. allocated to their highest-valued uses, and The global challenges of desertification, cli- farmers will not have incentives to maintain mate change, and loss of biodiversity require and improve the natural resources on which major efforts. If production per unit of land their livelihoods depend. is to nearly double in the next 30 years, the But today several major regions and many policy and institutional failures that cause or of the Bank's partner countries are agricultural contribute to the negative environmental im- underperformers or even dropouts. They have pacts of agriculture must be reversed, and institutional frameworks and agricultural poli- sustainable production systems developed, cies that discriminate against the rural sector, encouraged, and applied. underinvest in technology development and The four major challenges of reducing rural dissemination, maintain inappropriate agrar- poverty and hunger, raising economic growth, ian structures, lock up arable land in low- increasing global food production, and halting productivity ranching, undervalue natural re- natural resource degradation require action on sources and therefore waste them, seriously a broad and complex rural development front. underinvest in the health and education of It is not just a matter of raising food output, their rural populations, discriminate against but of ensuring that growth is widely shared private sector initiatives in food marketing, and sustainable. Box 1 outlines the vision for and fail to maintain existing or invest in new rural development. rural infrastructure. Unless these policies, in- stitutions, and public expenditure patterns are If It Is So Important, Why Is It corrected, the world will not have abundant Not Happening? food supplies, the major achievement of twen- tieth-century agriculture. But more impor- If rural development is so important, why is tantly for the partner countries of the World it receiving so little emphasis? There has been Bank Group, the long-term global outlook sug- a significant decline in commitment to rural gests that greater emphasis on agricultural development in countries, the World Bank, 4 Rural Development: From Vision to Action Box 1 The vision of the World Bank Group for rural development * Rural growth is widely shared, with private educational opportunities, and sufficient nutri- and competitive agriculture and agribusiness tious foods. as the main engines of growth. * Essential legal frameworks, public investment, * Family farms and nonfarm enterprises provide and productive and social services are provided ample remunerative employment opportunities and financed in a decentralized and participa- to men and women. tory manner. * Rural people manage the soils, water, forests, (The strategic policy, institutional development, grasslands, and fisheries in a sustainable manner. and public expenditure programs for achieving this * Rural people are linked to well-functioning vision are summarized in box 2.) markets for products, inputs, and finance. * Rural people have access to medical care, clean Note: See World Bank 1995a for a detailed discussion of the water and sanitation, family planning services, vision. and the international arena. Actions to in- International Dimension crease commitment are needed in all three dimensions. The international community has also become complacent about these issues, partly because Country Dimension of the decline in international food prices over the past two decades, but also because of poor Countries have reduced their conmmitment for coordination of international organizations, several reasons. First, they view agriculture as OECD governments, civil society groups, a dedining sector, and therefore not important and private foundations. Chapter 6 proposes for development. This ignores the crucial role initiatives for strengthening commitment to agriculture must play in the transition from an rural development, improving coordination agrarian society to an urban-industrial one. among donors, and promoting international Second, falling real food prices over the last policies and institutions that are supportive. two decades has led to complacency towards the agricultural sector. Complacency, in turn, World Bank Group Dimension has led to a failure to develop the capacity to execute the complex reforms and programs re- Within the World Bank Group, attention to ru- quired to achieve sustainable rural develop- ral development has declined, primarily be- ment. Third, the rural poor have little political cause the process of strategy formulation has voice. Because rural populations are geo- been weak, and because many past Bank-as- graphically dispersed and because rural com- sisted projects and programs performed munications and transportation infrastructure poorly. During the late 1980s, the performance is often poor, rural people, and rural women of the agricultural and rural development port- in particular, have difficulty organizing and folio in the World Bank deteriorated. In 1989 expressing their preferences through political only 52 percent of completed projects were processes. These factors, coupled with the po- judged satisfactory. The agribusiness portfolio litical power of urban elites, explain the urban of the International Finance Corporation (IFC) bias so characteristic of policies, institutions, also performed poorly. To improve perform- and expenditure patterns in developing coun- ance, rural development staff in both organi- tries. Greater understanding of these political zations initiated many measures. economy issues is badly needed. Chapter 3 In 1992 the IFC reorganized its agribusi- discusses the country dimensions of weak ness staff into a single department to serve demand. all the Regions, adopted a supply-chain Executive Summary 5 approach with projects ranging from produc- ized and top-down. Most decisions re- tion to final consumption, aggressively cleaned garding their design and implementation up its portfolio, and selectively made new in- were made by central government offi- vestments in countries with appropriate ena- cials, and communities were rarely in- bling macroeconomic and sectoral policies. As a volved in project design, implementation, consequence IFC's agribusiness portfolio per- or monitoring. formance has improved dramatically, and is now * Credit support to specific crops or sectors, such in line with the rest of IFC and growing rapidly. as agro-industry or livestock, through parasta- tal agricultural banks. Repayment perform- Actions to Improve Performance ance of these directed credit programs was poor, and they were not sustainable. They Actions taken by the Bank have led to improved benefited relatively well-off farmers rather performance of its portfolio of agricultural and than the poor. Furthermore, directed credit rural development projects, and to improved lines distorted financial markets by reduc- quality at entry. In fiscal 1996, 78 percent of ing interest rates for some types of activi- completed agricultural projects were rated sat- ties but not for others. isfactory, which is 10 percentage points better * Frontier settlement to solve the problems of than the Bank average. While this news is en- providing access to fannland to ever-growing couraging, it is too early to determine whether populations. The projects were centrally man- this good performance will continue, given the aged and costly, and some of them resettled 100 or so projects scheduled to close in the next people in areas unsuitable for farming. 18 months. There is no room for complacency * Construction of large-scale irrigation systems. if this good performance is to be sustained. It has become increasingly costly to con- The actions that have been taken all rely on struct new irrigation systems, as most of the same five principles. First, the policy and the high-potential areas have already been institutional framework must be supportive of developed. Furthermore, many irrigation project success, rather than working against it. systems constructed over the past decades Second, wherever possible, the private sector have not performed well, and some have must be mobilized to provide investment capi- led to environmental problems, such as tal, production, and most services. Third, the salinization and waterlogging of soils. state has new roles, away from heavy interven- * Seed production through parastatals. The pro- tion in the economy, towards providing ena- duction of seeds through parastatals was bling, sound macroeconomic, fiscal, and sector usually inefficient and unresponsive to policy environments. Fourth, a plurality of in- farmers' needs, and the parastatals stifled stitutions is involved, including community- entry of the private sector. level groups, and lower-level governments, in * Public sector involvement in production, input addition to central ministries. Fifth, projects supply, processing and marketing. These ac- and programs are decentralized and are de- tivities are best carried out through the signed and executed with a high degree of in- private sector, which can often perform fluence and participation by communities, them much more efficiently and more flex- associations, and local governnents. ibly than government-run institutions. We Have Learnedfrom Failed Approaches We Are Improving Our Mainline Business Failed approaches include: There are several core activities that the Bank "Integrated rural development" projects. has performed well in the past, and which the These failed by being excessively central- Bank should continue to support. These activi- 6 Rural Development: From Vision to Action ties include research and extension, reform of in the high proportion of "at-risk projects" agricultural services (seed development, ani- found in the just-completed irrigation mal health), and social forestry and natural re- portfolio review. sources management. Even in these areas, * In water resource management projects in the however, the Bank is introducing innovations Orissa and Tamil Nadu states in India, in line with the five principles to improve their which include institutional change for impact on growth and poverty alleviation. For river basin planning and management, are example, in research and extension the Bank is already in the design phase. Projects in supporting the use of private sector institu- Jordan and Tanzania go further towards tions, such as nongovernmental organizations implementing water resource manage- (NGOs), to carry out research and deliver in- ment (and provide pertinent performance formation in a way that is more responsive to indicators). farmers' demands. The Bank is also promoting * In natural resource management a commu- competition for research funds among all ac- nity-based approach to resource allocation, tors in national research systems. enforcement, and maintenance has proven successful in such diverse circumstances as In Other Core Areas We Have Made Major Burkina Faso and southern Brazil, and is Changes in Approach now being adopted in Egypt and incorpo- rated into the design of many new projects. Selected impacts and achievements are as * In forestry joint forest management by follows: agencies and residents is being promoted • In sector adjustment lending the recent in the Maharashtra and Andra Pradesh Operations Evaluation Department (OED) states in India, with similar approaches review documents significant improve- being incorporated into the designof many ment in program design and implemen- new projects. tation. * In rural finance the emphasis has shifted * In sector investment lending earlier innova- from providing rural credit to support- tions in Morocco and Tunisia have recently ing both savings and credit. The Bank is been carried further in Zambia, where the also fostering mechanisms to increase program has integrated 150 projects sup- competition in service provision and de- ported by 20 donors into an overall sectoral crease dependence on subsidies. There expenditure program. has been successful institutional innova- * In rural development the matching-grant tion in providing microfinance to the approach to local and community-driven poor in circumstances as diverse as Alba- development that is now being under- nia (village funds) and Benin (savings taken in northeast Brazil has turned and loans associations). The recently around a very large and poorly performing completed best-practice paper on rural portfolio of area development projects, finance provides more details on the and making it a flexible, participatory, and changes in direction. cost-effective poverty reduction program. * In land policy and land reform the World * In irrigation and drainage the transfer of re- Bank Group has become a significant sponsibilities for operation and mainte- source of policy advice and influence in nance from agencies to users' associations Europe and Central Asia, and has led the that was first proven on a large scale in development of new negotiated market- Mexico is now being adopted in Turkey, assisted approaches to redistributive land and incorporated into the design of many reform in South Africa and Latin America, new projects. The risks of reliance on over- where it has projects under preparation in centralized approaches are clearly evident Colombia, Brazil, and Guatemala. Executive Summary 7 These innovations offer great promise, but for rural sector operations, and has recom- they are yet to be rigorously incorporated into mended best practices for many components new nonlending services and projects, and in- of agricultural and rural programs. The strate- tegrated into the redesign and implementation gic policies, institutional development, and of problem projects. public expenditure programs needed to achieve the vision are summarized in box 2. Measures to Increase Commitment This strategic checklist for rural develop- to Rural Development ment provides a way for countries to see where they are in terms of creating the condi- The rural sector strategy takes a systematic and tions that foster thriving rural economies. The coherent approach to tackling the three dimen- list reflects the enormous range and diversity sions of weak commitment. Thus, recom- of issues that countries face in promoting rural mended actions in the international arena development. support the strengthening of country commit- The process of strategy formulation and con- ment, and therefore the performance of Bank sensus building will be constrained by the operations in partner countries. availability of staff and financial resources. Ef- To tackle the issue of weak commitment at fort should focus on countries where the gov- the country level, the rural sector strategy fo- ernment is sufficiently interested. Where cuses on the process of developing the country interest is lacking, or political capacity to im- assistance strategies (CASs) as crucial to cap- plement the recommendations is weak, strat- turing a renewed country and Bank commit- egy development may be best delayed until ment to rural growth. The CAS process defines more opportune times. Governments are al- the key issues for development, analyzes cur- ways in search of good ideas. Often, their ca- rent and future prospects, and provides the pacity to make major changes is greatest in overall context within which Bank operations their first one or two years in office. Strategy are undertaken. The CAS process is therefore formulation and consensus building are there- the defining mechanism that frames the Bank's fore most productive if they are appropriately future involvement in a country. If CASs are phased with the evolution of government based on well-defined rural strategies and treat terms. agriculture and the total rural economy com- Rural strategies for countries will need to prehensively, the chances for a sustained and cover all important policies, institutions, and effective rural sector program are substantially programs for rural development. For most improved. Chapter 4 and Matrix 1 provides countries, the job of developing and imple- further analysis and recommended actions. menting these strategies is huge and complex. The principal recommendation, therefore, is Therefore, countries need many partners. The to improve the analytical work and the synthe- Bank can assist with donor coordination, which sis of available country-specific knowledge to is already underway. The following principles fully articulate appropriate rural strategies, so of collaboration and selectivity must underlie that they can be properly reflected in all rele- all Bank activities in rural development: vant CASs over the next three years. A major . All Bank activities in rural development effort would be made to foster greater consen- must reflect its mandate of poverty reduc- sus in client countries in support of the im- tion, sustainable natural resources manage- proved strategies and programs, involving the ment, and private sector development. President personally in carefully selected focus * The Bank must build alliances with part- countries. This is the single most important set ners that work at the country level. It must of actions proposed in this document. also build alliances with partners at the Based on extensive research and past expe- central level to facilitate the country-spe- rience, the Bank has articulated a vision (box 1) cific partnerships. 8 Rural Development: From Vision to Action Box 2 Strategic checklist for rural development * Macroeconomic and sectoral policies are stable. hurts the poor. Where land distribution is The foreign exchange, trade, and taxation re- highly unequal, land reform is needed. Decen- gimes do not discriminate against agriculture, tralized, participatory, and market-assisted ap- but are similar for rural and urban sectors. proaches to land reform can achieve this much . The growth of private agriculture is encouraged faster than expropriation by land reform paras- by minimizing distortions among input and tatals. output markets and by market development for . Private and public sectors complement each agricultural and agro-industrial products, both other in generating and disseminating knowl- at home and abroad. edge and technologies. Public sector financing . Public investment and expenditure programs is particularly important for areas of limited in- for economic and social infrastructure, health, terest to the private sector, such as strategic re- nutrition, education, and famnily planning serv- search, smallholder extension, and diffusion of ices do not discriminate against rural popula- sustainable production systems and techniques. tions or the rural poor. * Rural development programs mobilize the . Large farms and large agro-industrial firms do skills, talents, and labor of the rural popula- not receive special privileges and are not able tion through administrative, fiscal, and man- to reduce competition in output, input, land, or agement systems that are decentralized and credit markets. participatory, and through private sector . The agrarian structure is dominated by efficient involvement. and technologically sophisticated family opera- * Rural development programs are designed so tors, who rely primarily on their own family's that the rural poor and other vulnerable groups labor. The rights and needs of women farmers are fully involved in the identification, design, and wage-laborers are explicitely recognized. and implementation of the programs. Other- * Access to and security of land and water rights wise, rural elites will appropriate most of the is actively promoted. Restricting land rentals benefits. . The Bank needs partners with field pres- and quality of rural development. The many ence and experience working in rural areas specific actions required to bring this about are of partner countries, partners with special discussed in chapter 7. The emphasis on im- and complementary expertise, and part- proving incomes and participation of poor and ners with influence and additional finan- marginal groups is particularly strong in the cial resources. proposed actions in long-ignored areas or areas • In each country the Bank must sequence its in which execution has been especially poor: own activities appropriately. food and nutrition policy, rural finance, market- * The Bank must choose the right product ing, agribusiness and small-scale nonfarm rural mix. entrepreneurship, land policy and land reform, The emphasis on strategy and consensus build- local and community-based rural development, ing is complemented by the sharp focus of the and decentralized and participatory natural re- rural sector strategy on increasing the incomes source management. and participation of the rural poor, and other But enhanced country commitment will not vulnerable groups in all of the Bank's assis- result in a greater impact on the ground unless tance programs. This is a necessary (but, of the trend toward improved project perform- course, not sufficient) condition for enhancing ance continues. Moreover, improved project the influence of these groups, and bringing performance is needed to increase commit- about real economic and social change. We rec- ment inside the World Bank Group. The rural ognize that this will require politically difficult sector strategy therefore includes portfolio re- reforms in policies, institutions, and expendi- views and other measures to raise quality. Al- ture patterns that have in the past favored ur- though today the performance of rural ban and rural elites, but that hinder the pace development projects is now equal to or better Executive Summary 9 than that of other sectors, it is still not good necessary commitment to improving the rural enough. Further improving portfolio perform- economy. The Fourth Annual World Bank ance cannot wait until new strategies are Conference on Environmentally Sustainable adopted and better projects are designed. Sys- Development (ESD) in 1996 focused on rural tematic portfolio reviews have been initiated, well-being. Mr. Wolfensohn with Enrique Igle- and completing them is the second key recom- sias, President of the Inter-American Develop- mendation of the rural sector strategy. The re- ment Bank, and Omar Kabbaj, President of views will result in better performance of the African Development Bank, addressed the projects under their existing design, redesign, participants and offered the full commnitment merger of projects into larger subsector or sec- of their institutions to the rural development tor investment programs, or in cancellation. agenda. The Food and Agriculture Organiza- The objective of the portfolio reviews and tion (FAO) of the United Nations, the Interna- other measures to enhance quality discussed tional Food Policy Research Institute (IFPRI), in chapter 5 is to achieve OED satisfactory ratings International Fund for Agricultural Develop- for 80 percent of completed projects by fiscal 2002 ment (IFAD), and many others delivered simi- and beyond. A recent OED analysis suggests lar messages at the Rome World Food Summit that this is an ambitious goal. Achieving it will in November 1996. There will be other oppor- require many measures, including significantly tunities to deliver the message and strengthen improving quality at entry and project imple- the consensus within the World Bank Group, in mentation, extensive use of piloting, and in- countries, and in the international community. creased willingness to restructure or cancel In addition the rural sector strategy proposes substandard projects. It will also require chan- two complementary high-profile initiatives at neling lending more to countries with favor- the international level. The first is to promote able economic and governance environments, further worldwide moves toward freer and and providing more nonlending services to fairer agricultural trade, a necessary condition others. Only with a dramatic shift from current for ensuring that countries can rely on intema- practices will it be possible to achieve an 80 tional markets, rather than self-sufficiency poll- percent satisfactory outcome within the next cies for their food security. It is also necessary five years. for ensuring access to OECD markets for agri- This emphasis on improved portfolio per- cultural and agro-industrial products, in which formance is not intended to discourage inno- partner countries can produce profitably. The vation and risk-taking in World Bank Group second is to coordinate with other actors to help assistance programs. In fact, the action pro- low-income food-deficit countries cope with gram strongly encourages undertaking experi- volatility in world cereal prices. mental and innovative projects and programs. Enormous investments will be needed to But it proposes that innovative, risky projects foster agricultural and rural growth. Most and programs be tested within an enhanced pro- investment resources must be generated do- gram of nonlending activities, policy reform, insti- mestically, primarily by rural people them- tutional development, and pilot activities, rather selves. But, this will not happen without than as part of large lending programs. Ex- supportive institutions and policies to provide perimental projects and programs that show the necessary incentives. Thus the rural sector a fair likelihood of succeeding on a larger strategy puts so much emphasis on strategy level can then be scaled up through project and policy. Large public investments will also lending. be necessary to support higher levels of private At the international level the rural sector sector participation and investment, including strategy defines a specific set of complemen- rural entrepreneurship. Foreign direct invest- tary actions led by the World Bank Group ment will make major contributions in middle- President James Wolfensohn to reestablish the income countries and a small number of 10 Rural Development: From Vision to Action low-income countries. If the rural sector strat- keting, input supplies, processing, or rural egy succeeds in raising commitment to rural credit through the public sector-instead, de- development, then more funds will be available velop the private sector in agribusiness; focus from the World Bank Group, other interna- on a few selected national and thereby sys- tional financial institutions, and bilateral do- temic programs of high impact-in research, nors. Yet even under the best of circumstances, extension, animal health, and natural resources official flows will be limited and must be used management (water, soil fertility, forests, pas- in a highly selective manner to focus on the tures, wildlife), plus one or two other areas, critical public goods (such as research and in- such as irrigation or rural finance, depending stitutional development), without which pri- on the country. The second major challenge is vate sector development will be constrained. to pursue rural, rather than just agricultural growth. This is being done by designing a com- Regional Rural Sector Strategies mon strategy for developing the rural econ- omy, with investment in infrastructure and Countries and regions vary greatly with regard social services to be undertaken through non- to the condition of their rural economies and agricultural projects. The third major challenge their rural development needs. There is no sim- is to make national programs work. Sector in- ple approach to rural development that will vestment lending is rapidly becoming a privi- work for all countries. In some countries land leged instrument; although still not yet proven, tenure may be important; in others managing it has the potential to generate systemic change scarce water resources is the main issue. In in the whole public rural expenditure program. still others redefining the role of the state and This is particularly important in Africa where, of parastatals is the key concern. Therefore, with official development assistance at 11.5 each Region has prepared its own rural sector percent of gross national product (GNP) in strategy based on the region's endowments, 1993 and many donors active in rural areas, distribution of assets, and functioning of donor coordination is essential. Agricultural markets and incentive systems for the alloca- policy reform would be more vigorously pur- tion of resources. In addition each Region sued through adjustment operations, as well as has identified two or more countries or region- through nonlending activities. There will be ex- wide programs for special focus (see section panded focus on generating African and donor on the Focus Program Initiative, p. 13, and commitment to agriculture and to agricultural appendix A). policy reform through African-wide regional fora such as the Special Programme for African Sub-Saharan Africa Agricultural Research (SPAAR), the West African and the Eastern and Southern African The overwhelming challenge in Africa is to in- associations of ministers of agriculture, and crease food production and raise incomes in through the African Water Pact. rural areas. Seventy percent of people in Sub- Saharan Africa live in rural areas. Agriculture Europe and Central Asia accounts for 30 percent of gross domestic prod- uct (GDP), 40 percent of exports, and 70 per- The main challenge in Europe and Central Asia cent of employment. In Africa, far more than is to reform agricultural policies that in the past in any other region, a prosperous agriculture encouraged inefficient farming practices. The is the engine without which poverty cannot be Region's strategy is to base rural lending on a reduced, natural resources cannot be managed graduated response to thresholds of policy re- sustainably, and food security cannot be as- form, including price and trade liberalization, sured. The Region has set clear directions for agribusiness and farmland ownership change, lending: no more financing of agricultural mar- demonopolization and deregulation of market- Executive Summary 11 ing, and financial sector reforms. Exceptions preoccupation with maintaining low urban are made for projects with long lead times, food prices. This preoccupation has led to the such as research, or for activities such as land prevalence of state marketing companies that registration that will enable a policy change, stifle commerce and to the implementation of when made, to take effect promptly. A second ineffectively targeted food subsidies. The fiscal major challenge, unique to the Region, is the drain is enormous, exacerbated by the recent severity of the needed restructuring and re- steep increase in world grain prices. While sec- building of agriculture and the agro-industrial tor adjustment operations have made signifi- complexes. This is a task without precedent- cant progress in addressing aspects of there is no blueprint. The Region will continue competitiveness, much more remains to be to devote a relatively large share of resources done in designing targeted food consumption to nonlending services, particularly to analyze programs that are effective and politically ac- land and rural property issues, and the impact ceptable. A third major challenge in Middle of privatization on efficiency and equity, and East and North Africa is posed by the scarcity to assist with determining the necessary legal of arable land and the severity of soil erosion, and regulatory framework for agribusiness and the indifference of many governments: and rural services. A third major challenge is there is little investment in watershed manage- the intention of Central European and Baltic ment. Many of the region's poorest people live countries to accede to the European Union. For in the upper watersheds, eking out livelihoods many countries this may mean the pursuit of from forests, rangelands, and steppes, and con- suboptimal policies, as they try to position tributing to watershed degradation in the proc- themselves in anticipation of the eventual ap- ess. Given the pervasiveness of urban bias in plication of the Common Agricultural Policy public expenditures, much more persuasive (CAP). Here, too, nonlending services will be analysis is required to significantly increase in- significant, as the Region endeavors to con- vestment in watershed management. vince governments not to introduce CAP-type policies prematurely. The Region will also South Asia work with the European Union to reduce the likelihood that introduction of protectionist The principal distinguishing feature in South measures prior to accession negotiations re- Asia is the world's largest concentration of sults in compensation benefits from the Euro- poor rural people. Landlessness is far more pean Union after membership. common there than elsewhere. Much rural poverty is found in rain-fed areas, where the Middle East and North Africa resource base is both more limited and more fragile than in the irrigated plains. Poverty re- The scarcest resource in Middle East and North duction is the main challenge. It is being ad- Africa is water, and the overwhelming chal- dressed by working to reduce all distortions in lenge is to increase the efficiency of water use agricultural product and factor markets. The in agriculture, currently the highest user. most important reason for these distortions is Water charges are symbolic, and operations exorbitant government intervention in market- and maintenance are inadequate because of ing, distribution, and finance, through paras- weak user participation. Yet intersectoral tatals and overregulation, as well as through water transfers are inevitable. Urgent action is protection of domestic industry which gener- required and is being sought by the Region ates higher input costs for agriculture. Rede- through a series of investment operations in fining the government's role in agriculture and the water sector. A second major challenge is removing market distortions are the second to improve the competitiveness of agriculture, most important challenge. The Region is en- while taking account of most governments' couraging speedy completion of trade policy 12 Rural Development: From Vision to Action reform and increasing competition in input connected to issues of natural resources man- and output markets, with an orderly transition agement. At the same time commercial farmers to full private sector orientation. In addition are beginning to better understand the concept the Region will strengthen sector work dis- of land conservation and sustainable farmning, semination and dialogue with stakeholders to and are seeking assistance in developing and raise country commitment in decentralized implementing these techniques. Poverty reduc- participatory rural development programs. A tion, better use of existing productive capacity, third major challenge is water resources man- and sustainable natural resource management agement. This has several dimensions: inter- are the three main challenges for the Region. sectoral and intercountry disputes over The Region's strategy is to redefine the role of allocation of scarce water, a crisis in irrigation government; emphasize community-based ap- service delivery, and a worsening problem of proaches to natural resources management; waterlogging and salinization, and pollution of target interventions to reduce rural poverty, both ground and surface water that threatens emphasizing indigenous peoples; increase ef- rural domestic water supply. The Region is ad- forts to speed the pace of land reform and land dressing the second two problems through in- allocation; work with governments to remove novative projects in irrigation and drainage, policy biases against small farmers; and mobi- flood control, and rural water supply. It envi- lize rural financial resources. sions taking a more proactive role in resolving water disputes by launching participatory ana- East Asia and the Pacific lytical work on water resources management, supporting regulatory measures, and dissemi- The main characteristic of East Asia and the nating policy advice. Pacific is fast growth, including fast agricul- tural growth (4 percent per year since 1980), Latin America and the Caribbean and good social service provision nationwide. Except for Indochina and the poorer areas of The most striking characteristic of the Latin China, East Asia and the Pacific countries are America and Caribbean region is the incredible not International Development Association diversity of the countries in terms of socio- (IDA)-eligible and have to borrow on the In- economic conditions and agricultural prac- ternational Bank for Reconstruction and Devel- tices. The region contains some of the Bank's opment (IBRD) terms. A major challenge is that highest-income borrowers (Mexico, Chile, Ar- borrowers have preferences for uses of I3RD gentina), where much agriculture is techno- lending, which may not be coincident with logically sophisticated and an engine of Bank priorities. Virtually all borrowing coun- growth, and some of its lowest income borrow- tries of East Asia and Pacific are willing to bor- ers (Bolivia and Haiti), where much agriculture row for large dams, and the Bank response is subsistence-based. Another characteristic is should be based solely on evaluation of eco- the extreme income inequality of the rural nomic, environmental, and resettlement costs population-a result of a long history of gov- and benefits. Many countries seem to have be- ernments providing discriminatory access to come less interested in borrowing for agricul- land and capital to the wealthy and powerful. tural research or watershed management, and Poverty is deep and prevalent in rural areas, more persuasive analysis will have to be un- and is a major source of urban poverty, because dertaken. Related challenges, in the sense that a high proportion of the rural poor have fled a sophisticated Bank response is required, to the urban peripheries. Many rural poor earn arises with respect to financing high technol- their livelihoods as laborers or subsistence ogy agribusiness and reforming marketing smallholders in environmentally fragile areas parastatals. For the first, new types of lending or on the frontiers, so rural poverty is closely instruments and new types of collaboration Executive Summary 13 with IFC are needed. For parastatal reform tion in Morocco, and water management there is a danger, in nominally market econo- and allocation issues across the entire mies, of replacing a relatively transparent and region efficient parastatal by an opaque private * South Asia. Focus on integrating several monopoly. Pragmatism will be required in existing activities into a multisectoral rural parastatal reform. A third challenge is the sheer strategy for Bangladesh. In India focus on heterogeneity of the region, ranging from some developing a comprehensive rural devel- of the largest Bank borrowers (China and opment strategy Indonesia) to some of the smallest (Laos, Fiji, * Latin America and the Caribbean. Focus Pacific Islands, and Mongolia). Donor competi- on rural poverty reduction in southern tion is strong but can be turned to an advantage Mexico, northeastern Brazil, and Guate- if another donor is willing to take the lead in mala, and support for the Regional Unit the agricultural sector of entire small countries. for Technical Assistance (RUTA) in Agri- culture Focus Program Initiative * East Asia and the Pacific. Focus on formulat- ing a rural development strategy for At the request of the President, Regions and Vietnam, implementing a recently com- Central Departments have identified focus pleted rural development strategy for the programs that would significantly accelerate Philippines, and analyzing China's op- agricultural and rural development in selected tions for long-term food security countries through concentrated efforts from the * Globally. Focus on the WTO and the world Bank and collaborators, show what is possible trading system for agricultural commodi- through a combination of political will and rig- ties, which are critical to the goal of foster- orous application of best-practices, and achieve ing rural development. significant regional and global impacts on food security and poverty reduction. Work on the Preparation of the Rural focal activities has just begun, and much needs Sector Strategy to be done to integrate the programs fully into the CAS process and into the Bank's budget Rural development is not a task solely for rural process. In addition consultation in and with development professionals, but requires atten- focus countries is needed to be sure they are tion by specialists in private sector develop- committed to the initiative. The 1996 Environ- ment, infrastructure, health, family planning, mentally Sustainable Development (ESD) con- nutrition, education, and social development. ference and Annual Meetings were used to Nevertheless, there is a narrower set of activi- build consensus on these initiatives. ties that will be carried out primarily by the The focal programs are summarized below: professionals grouped in the rural develop- * Africa. Focus on accelerating widely shared ment family, part of the Bank's new network agricultural growth in Guinea, Madagas- on Environmentally and Socially Sustainable car, Malawi, Mali, and Uganda Development (ESSD). The following sections * Europe and Central Asia. Focus on Ukraine, discuss the activities of the rural development whose agricultural recovery is important family, rather than the full set of activities of in itself and for global food security, and the World Bank Group in rural areas. focus on analyzing the cross-country agri- Mr. Wolfensohn recognized that the de- cultural policy issues faced by countries cline in agricultural and rural development who seek admission to the European activities had to be reversed. In December Union 1995 he commissioned the rural development * Middle East and North Africa. Focus on rural staff to design a rural sector strategy. A steer- strategy development and implementa- ing committee was formed immediately com- 14 Rural Development: From Vision to Action prising representatives from throughout the a period of piloting. Some 1,000 staff- Bank, including the Regions, Rural Develop- weeks of core training took place during ment Department (RDV), Environmentally fiscal 1997. Sustainable Development Agriculture Re- . Portfolio reviews have been undertaken search and Extension (ESDAR), Environment for forestry, and irrigation and drainage (ENV), Transportation, Water, and Urban De- projects, and clear lessons have been velopment (TWU), Human Development drawn for improving design and reducing (HDD), Development Economics and Chief risks. A review of the research and exten- Economist (DEC), OED, and IFC. The rural sec- sion portfolio is ongoing. tor strategy benefited greatly from the partici- * The steering committee was transformed pation of many persons from outside the into an Implementation Council, which traditional agricultural sector operating divi- guided the initial execution of the rural sions. The Agricultural Symposium work- sector strategy. The transition to the for- shops,held inJanuary and February 1996, gave mally-constituted Sector Board has been staff the opportunity to define the Bank's fu- straightforward. The Sector Board consists ture directions in rural development. Many of of Chair members from the six Regions and the recommendations for the subsectors and invited representatives of IFC, Economic for the Regions emerged from the symposium Development Institute (EDI), OED, Policy workshops. Staff also attended three Bankwide Research Department (PRD), and the Con- meetings to review progress and provide feed- sultative Group on International Agricul- back. The Gender Analysis and Policy Group tural Research (CGIAR), and thus largely and colleagues at the FAO reviewed the draft. retains the broad membership of the origi- Briefings on the final draft were presented to nal steering committee. Managing Directors, Vice Presidents, and rural * Intensive internal and external consult- development staff. The interim report, which ations have been held on the rural sector was presented to Mr. Wolfensohn on March 23, strategy, especially with NGOs and foun- 1996 was the outcome of wide and active par- dations, culminating in this year's ESD ticipation of staff from all parts of the Bank.' conference. Mr. Wolfensohn, the Presi- The process generated broad-based interest and dents of Africa Development Bank and the commitment to a new focus on agricultural Inter-American Development Bank, and growth and rural development, and has been the head of IFAD spoke with virtual una- extremely valuable. The report in its current form ninity on a vision for revitalizing rural truly reflects the views of the very broad group development and the actions needed to of people conmmitted to rural development. achieve the vision. Since the first report in March 1996, much * Old alliances haveflourished,notablywith has occurred. Actions taken include: CGIAR and with FAO and IFAD. Recent • Continued application of the program- alliances have grown, notably the Consult- matic changes introduced in the 1990s: ative Group to Assist the Poorest (CGAP) abandonment of failed approaches, im- and the Global Water Partnership, and provement in mainline business, and inno- new alliance-building initiatives have been vation in project design. started, such as the Hunger and Poverty . A core training program, organized into Knowledge Network, the Soil Fertility In- two main modules covering strategies for itiative, and the Indo-Gangetic Rice-Wheat agricultural, rural, and natural resources Initiative. development (5 days), and the design of * The rural sector strategy has been deep- agricultural and natural resource projects, ened by in-depth analyses of future de- including technological linkages (4 days), mand, available skills, and resources was implemented in May 1996 following required to jump-start the rural sector Executive Summary 15 strategy. The results of these analyses have and be reflected in business plans. A key rec- been incorporated into this report and are ommendation of the rural sector strategy is to briefly discussed below. improve rural strategy and policy formulation * A summary of the rural sector strategy and as part of the CAS process. If this is successful, the Bank's Food Security statement for the demand should rise considerably. In the mean- World Food Summit were discussed at a time, an approach relying on the judgment of Board seminar on November 5, 1996. This regional managers was used to project de- final version reflects the comments of the mand. The principle findings are: Board members. In the aggregate demand by product line * Mr. Wolfensohn offered his full commit- breaks down relatively evenly, with about 20 ment to the broad program of actions percent for each. But with the exception of East adopted at the World Food Summit held in Asia and the Pacific, the regional differences Rome in November 1996. by product line are very striling: This rural sector strategy is thus the out- * Europe and Central Asia projects that 36 come of a year-long intensive participatory percent of its work program will be in rural process. It incorporates the consensus arising strategy and policy formulation. from extensive internal and external consult- * Africa projects that 39 percent of its work ations. program will be in agricultural systems intensification. Areas of Concentration and Future Demand * South Asia (42 percent) and Middle East and North Africa (34 percent) both project These issues can, however, issues addressed by high demand for services in water alloca- the rural development staff of the World Bank tion, and irrigation and drainage. Group can be grouped into five clusters, or * Latin America and the Caribbean empha- product lines. This is the format followed in sizes natural resources management, and chapter 7, where we briefly review the state of local and community development and in- the art and key future directions in the subsec- frastructure, which together account for 69 tors of rural development. The five areas are: percent of its demand. . Rural strategy and policy formulation Thus the even breakdown of overall demand * Agricultural systems intensification among the five product lines masks highly dif- * Management of natural resources and ferentiated demand patterns across regions. forestry Indeed, the projections of future demand * Water allocation and management by managers are highly concordant with the ci- * Local and community development and verse priorities identified in the regional rural rural infrastructure. sector strategies. The distribution of staff While there is considerable overlap among will need to be adjusted to correspond to these these five product lines, they are sufficiently demands. distinct to make them meaningful for purposes of projecting demand for rural development Ensuring Capacity to Respond services, assessing current staff capabilities, to Likely Demand identifying skill gaps, and determining a hu- man resources strategy to equip the World A comprehensive inventory of existing staff ca- Bank Group to revitalize rural development. pabilities, projected retirements, and attrition Projecting demand is problematic in a context has been undertaken. Combined with the de- in which demand from countries and country mand projections indicated above, conclusions program managers will increasingly guide re- can be drawn about skill gaps and future re- source allocation in the Bank. Demand will ul- cruitment needs. timately be generated through the CAS process 16 Rural Development: From Vision to Action There are currently about 470 staff working What Would Be the Incremental Costs? on rural development, including more than 100 long-term consultants. A very high percentage Costs of doing business in rural development of the staff have the necessary technical skills have been scrutinized intensively, with a view and are fully competent, according to their to achieving savings. The principal findings managers. However, there are skill gaps in sev- are: eral areas, most notably in the area of strategy . The average preparation cost per ap- and policy. The Sector Board will give major proved rural sector project in fiscal 1996 emphasis to maintaining and improving staff was 19 percent higher than the Bankwide skills, and to matching the special technical average. This difference reflects the rela- skills of staff members to the areas where they tively high costs of doing business in rural can contribute the most. areas, because of their spatial dispersion While staff competency is strong, more than and heterogeneity, and the multiplicity of one-third of experienced staff members are government and nongovernmental insti- likely to be lost through retirement or attrition tutions involved. Incurring costs above the over the next five years. This change provides Bankwide average is an inescapable out- an opportunity to make the necessary changes come of doing business in rural areas. in staff skills to match changes in future . The average supervision cost for rural sec- demand for skills. Enhancing staff capacity in tor projects in the portfolio in fiscal 1996 the Bank will require a major recruitment effort, was about the same as the Bankwide aver- which has significant upfront costs. Therefore: age. * The Sector Board will make staff capacity * Steps initiated and ongoing to reduce costs building and recruitment a top priority, include: along with strengthening the knowledge o Ongoingportfolioreviewswhichshould base. In collaboration with the Human lead to the closing or restructuring of Resources Vice Presidency, the Sector problem-ridden projects. This will lead Board will develop a four-year recruitment to reduced costs for supervision. program. o A more strategic approach to lending, * Demand is expected to rise significantly for with more analysis, piloting, and con- expertise in two areas: water allocation, sensus building than in the past. This irrigation and drainage, and local and com- will reduce the number of project starts munity development and rural infrastruc- and therefore the costs of dropped pro- ture. Thus capacity is likely to grow in these jects before they reach the Board. areas. Demand and capacity are likely to be o Substantial use of local-hire staff, par- maintained at current levels for agricul- ticularly in Africa and South Asia. tural systems intensification and natural n Merging administrative units in Africa, resources management and forestry. De- Europe and Central Asia, and Latin mand and capacity is likely to fall in the America and the Caribbean, and Agri- fifth product line-strategy and policy for- culture and Natural Resources. mulation-although the content will shift a A further modest increase in reliance on toward markets and agribusiness, and ex- long-term consultants. pertise is likely to grow in these subareas. a Placing highly competent staff in coun- * To improve expertise in strategy and pol- tries to work with local staff and con- icy formulation, a core training program sultants in program and project design has been initiated. In addition a special and implementation. program to recruit and train economists Reversing the decline in lending and and other social scientists for work on rural strengthening the quality of nonlending serv- strategy and policy issues is planned. ices will require adjustments in the Bank's al- Executive Summary 17 location of resources. The activities to be pur- sibilities, but the Regions and the Rural Devel- sued will depend on the resources available. opment Sector Board will have to provide in- The following is a list of key activities for the puts, quality enhancement, and quality sector in descending order of priority: control. A highly decentralized approachfor imple- 1. Achieve impact on the ground by care- mentation is therefore needed, but with mechanisms fully managing and further improving to assure clear accountability of the results. the performance of the portfolio under Management and the Board require regular implementation feedback on the implementation of the rural 2. Initiate core functions of the rural devel- sector strategy and its impact. This will be a opment family, such as disseminating ex- primary responsibility of the Rural Sector isting knowledge on best-practices, and Board that has been established. The Sector providing all staff with core training. Board will be guided by the Environmentally If resources available for rural development and Socially Sustainable Development Net- continue their recent modest decline, it will work Council. still be possible to implement the first two priorities by using resources previously ab- What Are the Key Actions Proposed? sorbed by preparation of ultimately-dropped projects and the supervision of problem This rural sector strategy is not business as projects. usual! It proposes a new way of doing business 3. Pursue the focus programs within the ex- to meet the critical challenges of providing isting resource constraint food for all, raising rural incomes and reducing 4. Increase economic and sector work, and poverty, and sustainably managing natural re- reestablish a forward-looking research sources. The key recommendations are: program. . We need a broad ruralfocus. We will no longer If resources remain at current levels, it use the narrow agricultural sector focus. The should be feasible to implement the first four rural sector strategy focuses on rural sector priorities. strategies as crucial for promoting rural 5. Initiate an enhanced recruitment drive to growth. We will no longer look only at prevent the anticipated sharp erosion of irrigation and drainage, but also at water staff skills, and hire staff with critical skills resource allocation and comprehensive wa- 6. Accelerate implementation of focus pro- tershed management. We will not deal with grams agriculture, forestry, or livestock sepa- Implementing the first six priorities will be rately, but with the management of natural feasible only if resources become available for resources in sustainable production sys- additional upfront investments. tems. We will look at rural entrepreneur- 7. If capacities are built and demand rises as ship instead of agricultural credit, off-farm a result of the implementation of the rural employment, agro industries and market- development strategy, lending could ex- ing in isolation. And we will integrate hu- pand by up to 50 percent. Budget re- man capital development, infrastructure, sources for this expansion would be made and social development into rural develop- available from country budgets through ment strategies and programs. a demand-driven process. * The entire World Bank Group must be involved in promoting rural development. Coordina- Implementing the Rural Sector Strategy tion among the different actors must be greatly improved to ensure that efforts are All of the Bank Group will be responsible not duplicated or hampered. for implementing the rural sector strategy. * We must work with partner countries and the Country teams will have the greatest respon- broader international community to integrate 18 Rural Development: From Vision to Action rural development in overall country develop- Implicationsfor the Bank ment strategies. The rural sector strategy stresses the formulation of country assis- The key actions needed to achieve this ambi- tance strategies as critical to building con- tious target are discussed in section 1.4. The sensus both within the Bank and among rural sector strategy does not set targets for stakeholders in countries. nonlending and lending outputs, emphasizing * We will address long-ignored issues. We must instead the process of formulating national ru- not be timid on issues such as land reform, and ral strategies and building consensus for rural we must greatly increase our commitment to development. Nevertheless, one result of suc- food consumption and nutrition policy. Gender cessful consensus-building efforts with coun- will be an important aspect of many of these tries would be increased lending volume in issues. We must continue to tackle the focus countries and in others. This increase "anti-trader" bias in many borrowers' may well be offset by a complete or nearly regulatory frameworks. For many of our complete withdrawal from countries where partner countries land reform, better land consensus-building efforts fail. policies, and improved rural entre- preneurship would provide the incentives Implicationsfor Rural Development for investment and growth needed to raise food output and rural incomes. With ap- The major outcome of the rural sector strategy propriate policies all citizens could be will be greater commitment to rural develop- made better off. ment by international donors and our partner * We will address old issues in new ways. The countries. Action matrices for the subsectors of Bank has acquired considerable knowl- rural development provide detailed monitoring edge about what works and what doesn't. indicators for specific actions (the matrices are We will implement more widely the included in the March 1996 version of the rural promising new approaches. To name just sector strategy). These will enable staff and man- a few: agement to monitor the many diverse actions o We will revitalize rural development at needed to achieve this overarching goal and to local and community levels. evaluate their results. For example, increased in- o We will involve stakeholders in the de- ternational commitment should be reflected in velopment and execution of projects increased financial commitment by donor and through all stages. client countries to the international agricultural o We will deliver rural financial services research system. Bank-assisted national institu- to the poor using new approaches. tions and independent scholars will monitor o We will involve the private sector in country-specific progress in policies, institutions, delivering infrastructure and other and expenditure patterns for rural development, services. as well as the associated outcomes. o We will promote sustainable resource use through community-based manage- Three Major Outcomes ment. The success of the rural sector strategy must What Will the Outcome Be, and How Will ultimately be judged by three main outcomes. It Be Monitored? First, will the Bank by fiscal 2000 be seen as a leader in the fight to reduce rural poverty and The one broad quantitative target for the Bank improve the management of the natural re- that the rural sector strategy proposes is that source base, both in the international commu- 80 percent of projects receive ratings of satis- nity and in partner countries? Will it be seen factory by fiscal 2002. as a key ally of the rural poor and a major force Executive Summary 19 in sustainable natural resource management? a. Rural strategy and policy formulation: This can be evaluated through results of sys- rural strategy formulation; food and tematic client consultations, as well as by other nutrition policy; sector/agriculture indicators of Bank leadership. policy formulation; rural finance; and Second, will there be the complementary markets and agribusiness progress toward freer and fairer world agricul- b. Agricultural systems intensification: tural trade and toward developing interna- agricultural research; extension, rural tional coordination mechanisms to ensure that information and agricultural educa- countries can safely rely on international mar- tion; plant systems intensification (in- kets for food security and for profitable outlets cluding soils and pest management); for their enhanced production? Progress under and animal systems intensification (in- the high-profile international initiatives pro- cluding pasture management) posed will be monitored carefully. c. Management of natural resources and Third, will the rural underperformers and forestry: natural resources manage- dropouts have changed their ways, joining the ment (including biodiversity); forestry; countries of most of East Asia, which have had fisheries and aquaculture remarkable success in reducing rural poverty? d. Water allocation and management: This is a major goal of the rural sector strategy. water use efficiency and allocation; Monitoring this impact will require evidence irrigation and drainage and water from several sources, including poverty assess- management ments-the main instrument used by the Bank e. Local and community development, to identify social and economic priorities for and rural infrastructure: participatory, low-income and vulnerable groups. community-based rural development; land policy and land reform; rural infra- Notes structure (including water and sanita- tion and roads). 1. This document, "From Vision to Action in the Rural Sector," provides much more de- There are also several cross-cutting groups tail on the subsectors of rural development involved in rural development, including pro- and includes action matrices to guide the Sec- ject design and monitoring and evaluation; tor Board and staff in their work over the next portfolio management; global information sys- few years. tems; gender; indigenous peoples; and institu- 2. The groups comprised the following: tional reform. CHAPTER 1 The Context T he mandate of the World Bank Group is * Rural people have access to medical care, to help its clients reduce poverty and family planning services, clean water and improve living standards through sus- sanitation, educational opportunities, and tainable and broad-based growth and invest- sufficient nutritious foods. ment in people. Sustainable rural development * Essential legal frameworks, public, invest- can make a powerful contribution to four criti- ment, and productive and social services cal goals: are provided and financed in a decentral- * Poverty reduction ized and participatory manner. * Widely shared growth * Household, national, and global food secu- The Challenges rity - Sustainable natural resource manage- Four enormous challenges must be met: reduc- ment. ing poverty and hunger, raising economic Not all forms of rural development are growth, increasing global food production, equally beneficial for rural populations or for and halting natural resource degradation. national economic development. And some forms contribute to the degradation of the Poverty and Hunger Must Be Reduced natural resource base. Thus the World Bank Group will assist partners in achieving agricul- More than 1.3 billion people are compelled to tural growth and rural development in accord- live on less than one dollar a day. More than ance with its vision: 800 million people are hungry, and the number * Rural farm and nonfarm growth is widely will likely exceed one billion by the year 2020. shared, with private and competitive agri- There are more than 190 million children under culture and agribusiness as the main en- the age of 5 who are not receiving the nutrition gine of growth. they need to fully develop mentally and physi- * Family farms and nonfarm enterprises cally. The global population of underweight provide ample remunerative employment children below 5 years of age is expected to opportunities to men and women. grow from 193 million today to 200 million by * Rural people manage the soils, water, for- 2020, with most of the deterioration taking ests, grasslands, and fisheries in a sustain- place in Africa. able manner. Despite urbanization, the majority of the * Rural people are linked to well-functioning poor will continue to live in rural areas well markets for products, inputs, and finance. into the next century (figure 1.1). The signifi- 21 22 Rural Development: From Vision to Action Figure 1.1 In the developing world rural populations will economic growth. For most developing coun- exceed urban populations for another twenty years tries, agricultural growth is essential to eco- nomic growth. Very few low-income counrtries Billions have achieved rapid nonagricultural growth without corresponding rapid agricultural 4 Urban growth. Most of the developing countries that grew rapidly during the 1980s experienced 3 ' ~7u ral rapid agricultural growth in the preceding years. For example, China's remarkable annual 2 growth rate of 9.5 percent during the 1980s and 1990s was preceded by rural and agricultural / policy reforms in the late 1970s and early 1980s. Indonesia and Thailand also experienced o strong agricultural growth prior to the period 0 E I I I I I I I of high nonagricultural growth, which contin- 1950 1960 1970 1980 1990 2000 2010 2020 ues today. Agricultural growth stimulates eco- nomic growth in nonagricultural sectors, Source: International Food Policy Research Institute, based on 1993 United which results in increased employment and re- Nations population projections. duced poverty. Sustained nonagricultural growth, particularly in the poorest countries, cant majority of the rural poor depend on ag- is not likely to occur without first addressing riculture for most of their meager livelihoods. agriculture (figure 1.2). Others depend on associated nonfarm activi- Fostering rural growth also helps the urban ties. Many of the rural poor live in regions poor. There are four mechanisms through which where arable land is scarce, agricultural poten- this happens. First, much of agro-industrial de- tial is low, and drought, floods, and environ- velopment stimulated by agricultural growth mental degradation are common. Of the nearly one billion poor identified in 58 poverty pro- Figure 1.2 Agricultural growth and economic growth files completed by the Bank, 72 percent live in in low-income developing countries, 1965-89 rural areas. Access to basic human needs- education, potable water, health care, and sani- Agricultural growth rate per capita (percent) tation-are far less available in rural areas. The problems of malnutrition, low life expectancy, 3 and high infant mortality are more severe in 2 rural areas. Rural poverty is pervasive and persistent. It 1 * * a is particularly severe among female-headed 0 I- I o * l I I I households without an adult male. Absent a _1 major sustained effort to reduce rural poverty, 2 the Bank's overall objective of poverty reduc- tion cannot be met. Improving incomes for -3 small farmers is indispensable in meeting this -4 objective. -3 -2 -1 0 1 2 3 4 5 6 GNP growth rate per capita (percent) Economic Growth Must Be Fostered Note: Countries are Bangladesh, Burundi, China, Ghana, India, Indonesia, Kenya, Malawi, Mali, Nepal, Niger, Nigeria, Pakistan, Sri Lanka, Tanzania, No country has had a sustained impact on re- and Zambia. ducing poverty without continuing positive Source: von Braun and others 1993. The Context 23 occurs in urban areas, generating employment subject to much stricter environmental stand- there. Second, agricultural growth brings ards. Therefore, production on existing land down the price of food in cities, often a major will need to nearly double to provide a diver- component of budgets for the urban poor. sified, storable, and transportable food supply Third, by increasing employment opportuni- to an expanding urban population (figure 1.3). ties in rural areas, rural growth slows rural-ur- Despite disagreements about the degree of ban migration, leading to higher wages for the difficulty in raising agricultural output, all unskilled in cities. Fourth, urban growth, if not agree that meeting global food demand over concentrated on capital-intensive sectors, gen- the next 30 years will require expanded invest- erates employment opportunities (permanent ments in research and technology develop- or temporary) for members of rural families. ment, appropriate incentives to family farmers, Frequently, urban workers send remittances and an enabling policy environment. The tech- back to their rural homes, which family mem- nological challenge is enormous, requiring the bers invest in farms or rural industries. development of new, high-productivity, envi- ronmentally sustainable production systems. Developing Country Food Needs Could Double Private firms must be induced to develop and over the Next Thirty Years apply much of the new technology required. However, there are large areas of technology One the major achievements of the twentieth development that are of little interest to the century has been the remarkable increase in private sector, including subsistence crops or world food productivity, resulting in remark- truly public goods such as some aspects of able growth in agricultural output and declining natural resources management. It is here that real prices offood. Between 1966 and 1990 cereal public sector finance is critical-at interna- output rose by nearly 80 percent. Almost 50 tional, national, and local levels. The challenge percent of the increase occurred in the devel- is critical and immediate, requiring increases oping world. in research-not reductions, as have been oc- Everyone agrees that the world's population curring. Globally, the World Bank Group is the will exceed 8 billion people by 2025, an increase largest financier of national agricultural re- of 2.5 billion in the next 30 years. Most of the search in the developing world. The World increase will occur in developing country cities Bank must continue to provide strong leader- where urban populations will more than triple. ship in this area to meet its objectives of global, Most agree that given moderate income national, and family food security. growth, food needs in developing countries Food security requires adequate world food could nearly double. If supplies do not grow supplies, but it also requires country policies apace, world food prices will rise, making it that provide farmers with adequate incentives even more difficult to eliminate world hunger and consumers with prices reflecting market (box 1.1). The challenge to world agriculture is conditions. Governments cannot provide food therefore enormous. security by discriminating against farmers, Most of the future increases must come from since this discourages production and invest- biological yield increases alone, not from area ment in agriculture (McCalla 1994). expansion or increased intensification through irrigation-two major sources of growth in the Degradation of Natural Resources twentieth century. Why? Because new lands are Must Be Reversed marginal and environmentally sensitive and may not make up for the land being removed Hundreds of millions of private farmers, large from cultivation each year because of urbaniza- and small, are the stewards of the vast majority tion and environmental degradation. New irri- of the globe's arable land resources. Of the gation projects are increasingly expensive and world's fresh water used by people, agriculture 24 Rural Development: From Vision to Action Box 1.1 Recent grain price increases: long-term trend or short-term spike? Grain prices increased sharply in the past two years. average of 1,750 during the previous five years- Between May 1995 and May 1996, United States ex- prices rose sharply. port prices rose by 82 percent for maize, 65 percent There is potential to increase grain output by for wheat, and 21 percent for rice. A poor United bringing cropland back into production in both the States grain harvest in 1995, in combined with un- major exporting countries and in the former centrally usually low world grain stockpiles, led to the price planned economies. Some of this cropland has al- increases. World grain production fell by 3.2 percent ready been returned to production. Indeed, world in 1995/96 from the previous year, and grain stocks cropland devoted to grain production has increased fell to 49 days of consumption, their lowest level in to its highest level since 1986. This increased produc- at least 35 years. By comparison, the grain stocks in tion has contributed to the significant declines in the previous five years averaged 69 days of consump- world prices in the last half of 1996. Policy changes tion, and during the 1980s, 81 days of consumption. have also been made in both the United States and With grain stocks so low, any decline in production the European Union to partially reduce the planting translates quickly into higher prices. Contributing to restrictions of the past decade. However, it is not the increases in prices was China's entry into world likely that grain stocks will return to the high levels grain markets, with a purchase of 5 million tons in of the 1980s, given the current focus on reducing 1995. China had exported nearly 11 million tons of government involvement in agriculture. These grain in 1993/94. changes are firmly established in current govemment Changes in governments' policies during the policies and are also mandated by the recent General 1980s, contributed to the low level of production and Agreement on Tariffs and Trade (GATT) agreement grain stocks. During the 1980s world grain stocks on agriculture. With smaller grain stocks, grain prices rose to record levels-465 million tons in 1986, or 28.1 could be more volatile than in the past. percent of world consumption. This rise eventually Long-term price trends will be determined by in- led several of the major exporting countries to intro- creases in yields, improved transportation and storage duce policies to reduce production. The United facilities, and an open trading environment that al- States, the European Union, Australia, Argentina, lows countries to specialize in producing the products and Canada idled land devoted to grain production in which they have a comparative advantage. If gov- by 35 million hectares, and potential grain output by emments pursue proper economic policies and coun- roughly 150 million tons. With reductions in world tries invest in agricultural research, grain production production, stock levels declined to 236 mnillion tons will keep pace with demand, and prices will continue in 1995. And when 1995 world output proved lower on their downward trend of the past 50 years. The job than expected-1,700 million tons compared with an can be done, but there is no room for complacency. uses more than 70 percent for irrigation. And attention, through both lending and nonlend- unsustainable agriculture practices are signifi- ing services, to the development of agriculture cant sources of non-point source pollution. and forestry systems that are more productive Deforestation remains a critical issue, with 25 and protect natural resources. hectares of forest lost every minute. The global In sum, the Bank's objectives of poverty reduc- challenges of desertification, climate change, tion, sustainable natural resources management, and loss of biodiversity require major efforts. andfood security cannot be met unless rural devel- If production on existing lands is to be nearly opment in general, and a thriving agricultural econ- doubled in the next 30 years, the negative im- omy in particular, are nurtured and improved. This pacts of agricultural and forestry production is at the core of the recommended strategy for im- systems must be reversed, and sustainable pro- proving the rural economy. duction systems developed. Improved agricul- tural productivity also relieves pressure on The Rapidly Changing Context fragile lands and forest margins. The Bank's commitment to environmentally sustainable There are many changes taking place in the development cannot be met without serious world today. These pose special challenges. The Context 25 Figure 1.3 Area expansion is disappearing as a source tion and Development (OECD) countries. The of growth challenge to the global community is to main- (percentage growth in area cultivated and yields) tai a stable and open trading environment. Percent Only under these conditions can developing 2 countries rely on international markets in de- 1.8 signing their domestic agriculture and food 1.6 e strategies. 1.2 Rapid Changes Are Taking Place 1.2 l in the Development and Dissemination 0.8 of New Technologies 0.6 0.6 Major long-term changes are currently affect- 0.4 ing international agricultural research: a scien- 0.2 tific revolution in biology, leading to the 1966-74 1974-82 1982 - growth of disciplines such as molecular biol- ogy and biotechnology; the information tech- - Area EI Yield nology revolution; significant growth in the inumber of highly qualified agricultural scien- .Source: Intemational Food Policy Research Institute 1994. tists working in developing countries; the de- velopment over the past 25 years of an effective Globalization of Agricultural Trade Will Benefit network of international agricultural research Developing and Industrial Economies Alike centers-the Consultative Group on Interna- tional Agricultural Research (CGIAR)-which The global interdependence of nations in- has greatly enhanced the international ex- creased phenomenally in the last three decades change of germplasm and research results; and because of rapid growth in international capi- the expansion of the research agenda to include tal markets, the adoption of flexible exchange natural resource management. Each of these rates, and the explosion of information tech- major trends brings with it the necessity and nology. In the realm of trade, successive the opportunity for agricultural researchers to rounds of the GATT negotiations have sub- collaborate with a new group of partners (from stantially reduced trade barriers. In the most the private sector, national agricultural re- recent Uruguay Round, agriculture and tex- search systems, and farmer organizations, and tiles, long heavily protected sectors, were fi- other natural resource users, basic research in- nally brought under GATT rules. The new stitutions, and so on). These new or deeper and World Trade Organization (WTO) provides for more diversified partnerships define a new better enforcement of rules and more effective global agricultural research system that is dispute settlement. The consequence of these emerging and needs to be supported. developments for food policy is significant. All The stakes involved for developing coun- too frequently developing countries have tries-and particularly for the poor-are very equated food security with agricultural self- high because ensuring that they have sufficient sufficiency, and have pursued highly distor- voice in that new system will be a challenge. tionary policies, leading to inefficiency and But at the same time, these technical and insti- resource degradation. However, to adopt an tutional developments offer the possibility of open-economy agriculture and food policy, overcoming many of the constraints that have countries must be assured of stable, long-term hampered the productivity of agricultural re- access to international markets-including search in the past. In addition these develop- those of Organisation for Economic Co-opera- ments challenge the traditional view that 26 Rural Development: From Vision to Action technological development is the responsibility Monolithic decision chains dominated by of research institutions, while dissemination is central governments are giving way to much that of extension agencies, and farmers are left more broad-based participation of stakehold- with the task of adopting. It is now clear that ers at the community, local, and national levels. the processes involved are much more iterative When beneficiaries are involved in identifying, and interactive than recognized earlier. Thus designing, implementing, and evaluating pro- all the actors involved in technology develop- jects and programs, the operations are much ment, dissemination, and implementation more likely to match their needs and be sus- must adopt new roles and functions in work- tainable. Meeting the triple challenges brought ing together. on by the changed role of government, decen- tralization, and participation of rural men and The Nature of the Public and Private Interface, women complicates the process of program Decentralization, and Participation Is Changing identification and design but greatly enhances the chances of benefiting stakeholders and Rural strategies for the future must take into achieving long-run sustainability. account three fundamental changes that are only now becoming fully played out: the rap- The Challenges Are Intersectoral idly changing public and private sector inter- and Multidisciplinary face, increasing decentralization in political and fiscal decisionmaking, and growing participa- A Bank Group strategy for rural economy im- tion by both men and women stakeholders at provement, while having agricultural growth all levels-community, regional, and national. at its core, involves much more, including Increased reliance on markets for price for- growth and employment in the rural non- mation, driven by internal policy reform and farm sector, rural infrastructure, environ- GATT agreements, fundamentally shifts the ment, health, population, nutrition, and role of government from an active market par- education. This means cutting across tradi- ticipant to a maker and keeper of rules. Much tional sectors both in the Bank and in our part- of rural policy in previous decades relied on ner countries. government bureaucracies and/or parastatals Thus developing effective rural strategies in- for marketing, input supply, credit, and inte- volves two critical challenges: overcoming in- grated rural development. But, past experience tersectoral barriers and mounting a truly shows that often there were rigidities, ineffi- multidiscplinary approach. For the first bar- ciencies, and rampant rent-seeking associated rier, mechanisms must be developed in the with public sector implementation. In the fu- Bank and in our client countries for linking ture the importance of government will remain together agriculture, agribusiness, water, infra- high, but its role will have a fundamentally structure, health, information, and other areas different focus, mainly providing true public with a common goal of raising incomes and goods, setting the rules of the game, and cor- reducing poverty in rural areas. Traditionally, recting policy and market failures. There is in both the Bank and our partners, agriculture growing evidence that decentralized and com- has been treated narrowly as a productive sec- munity-based approaches to development in- tor, and the focus has been physical and bio- crease the share of resources reaching intended logical. The approach recommended in this beneficiaries and greatly enhance the chances rural sector strategy requires a much broader of sustainability after Bank operations cease. involvement of macro-, international, and en- Increased decentralization, community in- vironmental economists, social sector and volvement, and participation will lead to more gender analysts, agro-industrial, and infra- disaggregated operations with smaller and structure specialists, in addition to technical more dispersed components. specialists. Willingness to overcome these The Context 27 barriers is essential to the success of these works is key to the development of sus- approaches. tainable farming systems and natural re- Traditional agricultural departments and source management techniques. This is divisions in the Bank cannot link solely with one of the major challenges and rationales ministries of agriculture. Further, in a market- for World Bank Group involvement in the oriented, open-economy environrment, inter- sector. sectoral, macroeconomic and international * The World Bank Group must focus on the de- linkages are critical. Thus country operations velopment of country-specific strategies rather divisions and ministries of finance must also than on regional and global rural sector strate- be involved and, in fact, lead in developing gies. Countries are highly heterogeneous in integrated rural development strategies. the conditions and needs of their rural sec- tors. To respond to demand from client Spatial Dispersion and Heterogeneity of Rural countries, the Bank must tailor its assis- Operations Require Special Strategies tance strategies to country-specific condi- tions in the rural sector. Therefore, this Rural people and production are geographi- rural sector strategy focuses on the proc- cally dispersed, so the costs of providing pri- esses that will lead to better incorporation vate and social infrastructure and services are of rural issues into country assistance especially high. And the heterogeneity within strategies (CASs) and assistance programs. countries, and even among districts and vil- And it is based on the development of lages in agroclimatic conditions, soil type, and region-specific rural sector strategies as an economic and social conditions adds to the dif- iterative process between country teams ficulty of providing appropriate assistance. and regional management. This has three major implications: * Circumstances and priorities differ enonnously - The planning, execution, andfinancingofrural by region and by country. The record shows programs and services must be highly decen- that rural growth and poverty reduction tralized and participatory. To be truly sus- are most likely to occur and be sustained tainable, projects and programs must under a favorable policy environment. Re- match the preferences and resources of the gions and countries differ enormously in people who will benefit. Local people have the degree to which they have imple- the knowledge and skills to manage the mented appropriate policies, institutions, complexities associated with heterogene- and expenditure patterns (see box 2 of the ity. Community-based approaches ensure executive summary). that projects match local desires and use local skills and knowledge. Many Bank-as- Role of the World Bank Group sisted projects and programs failed in the past because project management was ex- The World Bank Group is a knowledge-based cessively centralized. institution with a global mandate. It has lim- • Special efforts must be made to bring outside ited capital transfer capabilities, compared knowledge and capacities to rural areas. Be- with overall development needs: it fosters de- cause rural communities are often isolated, velopment primarily by synthesizing and dis- they may not receive information gener- seminating knowledge. It is not a technical ated at the regional, national, and interna- agency but a user, collaborator, developer, and tional levels that would help raise financier of technical capacities around the productivity or improve well-being. Also, world. The combination of lending and many rural people do not have the capaci- nonlending activities gives the Bank Group un- ties to adopt new techniques. Connecting paralleled leadership and coordination capa- rural people to external knowledge net- bilities and leverage. But its resources are 28 Rural Development: From Vision to Action limited, both financially and intellectually. The banks; the CGIAR; the Consultative Group Bank Group must therefore work through mul- to Assist the Poorest (CGAP); bilateral do- tiple partnerships and be highly selective in nors; the academic research community; formulating its programs. nongovernmental organizations (NGOs); In the rural sector the World Bank Group and all other parts of the civil society. must play both leading and catalytic roles in: * The Bank Group must carefully analyze its * Strategy and policy formulation and re- relative advantage in providing assistance form to partner countries. The division of labor * Institutional change and development must be chosen to maximize impact. Some- * Developing, demonstrating, and dissemi- times the Bank will be the leader, some- nating successful approaches to environ- times a donor of last resort, and sometimes mentally sound development and poverty only a provider of policy advice. The Bank reduction cannot expect to do it all. * Mobilizing private and public resources The Bank Group must be selective in adjust- for agricultural and rural development, ing its level of operations to country conditions. especially for technology generation and * The Bank Group will only finance rural dissemination. sector operations when the policy frame- The job is huge and complex. The World work, the institutional envirormnent, and Bank Group cannot do it alone. It must seek public expenditure patterns are good, or partners with influence, knowledge, and field improving so as to give confidence that presence. In its operations within each country operations will succeed. the World Bank Group must be highly selective * Otherwise, the Bank Group will should and collaborative. In particular: focus on nonlending operations and se- . The Bank Group must be a collaborator lected pilot operations which aim to and synthesizer in building partnerships strengthen the knowledge base and build with United Nations agencies, particularly consensus for the needed reorientation in Food and Agriculture Organization rural development policies, institutions, (FAO), United Nations Development Pro- and public expenditure patterns. gramme (UNDP), United Nations Envi- . Where the prospects are poor that non- ronment Programme (UNEP), and the lending services can achieve these objec- lnternational Fund for Agricultural Devel- tives, the Bank should not be involved in opment (IFAD); regional development rural sector activities at all. CHAPTER 2 If Rural Development Is So Important, Why Is It Not Happening? R ural development has been neglected They failed to recognize the critical impor- for many reasons, but three stand out tance of productivity improvements and as critical: poor commitment and ca- growth in the rural sector in the long tran- pacities in partner countries, waning intema- sition from an agrarian to an urban-indus- tional interest in rural issues, and poor trial society. commitment and weak past performance in the * Falling realfood prices over the last two decades Bank. Actions to address these causes of poor have led to complacency toward the agricul- commitment represent the key components of tural sector. Over the past two decades real this rural sector strategy. cereal prices have declined, reducing the returns to irrigation and other investments Poor Commitment and Capacities in agriculture. While much of the decline of Countries in prices has been due to technological im- provements, some of it results from the Lack of political commitment on the part of protectionist agricultural policies pursued partner countries to the broad vision of rural in OECD countries. development is a major reason for the declin- * The rural poor have little political power. Be- ing importance of the rural sector in World cause rural populations are geographically Bank operations, and the generally slow pace dispersed, and because rural communica- of agricultural policy and institutional reform. tions and transportation infrastructure is Why are client countries lacking commitment often poor, rural people have great diffi- if the agenda is so important? culty organizing and expressing their pref- Partner countries frequently assign low pri- erences through political processes. The ority to agricultural growth and rural develop- rural poor, women in particular, have little ment because: political voice. They view agriculture as a declining sector. As * Urban elites pursue policies that disadvantage countries develop, the share of the rural the agricultural sector. These policies in- and agricultural sectors in production clude excessive taxation through overval- (GDP) and employment shrinks relative to ued exchange rates, industrial protection, the industrial and service sectors. Many export taxes, and low urban food price developing countries have focused re- policies. This policy set, often identified as sources on the urban and industrial sec- urban bias, has been pervasive in many tors, often at the expense of the rural sector. countries. Rural elites are often able to 29 30 Rural Development: From Vision to Action obtain some compensation, but this The World Bank Group can help countries amount is insufficient to offset urban bias, strengthen their commitment and their ca- and often aggravates the impacts of urban pacities in many ways. The following are just bias on the rural poor. a few: Other factors hampering rural development . Help policymakers understand the importance include: of agricultural growth, sustainable natural re- * The roles of the state and traditional public source management, and rural developmentfor institutions have been unclear. In many coun- overall development, employment, and poverty tries public institutions or parastatals have reduction. dominated the agricultural sector by con- * Assist in redefining the role of the state in the trolling input and output markets, land rural sector. In many countries, responsi- markets, and access to finance. These insti- bilities formerly handled by state institu- tutions have often been highly inefficient tions or parastatals are now being given to and unresponsive to changes in market the private sector. The Bank can help by conditions, and provided privileges and providing policy advice and financial sup- rents to a favored few. port during this transition. * Resources have been concentrated in the hands of * Help poor and vulnerable groups increase their a few. In some countries resources, such as income through local and community-based land, capital, and access to knowledge and programs. technology, have been concentrated in the * Assist poor men and women to understand hands of elites. This distribution has some- policy options and articulate their demands. times led to high unemployrnent and low- Our understanding of the political econ- productivity among rural inhabitants, omy of agriculture and agrarian relations combinedwithovercapitalizationofagricul- is increasing. The Bank has recently syn- ture and poor utilization of productive land. thesized a large body of research on the • Designing incentive systems to deal with com- political economy of the rural sector and mon property resources is inherently difficult. will disseminate the findings to help op- Natural resources, such as water, pastures, erational staff better understand and deal forests, and fisheries, are being overused with the political difficulties of implement- and degraded in many countries because ing the vision for rural development. But they are often treated as open access re- still more research is needed so that these sources with few restrictions on who may issues can be integrated into policy advice use them. Designing and implementing ef- and country assistance strategies. One fective community-based systems for component of the rural sector strategy is to managing these resources is difficult and undertake such a research program. only just starting in many countries. . Help countries strengthen their capacity for The last three factors apply primarily to rural development. Governments often have country and Bank relations-they are much great difficulty coordinating the many less relevant to the IFC's pursuit of investment agencies responsible for rural polices and opportunities with private business partners. programs. These agencies include the min- Indeed, the IFC's financing of agribusiness has istry of finance and the central bank; the grown from about US$100 million in fiscal 1992 ministries of trade, agriculture, infrastruc- to about US$600 million (including syndica- ture, environment, education, and health; tions) in fiscal 1995. This growth reflects the parastatal organizations carrying out mar- growing recognition by governments that ag- keting or land reform, rural financial insti- ribusiness is essentially a private activity, and tutions; and state and local governments. a willingness to foster private investment, in- * Help countries strengthen their national re- cluding with IFC (box 2.1). search and extension systems, and link them to If Rural Development Is So Important, Why Is It Not Happening? 31 Box 2.1 The IFC has sharply improved its agribusiness operations The International Finance Corporation (IFC) has been Also in 1992, the IFC took strong steps to improve active in projects involving agribusiness develop- the performance of its agribusiness portfolio, which ment since its early days. The IFC's involvement in contained a high share of underperforming or this sector reflects its pervasive importance in the nonperforming projects, through a two-pronged economies of borrowing member countries. Food and approach: agribusiness currently make up about 10 percent of 1. Aggressive cleaning-up of its inherited portfo- the IFC's portfolio. Its experience indicates that the lio through workouts and restructuring, to financing of agribusiness generates significant bene- minimize their impact on the bottom line. fits in terms of development, but that agribusiness 2. Elective build-up of new high-quality assets. projects also entail unusual risks that are not gener- This approach has been successfully imple- ally found in other industrial activities. mented. The agribusiness portfolio is now perform- In 1992 the IFC began to reflect seriously on its ing in line with the rest of the IFC, while the volume mediocre past agribusiness experience and bring re- of financing in fiscal 1996 exceeded US$800 million newed focus to its investments in the sector. The (including syndications), an eight-fold increase over IFC's activities in the agribusiness sector were con- fiscal 1992. solidated in the new Agribusiness Department. This Barring a strong reversal of the current favorable decision was based on the lessons learned in past investment climate in client countries, the IFC fore- operations and emphasized the following points: sees continued but controlled growth of its agri- * Staff resources should be concentrated in a spe- business financing for the years to come. Recent cialist department with the capability of iden- experience has demonstrated that financing agri- tifying and evaluating agribusiness projects cultural development can be profitable and there- worldwide. fore a good area for financing by the IFC. * To best manage the special risks of agribusiness The IFC held a Board seminar on December 12, ventures, the Department should follow a supply- 1996 to discuss its food and agriculture operations. chain perspective and develop projects ranging Its vision for these operations is fully consistent with from farm production to final consumption. the rural sector strategy. international knowledge systems of the private tion of assets, and functioning of markets and sector, the pubic sector, and the CGIAR. incentive systems for the allocation of re- Help design and implement natural resources sources. The rural sector strategy indudes such management systems. There is a growing a diverse and wide range of actions so as to body of evidence showing that common meet the incredibly varied needs of countries. property resources may be managed sus- tainably when their management is decen- Waning International Commitment tralized to the community level. The Bank to Agriculture and Rural Development can help countries design programs based on successful experiences and can support International interest in agricultural and rural the piloting of promising new approaches. matters has waned over the past decade. This Countries and regions vary greatly with regard has also been reflected in the decline of the to the condition of their rural economies and Bank's activities in agriculture and rural devel- their needs to foster rural development. There opment (figure 2.1). is no simple approach to rural development There are many reasons for the decline, in- that is appropriate for all. In some countries cluding the following: land tenure may be important, in others man- * Real grain prices have been declining, leading aging scarce water resources is the main issue. to complacency. The continuation of a cen- In still others redefining the role of the state tury-long decline in real grain prices has and of parastatals is the key concern. Each Re- been linked to policy-induced "surpluses" gion has prepared its own rural sector strategy in OECD countries, leading to the conclu- based on its countries' endowments, distribu- sion that global food supplies are not an 32 Rural Development: From Vision to Action Figure 2.1 World Bank staff, lending, and economic and sector work In agriculture and rural development, various years Staff Lending Economic and sector work (two iscal year moving average) (two fisca year moving average) Number Millions (1996 constant US$) Staff weeks 450 8,000 3,000 400 7,000 350 ~~~~~~~~~~6,000 2,500 300 250 zrDegular and iixed-tern staff % 5,000 2500 23,000 2,000 150 Long-term consultants 100 2,000 1,500 50 1,000 0 0 I I O I I i 1,000 I l l l l l l 1986 1991 1996 2001 86 88 90 92 94 96 89 90 91 92 93 94 95 96 NOW. Lending subsectors include agriculture, agricultural credit, rural development, fisheries, irrigation and drainage, livestock, marketing, agro-industry, pemnnial crops, annual crops, research and extension, food security, forestry, and other agriculture. Economic and sector work is the analytical work on agricuture and rural development for partner countries that is used to define strategy and design lending operations. Source Word Bank data. issue. The downward trend is related to the cent (see box 2.1). The land held out of faster growth in productive capacities rela- production is marginal and is dedining. tive to demand, a result of investment in * During the 1980s development assistance in- research and technology. This is a positive creasingly diverted finance to projects in envi- sign of development and should not trig- ronmental protection and natural resource ger declining international commitment. management. Unfortunately, the link be- Further, there is no assurance that the long- tween environmental protection and in- term decline in prices will continue unless creases in agriculture productivity has positive actions are taken to improve pro- been neglected. Farmers who increase ductivity and correct policy distortions. yields per unit of land have less reason to * There is general aidfatigue among donor coun- push into marginal, environmentally sen- tries. External assistance for agriculture in sitive lands to meet food needs. the developing world has declined by * Poverty alleviation programs have been in- nearly 50 percent since 1986. This decline creasingly disconnectedfrom agricultural pro- is a result of aid fatigue coupled with per- duction. Recently, programs to reduce ceptions of surpluses-which lead to dis- poverty have focused more on policy re- proportionate reduction in agricultural form and on issues of gender, social, and support. institutional democratization rather than * There has been a perception that the world is on increased production, diverting funds awash in surpluses and that much excess capac- away from agriculture. ity is held out of production by policies in the While there are positive signs of change- OECD countries. This perception persists successful inclusion of agriculture under the despite the fact that between May 1993 and rules of the GATT and revitalization of the May 1996 grain stocks fell to levels lower CGIAR-much remains to be done. Later, we than at any time since World War II, and recommend specific actions to raise interna- international cereal prices rose by 50 per- tional conmmitment to rural development. If Rural Development Is So Important, Why Is It Not Happening? 33 Poor Commitment in the Bank: icy and institutional framework must support Overcoming Poor Performance of the Past project success, rather than work against it. Second, wherever possible, the private sector The declining importance of agriculture in the must be mobilized to provide investment Bank is in part a reflection of lack of govern- capital, production, and most services. Third, ment commitment (partner responsiveness), the state has new roles, away from heavy but also reflects factors internal to the Bank. intervention in the economy, toward provid- Some are straightforward: ing an enabling, sound macroeconomic, fis- . Inadequate performance in the develop- cal, and sector policy environment. Fourth, a ment of broad rural strategies has miti- plurality of institutions must be involved, in- gated against developing borrower cluding community-level groups and lower- commitment and has led to inadequate at- level governments, in addition to the central tention to agricultural and rural develop- ministries. Fifth, projects and programs are de- ment in the formulation of CASs. centralized and are designed and executed * With increasing priority assigned to edu- with a high degree of influence and participa- cation, health, and the environment in tion by communities, associations, and local Bank assistance programs, formerly large governments. sectors such as agriculture have been The steps are producing results, as is evident reduced. in the performance of the agricultural portfolio, * Until recently, the large difference be- which has improved from 58 percent of com- tween the performance of agricultural and pleted projects judged satisfactory or better in other projects encouraged reducing the 1981-89, to a more respectable 78 percent in priority given to rural development in 1995-above the Bank average for all projects. CASs. Although the performance gap has We have improved performance because we disappeared, the perception of relatively have learned from failed approaches. These poor performance has not. include: * With the advent of dollar budgeting, the * "Integrated rural development" projects. relatively high cost of rural projects has These failed by being excessively top- come under increasing scrutiny in the down. Most decisions regarding their de- country budgeting process. sign and implementation were made by Others are not specific to the rural sector, but central government officials, and commu- have an acute impact on that sector, including: nities were rarely involved in project de- * The dispersal of technical capacities, use of sign, implementation, or monitoring. technical staff as generalist task managers, . Credit support to specific crops or sectors, such and lack of validation of technical excel- as agro-industry or livestock, through agricul- lence, which lead to a loss of focus. tural banks. Repayment performance of * Rigidities in organizational structures, these directed credit programs was poor, budget procedures, and personnel policies and they were not sustainable. They bene- which make cooperation across sectoral fited relatively well-off farmers, rather lines and sharing of responsibilities very than the poor. Furthermore, directed credit difficult, if not impossible. lines distorted financial markets, by reduc- ing interest rates for some types of activi- What Have We Done about Poor ties but not others. Performance? * Frontier settlement to provide access to farn- land to growing populations. The projects The Bank has taken many steps to address the were centrally managed and costly, and poor performance of the past. These actions some projects resettled people in areas un- rely on the same five principles. First, the pol- suitable for farming. 34 Rural Development: From Vision to Action * Construction of large-scale irrigation systems. Bank's portfolio has undergone a dramatic It has become increasingly costly to con- change in composition, quality at entry is im- struct new irrigation systems, as most of proving, and many innovations are proving the promising areas have already been de- successful and are spreading rapidly. They are veloped. Furthermore, many irrigation listed here and discussed in boxes and in chap- systems constructed over past decades ter 7. have not performed well, and some have * In sector adjustment lending the recent Op- caused environmental problems, such as erations Evaluation Department (OED) re- salination and waterlogging of soils. view documents significant improvement * Seed production through parastatals. The pro- in program design and implementation duction of seeds through parastatals was (box 2.2). usually inefficient and unresponsive to * In sector investment lending earlier innova- farmers' needs, and the parastatals stifled tions in Morocco and Tunisia have recently entry of the private sector. been carried further in Zambia, where the * Public sector involvement in production, input program has integrated 150 projects sup- supply, processing, and marketing. These ac- ported by 20 donors into an overall sectoral tivities are best carried out through the expenditure program (box 2.1). private sector, which can often perform * In agricultural research the focus is diversi- them much more efficiently and flexibly fying away from publicsector research than government-run institutions. institutes and toward bringing new re- We are continuing our mainline business. sources and skills into the research system There are several core activities that the Bank from all actors (box 2.5). has performed well in the past and that the * In rural development the matching-grant ap- Bank should continue to support. These activi- proach to local and community-driven de- ties include agricultural policy development, velopment that is now being undertakenin research and extension, reform of agricultural northeast Brazil has turned around a very services (seed development, animal health), large and poorly performing portfolio of and social forestry and natural resources man- area development projects. It has become agement. Even in these areas, however, the a flexible, participatory, and cost-effec- Bank is experimenting with innovations to im- tive approach for poverty reduction (box prove their impact on growth and poverty al- 6.10). leviation. For example, in research and * In irrigation and drainage the transfer of re- extension the Bank is supporting the use of sponsibilities for operation and mainte- private sector institutions, such as NGOs, to nance from agencies to user associations carry out research and deliver information that was first proven on a large scale in in a way that is more responsive to farmers' Mexico is now being adopted in Turkey demands (boxes 2.4 and 2.5). The Bank is and incorporated into the design of many also promoting competition for research new projects. Focusing on a more compre- funds among all actors in national research hensive approach to water allocation will systems. require mechanisms for allocating water across sectors, full participation of stake- Positive Consequences Are Happening holders, and effective frameworks for re- solving disputes (box 6.9). While the importance of rural development in * In water resource management projects in the Bank has declined, the importance of agri- Orissa and Tamil Nadu states in India, business and farm privatization in the IFC has which include institutional changes for grown rapidly, although not sufficiently to off- river basin planning and management, are set the decline in the Bank (see box 2.1). The already in the design phase. Projects in If Rural Development Is So Important, Why Is It Not Happening? 35 Box 2.2 Reforming agriculture: the World Bank goes to market A recent Operations and Evaluation Department * Performance indicators in AGSECALs have (OED) report evaluates the World Bank's experience been the exception rather than the rule. They with the 50 agricultural adjustment operations (AG- are needed because policy actions-for example SECALs) approved by the Board since 1979. It reflects de jure market liberalization-may not be fol- on the impact that a widespread shift in the develop- lowed by the desired outcomes because of un- ment paradigm has had on Bank programs and pro- expected difficulties. jects. Throughout the 1980s the state-production and * International input markets get little attention. control model still underpinned many AGSECALs. More than three-quarters of AGSECALs do not Not until the late 1980s did the Bank clearly "go to address integration of inputs (seeds, agro- market"-decisively supporting the liberalization chemical, equipment) into world markets. and market-orientation in agricultural reform pro- * Beyond price and major institutional reforms, grams. As a result of this shift there has been sub- AGSECALs have not given enough attention to stantial improvement in the quality of the most recent the ways domestic agricultural commodity and AGSECALs. input markets operate, even though evidence The OED report notes that best practice in the Bank shows they are often inefficient. on a number of agricultural reforms is now satisfac- * The Bank has paid little attention to the political tory, including pricing reforms and reform of public economy of agricultural reform, although agri- enterprises. Although the Bank often fails to clearly cultural reform is overwhelmingly political. address the basic shortcomings of public expenditure These and other findings give rise to several rec- programs, generally the analysis is also satisfactory. ommendations by OED. First, the Bank should de- All the same, the study found much "unfinished velop a good practice statement that would be business": helpful to those working on agricultural reforms. Sec- Many governments worry that agricultural re- ond, the AGSECAL should be modified as a lending forms will adversely affect food security and instrument by dropping the requirement that its the incidence of poverty. Thus systematic use be restricted to quick-disbursement lending. In analysis in AGSECALs of the impact of reform addition policy and institutional reform should on food security is likely to enhance govem- also be part of the other operations, such as hybrid ments' support for agricultural reforms. Yet 83 AGSECALs, agricultural sector investment opera- percent of all AGSECALs (although few re- tions, and investment projects, with key reforms be- cently) have ignored food security. ing undertaken prior to the proposed investments. Jordan and Tanzania go further toward * In rural finance increased competition in implementing water resource manage- service provision and decreased subsidy ment, and provide pertinent performance dependence is being sought in many indicators (box 6.8). projects. There has been successful institu- * In natural resource management a commu- tional innovation in providing micro- nity-based approach to resource alloca- finance to the poor in circumstances as di- tion, enforcement, and maintenance has verse as Albania (village funds, box 6.3) and proven successful in such diverse circum- Benin (savings and loans associations). stances as Burkina Faso, southern Brazil, What is required now is an overarching com- and China (box 6.6). It is now being mitment to developing broad rural strategies adopted in Egypt and incorporated into and mainstreaming the growing number of the design of many new projects. best practices as illustrated in the examples * In forestry joint forest management by above. agencies and residents is being promoted in Maharashtra and Andra Pradesh states We Are Pursuing Promising Fresh Ideas in India, with similar approaches being incorporated into the design of many new There are also many pilot approaches being projects. tried in countries to solve problems in new 36 Rural Development: From Vision to Action ways. For example, integrated pest manage- development in general has been increasingly ment appears to be a promising way to reduce recognized (box 2.3). Over the past decade the or eliminate chemical pesticides that are expen- Bank and member countries have paid much sive and that poison farm workers and the en- more attention to women's issues. Recently, vironment. Market-assisted land reform may women's issues have been the focus of the So- help improve the rural poor's access to land cial Summit, the United Nations World Con- without the political resistance of other ap- ferences for Women, and the World Food proaches to redistributing land. Pilot programs Summit. are being undertaken in Russia and Ukraine by Improving conditions for rural women the IFC to distribute land through an internal should be a central objective in all the work we auction. Individuals and groups bid on sec- do, rather than an add-on or a special project. tions of the farm using land and property en- Bank policy is to integrate gender concerns into titlements as means of payment. Results of all policies and programs. In some cases tar- these experimental programs are being care- geted gender programs are necessary, but fully evaluated, and programs refined and more commonly gender-sensitive planning spread if appropriate. and implementation are the key to ensuring The Bank is also a leader in introducing that the concerns of both men and women are untried but promising approaches to improve fully understood. Our work in this area is still natural resources management and promote ru- inadequate, but improving: ral growth. Many of these projects and * Participatory methods for gender analysis are approaches are too risky or too large-scale being used to ensure that gender concerns are for other institutions to effectively carry out. The reflected in poverty assessments and sector Bank's comparative advantage is that it has sub- studies. Participatory poverty assessments stantial financial resources and management have proved to be particularly effective skills, and can better withstand failures. Some instruments for understanding the gender promising fresh approaches include spreading dimensions of poverty and how women biotechnology, including biodiversity considera- are affected by periods of economic stress. tions in projects, and integrating food policy and Countries where poverty assessments nutrition in agricultural operations. have directly addressed gender issues in- clude Argentina, Benin, Brazil, Kyrgyz Re- Gender in Rural Development public, Morocco, Poland, Russia, Vietnam, and Zambia. An example of a sector study The critical role of women in producing food, is the Morocco Sector Study on Integrating nurturing future generations, and furthering Women into Economic Development. Box 2.3 Gender makes a difference Women account for more than one-half of the labor have difficulty obtaining seeds, fertilizer, credit, tech- required to produce food in the developing world, nical information, or access to markets. Thus in many and about three-quarters in Africa. African women countries women smallholder farmers are the under- perform about 90 percent of the work of processing performers in agricultural production. We know food crops, and nearly all the work of collecting from research that women are at least as productive water and fuelwood for cooking. In Africa 80 to 90 as men, when some limitations are removed. percent of the female labor force is engaged in agri- There is strong evidence that women spend their culture. In other parts of the world many women additional income on investments in family welfare, participate without being counted. thus having potentially greater immediate and long- Yet in many countries women cannot own or in- term impacts on poverty than increased earnings for herit the land on which they work. Women often men. If Rural Development Is So Important, Why Is It Not Happening? 37 * Many CASs now incorporate gender concerns. lection, design, and implementation of ag- While gender issues are a concern in all ricultural projects. sectors, the CAS addresses gender issues * In agricultural research women-friendly tech- within an overall development strategy. nologies are being promoted in many parts of Recent CASs directly incorporating gender Africa. For example, in Kenya and Uganda issues include those for China (with a focus the Bank is supporting the development of on poverty alleviation); Indonesia (pov- improved techniques for growing vegeta- erty and health); and Bangladesh, India, bles near houses; simple, lighter-weight Pakistan, and Sri Lanka (the participation tools for weeding and harvesting; and im- of women). In the Africa Region, efforts are proved village-level food processing tech- being made to include three key con- niques. A special effort is being made to elicit straints facing women in all CASs. women's views in determining production * In agricultural projects women's concerns are constraints and, consequently, research pri- being addressed in many ways. For example, orities. Women are represented in the formnal in India three agricultural projects worked research program review committees of re- with local women's groups to improve search centers and institutes. women's access to scarce land resources. In * In rural education, health, nutrition, family Africa, through the Structural Adjustment planning, water and sanitation, women are and Gender in Africa Initiative, ministries generally involved in project planning, design, of agriculture are being trained in how to and execution. Projects designed with exten- incorporate gender dimensions into the se- sive input from women's groups include Box 2.4 Agricultural extension Agricultural extension can significantly accelerate the To address the issue of sustainability, agricultural adoption of improved technology. Private entities- extension investment must be tailored carefully to fit commercial input suppliers, industry and trade or- not only the needs of agricultural producers, but the ganizations, commodity and farmer groups, and fiscal capacities of countries. Face-to-face services for management consultants-are actively involved in smallholders will not always be feasible, and services seeking out new technologies and providing poten- have to be prioritized. Agricultural extension must tial end-users with appropriate information. How- develop responsive systems capable of providing ever, where the private sector does not provide all services to a diversity of farming systems, taking into stakeholders with relevant information-as is often account the quality and educational level of staff in the case for small farms and the poor-the public national extension systems. Programs must also aim sector must help finance this activity. to transform traditional supply-driven, top-down at- Since the mid-1980s the World Bank has invested titudes in public sector extension services, creating heavily in agricultural extension. In Africa, where the services focused on strong participatory relationships Bank has been especially active, a key objective has with clients. been to reach smallholder farmers through the train- In Africa recent projects based on T&V systems are ing and visit (T&V) extension approach. Efforts have trying to address at least some of the common prob- been so successful that most countries in Sub-Saharan lems. For example, in the recently approved agricul- Africa have undertaken extension investment pro- tural project in C6te d'Ivoire, staffing at the extension jects involving some form of T&V. agency was substantially reduced, farmer organiza- Labor-intensive extension services, however, have tions were given a larger role in extension program- high recurrent costs for both personnel and field op- ming and information transfer, the use of economic erations. Although resources allocated to extension analysis and a whole-farm approach replaced the are likely to generate high benefits, extension services narrow message delivery system, and capacity for must compete with other public services, such as continuous monitoring and analysis was installed to health and education. For this reason concern is enable program adjustments as necessary. growing about the fiscal sustainability of many of the Bank-supported extension services. Source: World Bank 1994. 38 Rural Development: From Vision to Action Box 2.5 Key issues for national agricultural research systems in the future By the mid-1980s national agricultural research sys- between research and extension. It will also be vital tems (NARSs) in developing countries employed to strengthen institutional capacity through better 80,000 agricultural researchers and had annual budg- planning, priority setting, and evaluation. ets of almost US$4.5 billion (1980 values)-a level Several potentially important participants in the comparable to that of all the industrial countries com- agricultural research system have been insufficiently bined. Nevertheless, the percentage of agricul- recognized as alternative suppliers of new technolo- tural value-added devoted to agricultural research in gies. These include universities, which often have ac- developing countries was only about 0.7 percent, cess to highly-trained scientists but which have which is much lower than the average of about 2 seldom been integral parts of national agricultural percent in industrial countries. Furthermore, expen- research systems; private companies, selling technol- ditures per researcher have not kept pace with the ogy for a profit; farmer organizations and coopera- growth in staffing. This is threatening the effi- tives that might organize their own research ciency, effectiveness, and fiscal sustainability of institutions or support research in other ways; and many systems. NGOs, which have become more important in all Sustained investment in national agricultural re- sectors over the past decade. search is therefore essential. A key role for the Bank Key elements of a strategy for NARSs over the next is to highlight the importance of investment in re- few decades thus include: search during policy dialogues with national authori- * Increasing the efficiency of the use of existing ties. A second role is to help countries increase the resources in public sector NARSs through im- payoffs to resources already committed to research proved management and incentives, better pri- by undertaking major institutional reforms to im- ority setting, and greater competition for prove incentives to researchers and managers, by in- research resources creasing the share of operating funds relative to * Building partnerships with universities, NGOs, salaries, and by improving the technical content of farmer groups and the private sector research. A third role is to mobilize local sources of * Convincing policymakers to properly support funding for research through public sector support, public agricultural research that is adequate in private sector involvement, or farmer financing. scope and scale, maximizes its sources of non- To ensure high quality and impact of research, it traditional funding, has divested itself of re- is critical to employ the best available scientists and sponsibilities that can be undertaken by private provide them with appropriate incentives, routinely entities, and operates efficiently. invite critical reviews of research programs by inde- pendent authorities, and establish stronger linkages Source: World Bank 1996a. the Zambia Urban Restructuring and Water ing gender stereotypes in school texts, im- Supply Project and the Baku Water Supply proving teacher quality, and introducing Project. The Sri Lanka Community Water career guidance. Supply and Sanitation Project employs * In agricultural extension both the topics cov- educated women as community facilita- ered and the way information is delivered tors. Women community facilitators have reflects the needs and concerns of women proven to be very efficient in conducting much more than in the past. Women farm- group discussions and group training at ers, scientists, and communication special- the village level. In El Salvador the Basic ists are helping to design extension Education Modernization Project is sup- programs. As a result extension services porting curriculum reform that empha- are now likely to cover topics of special sizes the specific needs of women and the interest to women, such as food crop pro- key role of educated women in reducing duction, small animal husbandry, and fertility and guiding the education of food processing and storage techniques. In young children. The project will support addition information is delivered in ways reform efforts by eliminating the remain- that take into account how women spend If Rural Development Is So Important, Why Is It Not Happening? 39 their time. For example, radio programs resources. It is anticipated that women en- with information of interest to women are trepreneurs will be the primary beneficiar- broadcast during the hours when women ies of the CGAP program (see box 6.2). In have time to listen. Chad the Social Fund Credit Program has * In natural resources management women are given 68 percent of its loans to female en- involved in the planning and implementa- trepreneurs. Most of the loans are for less tion of projects from the very beginning. than US$1,000 and have benefited the The participatory rapid rural appraisal country's poorest women. The repayment process-which is the starting point of all rate is 90 percent. In Honduras women are village-level activities-indudes a specific the major beneficiaries of credit under the component for women. This ensures that microenterprise and community bank women's particular interests and concerns schemes of the Social Investment Fund are expressed, noted, and can be integrated Project. into the overall land-use and development plan. Many projects now contain elements We Are Becoming Visible Again such as soil and water conservation of women's group plots, support for small- The poor performance of the past, which was scale market gardening by women's eroding the importance of rural development groups, and technical and financial inputs in the Bank's operations, has ended. Other ac- for small-scale sheep and goat fattening. tivities that have made the Bank visible again The Burkina Faso and Mali Natural include: Resources Management Projects are exam- * Successfully managing the financial crisis ples of projects with important compo- of the CGIAR (box 5.1) nents for women. * Anticipating the recent spike in cereal . In ruralfinance women have been the bene- prices and initiating the coordination of ficiaries of small loans-and have an excel- the international response (box 5.3). lent repayment rate. There are a number of The international community is again looking initiatives underway at the Bank to in- to the World Bank for leadership in these and crease the access of the poor and vulner- other areas to meet the difficult and diverse able, including women, to financial challenges of rural development. CHAPTER 3 Formulating Country Strategies and Building Consensus C entral to the formulation of the assis- vate sector cooperation, decentralization, and tance program of the Bank in all bor- participation. Further, it would help ensure rowing partner countries is the CAS, that the rural sector receives its share of Bank and the quality of the economic and sector resources in competition with other sectors, work (ESW) on which the CAS is based. The and that the rural sector is included in the CAS, developed in varying degrees of partner- macroeconomic debate. ship with the country, defines the key issues The inclusion of a competently developed for development, analyzes the current and fu- rural sector strategy in the CAS, in line with ture prospects for dealing with the issues, and the importance of the sector to the country's provides the overall context within which Bank development and poverty reduction prospects, operations are undertaken. is necessary for fostering rural development, for improving portfolio performance, and for Country Assistance Strategies arresting the decline in Bank agricultural and Must Include Analyses of Rural rural services. But there are clearly wide dif- Development Issues ferences of opinion within the Bank and among our partners as to the priority that should be It is the defining document that frames the given to the rural sector. Opinions range from Bank's future involvement in a country. If recognizing a positive, even essential, role for CASs have well-defined, coherent rural strat- agricultural growth in the overall development egy components, and treat agriculture compre- strategy, to benign neglect, to a virulent urban hensively, the chances for a sustained and bias. This debate needs to be resolved by rig- effective rural sector program are substantially orous analysis, not by benign neglect. improved. The inclusion of a rural strategy in the CAS CASs should treat rural development thor- is the end point of a critical process of analy- oughly, and where appropriate, include a rural sis, including ESW. It is crucial to improve strategy. Doing so would highlight key sector- the process of rural strategy formulation wide issues and underscore the critical role of as an input to the CAS by improving the ESW and policy reform as prerequisites to analytical base, identifying the necessary lending operations. It would also encourage changes in policies, institutions and expendi- countries to move away from the technical pro- ture allocations, developing a coherent strategy ject approach-which is clearly less relevant with priorities clearly stated, determining an for the changed environment of public and pri- appropriate balance between lending and 40 Formulating Country Strategies and Building Consensus 41 nonlending services, developing partnership ership from the technical department. But for relationships with appropriate government many countries there is considerable knowl- ministries, and involving participation of the edge in the Bank, which, if tapped, could be civil society at all levels. used to formulate strategies. In addition to Good sector work, which evaluates the po- country-specific literature and the unwritten tential contribution to development that Bank- knowledge of country experts and Bank staff, supported interventions can make, is essential. the analytical base indudes: poverty assess- Of course, this sector work-focused on devel- ments, environmental rural sector strategies, oping and implementing a viable rural strat- macroeconomic analyses by the Bank and the egy-requires much more than agricultural International Monetary Fund (IMF), ESW expertise. It requires inputs from experts on documents, project documents, and OED audit education, population, health, nutrition, infra- reports. The main task is to synthesize this structure, the environment, and economics, at knowledge. It is time and high level skills to a mninimum. Each country department, in each do the work that are scarce. Region should be challenged to address this Clearly, it will not be possible to develop and issue by proposing mechanisms for effective update rural strategies for every country, every coordination through, for example, country year. Effort should focus on countries where teams, by reorganizing into rural sector divi- the government is sufficiently interested. If in- sions, or by other mechanisms they deem terest is lacking or political capacity to imple- appropriate. ment the recommendations is weak, strategy But developing a coherent rural strategy and development is best undertaken at a more op- incorporating it into the CAS is not enough if portune time when the government is ready to consensus in the country is lacking. Therefore discuss a new strategy. Governments are al- the Bank needs to involve national experts, ways in search of good ideas. Often their ca- men and women, inside and outside of gov- pacity to make major changes is greatest in einment, and civil society groups in ESW and their first one or two years in office. Therefore, in rural strategy formulation. This will im- phasing and selectivity are needed. prove the quality of the background work, and Finally, in virtually all our partner countries contribute to consensus building. there are many donors and multilateral finan- The strategy will also need to address the cial institutions promoting often disjointed en- fragmentation in the treatment of rural issues clave projects. These enclave projects are often in our partner countries. In India a coherent launched where the policy environment is not food and agriculture policy would involve at favorable and a coherent rural strategy is lack- least nine ministries and four national parasta- ing. Consequently, many of these projects fail tals, plus numerous other actors at the national to achieve their development objectives, and and the state level. Agricultural ministries tend undermine local commitment and domestic in- to be production-oriented and distant from the stitutional capacity. Within the overall rural policy process or the social debate. Ministries strategy, the Bank should be pressing for sector that provide infrastructure, education, and or subsector programs that are integral parts health services tend to see rapidly growing ur- of the government's development strategy and ban areas as their prime concern. It is therefore public expenditures and budget. These pro- critical that the rural strategy addresses how grams have advantages over enclave projects: best to approach the dialogue with partner they provide a cohesive framework for the countries. government's public sector investment pro- Doing thorough background analyses and gram, they enhance the effectiveness of public formulating rural strategies can be costly. A sector management by eliminating fragmented rural strategy produced for Brazil, for example, project management units, they foster local involved staff from several divisions and lead- ownership and commitment by empowering 42 Rural Development: From Vision to Action the country to determine its development pri- egy work has already been completed for Bra- orities, and they increase the effectiveness and zil, Colombia, South Africa, and for the agri- sustainability of development aid through ef- cultural sector of Bangladesh. Major efforts are fective donor coordination (box 3.1). As a ongoing in India and Morocco. Additional fo- broad-based multilateral financial and devel- cus countries include Guatemala, Guinea, opment institution, the Bank has a special re- Madagascar, Malawi, Mali, the southern states sponsibility in pressing for effective donor of Mexico, the Philippines, Uganda, Ukraine, coordination, including perfecting lending in- and Vietnam. struments and harmonizing implementation Within three years rural strategies will be arrangements. The Bank should take the lead- carried out for most countries where the Bank ership in promoting sector or subsector invest- is active and rural poverty and development ment lending as one of the major instruments remain important. Rural strategies will cover of development assistance. both what the country can and should do, and Because current capacity is limited, the strat- what the Bank and other donors can do to sup- egy focus will initially be concentrated on se- port the country program. Much greater em- lected focus countries (at least two per Region), phasis will be placed on tapping and in which country commitment to rural devel- synthesizing the knowledge available in the opment is weak, as expressed by the absence Bank and from country scholars and practitio- of a sound strategy, policies and expenditure ners, and on consensus building-both while patterns that are biased against rural areas, and formulating strategies and later while imple- a lack of institutional capacity. Intensive strat- menting the recommended programs. Box 3.1 Sector investment programs Especially in Africa, but in other regions as well, the The SIP approach is not appropriate or desirable traditional project approach to development assis- in all countries at all times. It is not likely to succeed tance has had limited impact in increasing rural in- where macroeconomic and sector policies are distor- comes and reducing rural poverty. It has resulted in tionary, or where there are major disagreements be- a great deal of dissatisfaction among both donors and tween donors and governments over the broad recipient countries. Most development experts agree elements of the policy and institutional framework that fragmentation, duplication, and a lack of partici- and public expenditure program. The lack of imple- pation by local stakeholders in project design, imple- mentation capacity of local stakeholders may also mentation, and supervision are among the reasons hinder success, although with competent local lead- for the lack of success. This recognition has led to the ership and country commitment to the program, ca- development of the Sector Investment Program (SIP) pacity can almost always be developed. as an altemative vehicle for providing development The sector investment approach to development assistance. assistance is still new, and its success still unproved. The SIP is an operational instrument for imple- Therefore, it is very important that the impact of a menting a broad sector approach to investment lend- SIP is continuously monitored and evaluated. SIPs ing. Six features of the SIP differentiate it from the should be designed to be flexible in a way that per- traditional project approach. A SIP covers the entire mits experimentation and periodic adjustments sector or subsector, is prepared by the country's local based on sector performance, policy changes, and stakeholders, is implemented within the country's in- joint annual reviews of workplans and budgets. Per- stitutional framework (no new project management formance indicators must be used to measure the units are created), is supported by all the active donors overall sectorwide impact, client satisfaction, and the in the sector (the Bank supports the integrity of the extent of donor participation. It is recommended that program approach by acting as the donor of last resort sector performance analysis and policy monitoring for program components not supported by other do- be carried out independently in the form of an audit. nors), uses common implementation arrangements for The SIP should therefore be used as a vehicle for all financiers to the extent possible, and tailors long- building in-country capacity for policy monitoring term technical assistance to meet demand. and sector performance analysis. Formulating Country Strategies and Building Consensus 43 Few Bank staff are adequately trained to for- terests and capabilities of all partners. The mulate rural strategies and build consensus. CGIAR provides one of several models for Even staff members who are not directly in- such partnerships. Several additional efforts volved in the formulation and dissemination are underway, in which the Bank is a partner of strategies will need to be trained in order to with others, such as the CGAP, and the Global understand the context within which they are Partnership for Water. IFAD is working with working. Therefore, the Rural Development the Bank on a global network for rural devel- Department (RDV) has developed and tested opment. More modest initiatives include a a core course on rural strategy formulation, planned network with FAO and IFAD on land which will be offered over the next three years reform, which will facilitate the exchange of to all staff involved in rural development and experience among countries that are introduc- to many country economists. RDV will also de- ing negotiated or market-assisted processes for velop a research program focused on the po- land reform. These partners are also initiating litical economy of rural development to a network to foster the exchange of information strengthen our understanding of how rural de- among countries engaged in sector investment velopment comes about, so that we may offer programs. The fourth annual World Bank ESD sound policy advice. conference in September 1996 and the World Matrix 3.1 summarizes the objectives, chal- Food Summit in November 1996 provided op- lenges, and actions needed to improve strategic portunities to build alliances with partners, and formulation and consensus building. It sets to agree on a common vision and general strate- out the key actions and their sequence, the ac- gies for rural development. countable organizational units, internal and ex- The Bank needs partners with field presence ternal collaborators, dates by which actions and experience working in rural areas of part- need to be completed, and outputs or monitor- ner countries, partners with special and com- ing indicators. plementary expertise, and partners with influence and additional financial resources. World Bank Group Must Combine Of the partners with influence and specialized Partnerships and Selectivity knowledge, the Bank can work with the WTO on freer agricultural trade and on access to Rural strategies will need to cover all impor- OECD markets; with FAO on data collection tant policies, institutions, and programs for ru- and analysis, land reform, and fisheries man- ral development. For most countries the job of agement (among others); with the CGIAR on developing and implementing the strategies is agricultural technology; and with IFAD and huge and complex. Therefore, countries need NGOs on poverty reduction. Multilateral de- many partners. The Bank can assist with donor velopment banks can provide financial re- coordination, which must start immediately. sources to support irrigation and drainage, The following principles of collaboration and rural finance, and infrastructure. Bilateral donors selectivity must underlie all Bank activities in can join with the Bank in supporting areas as rural development: diverse as agricultural research, forestry, and ca- All Bank activities in rural development must pacity building. Partners with field presence reflect its mandate of poverty reduction and sus- would include NGOs, community-based organi- tainable natural resources management. The zations, the private sector, and a wide range of Bank must build alliances with partners that regional and local government agencies. work at the country level. It must also build In each country the Bank must sequence its own alliances with partners at the central level, to activities appropriately. It is now well under- facilitate the country-specific partnerships. stood that projects are more likely to meet their Partnerships must be based on a common vi- objectives when certain conditions are met sion for rural development, and reflect the in- first. The Bank should sequence its activities 44 Rural Development: From Vision to Action accordingly. The first step is to secure agree- * Agriculture represents about 30 percent of ment on strategy and policy for rural growth, GDP in Africa and South Asia; about 20 employment, and natural resources manage- percent in East Asia and the Pacific, and the ment. The second step is to support the de- Middle East and North Africa; and about velopment of country institutions so that 10 percent inEurope and Central Asia, and countries obtain the capacity to manage their Latin America and the Caribbean. own development. The third step is to target * The 1980-93 agricultural growth rate is programs for poor people, poor regions, and about 4 percent in the Middle East and threatened natural resources. North Africa, and East Asia and the Pacific, The Bank must choose the right product mix. The about 3 percent in South Asia; about 2 per- Bank must emphasize areas in which it has a cent in Latin America and the Caribbean, comparative advantage and that are most and Africa; and negative in Europe and likely to produce results. Central Asia. In nonlending services, the Bank will focus on: Equally striking are regional differences in * Analyzing and disseminating cross-coun- the importance of the rural population and re- try experiences cent growth rates: * Helping create internal capacity for strat- * Rural people make up about 70 percent of egy and policy formulation (stronger inter- the total population in Africa, East Asia nal capacity will reduce the need for the and the Pacific, and South Asia, about 50 Bank to conduct economic and sector percent in the Middle East and North work) Africa, and about 30 percent in Europe and * Linking countries with centers of excel- Central Asia, and Latin America and the lence around the world Caribbean. * Establishing processes for consensus- * The 1980-93 rural population growth rate building is about 2 percent in Africa, the Middle In lending services, the Bank will emphasize: East and North Africa, and South Asia; e Policy and institutional adjustment through about 0.5 percent in Latin America and policy-oriented operations (others rarely the Caribbean, and East Asia and the Pa- do this) cific; and negative in Europe and Central * Program lending, involving a high degree Asia. of donor coordination (needs time and There is also variation among regions in the resources) importance of agriculture in exports. About 30 * Making small loans as preludes percent of exports from Latin America and the * Making more lending contingent on de- Caribbean and Africa are agricultural prod- monstrable results of prior lending ucts; 20 percent of exports from South Asia, • Where such prior results are not available, and East Asia and the Pacific are agricultural piloting experimental approaches (often products, while only 5 percent of exports from too risky for others to do alone). the Middle East and North Africa are agricul- These principles of collaboration and selec- tural products. tivity must underlie all Bank activities in rural There are also important differences within development. regions. To take Latin America and the Carib- bean as an example: excluding Cuba, the Diverse Regional Circumstances 11 countries with populations under one mil- and Priorities lion, and the dependent territories, there are striking differences between the remaining 21 Regional differences in the importance of agri- countries: culture and in recent trends in agricultural * While agriculture represents only 10 per- growth are quite staggering: cent of GDP regionwide, it represents more Formtulating Country Strategies and Building Consensus 45 Box 3.2 Conference on Poverty and Hunger. a popular coalition for action The Conference on Poverty and Hunger, held in group investigating ways to establish the knowledge Rome in November 1995, was intended to merge the network, comprising Society for Research and Initia- common missions of national governments, multilat- tives for Sustainable Technology and Institutions eral institutions, and civil society organizations into (SRISTI), FAO, the World Bank, and IFAD, met in one strategy for fighting poverty and hunger. The Rome in March 1996, with the participation of three outcome was a Programme of Action that consists of experts. five imperatives: The knowledge network will be devoted to the 1. Establish a coalition to empower the poor exchange of civil society knowledge and experience 2. Establish a knowledge network through which in fighting hunger and poverty. It will link together successful grassroots and civil society initia- existing networks and facilitate the exchange of tives can be identified, replicated, or scaled up views among civil society organizations, policymak- 3. Develop strategies to build public awareness ers, donors, intemational organizations, academics, and create political will for the alleviation of and people's groups from around the world. hunger and poverty The knowledge network will begin by concentrat- 4. Initiate a global program in emergency pre- ing on sharing information related to the empower- vention ment of the poor through increased access to land, 5. Ensure the early implementation of the Con- water, and other natural resources, with particular vention to Combat Desertification. emphasis on marginal ecosystems (a subsection of Following the conference, an interim committee the first action initiative of the conference). As stipu- was put into place comprising the World Bank, FAO, lated in the Programme of Action, this includes in- World Food Programme (WFP), IFAD, the European formation on land redistribution, titling and Commission, and one sectoral and five regional inheritance rights, securing rights to water and pro- NGOs. IFAD was designated as the Secretariat of the ductive assets, guaranteeing rights of indigenous coalition. The purpose of the interim committee is to people, ensuring equal rights to resources for guide and oversee the initial stages of implementa- women, and providing for the sustainable local man- tion of the Programme of Action. The committee has agement of common property resources, as well as formed action groups to investigate how to best im- rights to land use for pastoralists and access to water plement eadc action initiative or its components. The for fishermen. than 25 percent of GDP in 4 countries (Gua- Challenges, General Directions, and temala, Haiti, Nicaragua, and Paraguay). Specific Focus Activities for Each Region * While the regionwide 1980-93 agricultural growth rate was a modest 2.1 percent, it Africa exceeded 3 percent in 6 countries (and ex- ceeded 4 percent in Chile and Ecuador), The overwhelming challenge in Africa is to in- but was less than 1 percent in 5 countries. crease food production and raise incomes in Similar interregional differences are found in rural areas. Seventy percent of people in Sub- other indicators. These differences require different Saharan Africa live in rural areas, agriculture rural strategies by country. accounts for 30 percent of GDP, 40 percent of For the larger countries, such as Brazil and exports, and 70 percent of employment. Far Mexico, important differences are also found more than any other region, a prosperous ag- among states and agro-ecological zones, and in riculture is the engine without which poverty the spatial incidence of acute poverty. Such in- cannot be reduced, natural resources cannot be country differences will have to be taken into managed sustainably, and food security cannot account in designing rural strategies. Thus no be assured. The Region has set clear directions blueprint can be offered for rural strategy de- for lending: no more financing of agricultural sign: it must to be country-specific and, in marketing, input supply, processing, or rural larger countries, tailored to specific subregions credit through the public sector; focus on a few and/or subsectors. selected national and thereby systemic pro- 46 Rural Development: From Vision to Action grams of high impact-in research, extension, major challenge, unique to the Region, is the animal health, and natural resources manage- severity of the needed restructuring and re- ment (water, soil fertility, forests, pastures, building of agriculture and the agro-industrial wildlife), plus one or two other areas such as complexes. This is a task without precedent.- irrigation or rural finance, depending on the there is no blueprint. The Region will continue country. The second major challenge is to pur- to devote a relatively large share of resources sue rural, rather than just agricultural, growth. to nonlending services, particularly to analyze This is being done by designing a common land and rural property issues, and the impact strategy for development of the rural economy, of privatization on efficiency and equity, and with investment in infrastructure and social to assist with determining the necessary legal services to be undertaken through nonagricul- and regulatory framework for agribusiness tural projects. The third major challenge is to and rural services. A third major challenge is make national programs work. Sector invest- the intention of Central European and Baltic ment lending is rapidly becoming a privileged countries to accede to the European Union. For instrument; although still not yet proven, it has many countries this may mean the pursuit of the potential to generate systemic change in the suboptimal policies, as they try to position whole public rural expenditure program. This themselves in anticipation of the eventual ap- is particularly important in Africa where, with plication of the Common Agricultural Policy official development assistance at 11.5 percent (CAP). Here, too, nonlending services will be of GNP in 1993 and many donors active in significant, as the Region endeavors to con- rural areas, donor coordination is essential. vince governments not to introduce CAP-type Agricultural policy reform would be more vig- policies prematurely. The Region will also orously pursued through adjustment opera- work with the European Union to reduce the tions, as well as through nonlending activities. likelihood that introduction of protectionist There will be expanded focus on generating measures prior to accession negotiations re- African and donor commnitment to agriculture sults in compensation benefits from the Euro- and to agricultural policy reform through pean Union after membership. Africa-wide regional fora such as the Special Programme for African Agricultural Research, Middle East and North Africa the West African and the Eastern and Southern African associations of ministers of agriculture, The scarcest resource in Middle East and North and through the African Water Pact. Africa is water, and the overwhelming chal- lenge is to increase the efficiency of water use Europe and Central Asia in agriculture, currently the highest user. Water charges are symbolic, and operations The main challenge in Europe and Central Asia and maintenance are inadequate because of is to reform agricultural policies that in the past weak user participation. Yet intersectoral encouraged inefficient farming practices. The water transfers are inevitable. Urgent action is Region's strategy is to base rural lending on a required and is being sought by the Region graduated response to thresholds of policy re- through a series of investment operations in form, including price and trade liberalization, the water sector. A second major challenge is agribusiness and farmland ownership change, to improve the competitiveness of agriculture, demonopolization and deregulation of market- while taking account of most governments' ing, and financial sector reforms. Exceptions preoccupation with maintaining low urban are made for projects with long lead times, food prices. This preoccupation has led to the such as research, or for activities such as land prevalence of state marketing companies that registration that will enable a policy change, stifle commerce and to the implementation of when made, to take effect promptly. A second ineffectively targeted food subsidies. The fiscal Formulating Country Strategies and Building Consensus 47 drain is enormous, exacerbated by the recent raise country commitment in decentralized steep increase in world grain prices. While participatory rural development programs. A sector adjustment operations have made sig- third major challenge is water resources man- nificant progress in addressing aspects of com- agement. This has several dimensions: inter- petitiveness, much more remains to be done in sectoral and intercountry disputes over designing targeted food consumption pro- allocation of scarce water, a crisis in irrigation grams that are effective and politically accept- service delivery, and a worsening problem of able. A third major challenge in Middle East waterlogging and salinization, and pollution of and North Africa is posed by the scarcity of both ground and surface water that threatens arable land and the severity of soil erosion, and rural domestic water supply. The Region is ad- the indifference of many governments: there is dressing the second two problems through in- little investment in watershed management. novative projects in irrigation and drainage, Many of the region's poorest people live in the flood control, and rural water supply. It envi- upper watersheds, eking out livelihoods from sions taking a more proactive role in resolving forests, rangelands, and steppes, and contrib- water disputes by launching participatory ana- uting to watershed degradation in the process. lytical work on water resources management, Given the pervasiveness of urban bias in public supporting regulatory measures, and dissemi- expenditures, much more persuasive analysis nating policy advice. is required to significantly increase investment in watershed management. Latin America and the Caribbean South Asia The most striking characteristic of the Latin America and Caribbean region is the incredible The principal distinguishing feature in South diversity of the countries in terms of socio- Asia is the world's largest concentration of economic conditions and agricultural prac- poor rural people. Landlessness is far more tices. The region contains some of the Bank's common there than elsewhere. Much rural highest-income borrowers (Mexico, Chile, Ar- poverty is found in rain-fed areas, where the gentina), where much agriculture is techno- resource base is both more limited and more logically sophisticated and an engine of fragile than in the irrigated plains. Poverty re- growth, and some of its lowest income borrow- duction is the main challenge. It is being ad- ers (Bolivia and Haiti), where much agriculture dressed by working to reduce all distortions in is subsistence-based. Another characteristic is agricultural product and factor markets. The the extreme income inequality of the rural most important reason for these distortions is population-a result of a long history of gov- exorbitant government intervention in market- ernments providing discriminatory access to ing, distribution, and finance, through paras- land and capital to the wealthy and powerful. tatals and overregulation, as well as through Poverty is deep and prevalent in rural areas, protection of domestic industry which gener- and is a major source of urban poverty, because ates higher input costs for agriculture. Rede- a high proportion of the rural poor have fled fining the government's role in agriculture and to the urban peripheries. Many rural poor earn removing market distortions are the second their livelihoods as laborers or subsistence most important challenge. The Region is en- smallholders in environmentally fragile areas couraging speedy completion of trade policy or on the frontiers, so rural poverty is closely reform and increasing competition in input connected to issues of natural resources man- and output markets, with an orderly transition agement. At the same time, commercial farm- to full private sector orientation. In addition ers are beginning to better understand the the Region will strengthen sector work dis- concept of land conservation and sustainable semination and dialogue with stakeholders to farming, and are seeking assistance in devel- 48 Rural Development: From Vision to Action oping and implementing these techniques. and efficient parastatal by an opaque private Poverty reduction, better use of existing pro- monopoly. Pragmatism will be required in ductive capacity, and sustainable natural re- parastatalreform. Athirdchallengeisthesheer source management are the three main heterogeneityoftheregion,rangingfromsome challenges for the Region. The Region's strat- of the largest Bank borrowers (China and In- egy is to redefine the role of government; em- donesia) to some of the smallest (Laos, Fiji, phasize community-based approaches to Pacific Islands, and Mongolia). Donor compe- natural resources management; target inter- tition is strong but can be turned to an advan- ventions to reduce rural poverty, emphasizing tage if another donor is willing to take the indigenous peoples; increase efforts to speed lead in the agricultural sector of entire small the pace of land reform and land allocation; countries. work with governments to remove policy bi- The key characteristics of each region ases against small farmers; and mobilize rural and their main priorities are summarized in financial resources. table 3.1. East Asia and the Pacific Focus Programs Initiative The main characteristic of East Asia and the At the request of the President, Regions and Pacific is fast growth, including fast agricul- Central Departments have identified focus tural growth (4 percent per year since 1980), programs that would significantly accelerate and good social service provision nation- agricultural and rural development in selected wide. Except for Indochina and the poorer countries through concentrated efforts from areas of China, East Asia and the Pacific the Bank and collaborators, show what is pos- countries are not International Development sible through a combination of political will Association (IDA)-eligible and have to bor- and rigorous application of best-practices, row on the International Bank for Recon- and achieve significant regional and global struction and Development (IBRD) terms. A impacts on food security and poverty reduc- major challenge is that borrowers have pref- tion. Work on the focal activities has just be- erences for uses of IBRD lending, which may gun, and much needs to be done to integrate not be coincident with Bank priorities. Virtu- the programs fully into the CAS process and ally all borrowing countries of East Asia and into the Bank's budget process. In addition Pacific are willing to borrow for large dams, consultation in and with focus countries is and the Bank response should be based solely needed to be sure they are committed to the on evaluation of economic, environmental, initiative. The 1996 Environmentally Sustain- and resettlement costs and benefits. Many able Development (ESD) conference and the countries seem to have become less inter- Annual Meetings were used to build consensus ested in borrowing for agricultural research on these initiatives. or watershed management, and more persua- The focal programs are summarized below: sive analysis will have to be undertaken. * Africa. Focus on accelerating widely shared Related challenges, in the sense that a sophis- agricultural growth in Guinea, Madagas- ticated Bank response is required, arises with car, Malawi, Mali, and Uganda respect to financing high technology agri- * Europe and Central Asia. Focus on Ukraine, business and reforming marketing parasta- whose agricultural recovery is important tals. For the first, new types of lending in itself, and for global food security, and instruments and new types of collaboration on analyzing the cross-country agricul- with IFC are needed. For parastatal reform tural policy issues faced by countries there is a danger, in nominally market econo- who seek admission to the European mies, of replacing a relatively transparent Union Formulating Country Strategies and Building Consensus 49 * Middle East and North Africa. Focus on rural * East Asia and the Pacific. Focus on formulat- strategy development and implementa- ing a rural development strategy for tion in Morocco, and water management Vietnam, implementing a recently com- and allocation issues across the entire pleted rural development strategy for the region Philippines, and analyzing China's op- * South Asia. Focus on integrating several tions for long-term food security existing activities into a multisectoral rural * Globally. Focus on the WTO and the world strategy for Bangladesh. In India focus on trading system for agricultural commodi- developing a comprehensive rural devel- ties, which are critical to the goal of foster- opment strategy ing rural development. * Latin America and the Caribbean. Focus on Thus the Focus Program Initiative involves rural poverty reduction in southern Mexico, special programs for fifteen countries, pro- northeastern Brazil, and Guatemala, and grams on three thematic issues, and support support for the Regional Unit for Technical for a regional institution. Appendix A provides Assistance in Agriculture (RUTA) detailed descriptions of the focus programs. Table 3.1 Diversity of regional Issue Region Key characteristic Three priorities and challenges Africa Slow agdcuftural and rural nonfarm Achieve rapid agricultural growth (to Develop a common strategy for Promote program lending to achieve growth attain all other societal objectives) improving the rural economy, but systemic changes (with donors) implement it by sector East Asia and the Pacific Fast agricultural growth Respond to partners' willingness to Innovate, with the IFC, to finance high- Address heterogeneity of region and borrow on IBRD terms, in a technology agribusiness and exercise donor competition sophisticated way pragmatism in parastatal reform Europe and Central Asia Resistance to reform, despite Base rural lending on a graduated Search for ways to hasten farm and Convince European Union aspirants negaive agricultural gTrOMi response to thresholds do policy agribusiness restructuring not to introduce CAP-type policies reform Ul Latin America and the Caribbean Deep rural poverty, underutilized Improve resource allocation and Emphasize indigenous peoples Manage natural resources o productive capacity, fragile reduce poverty through land reform, sustainably using community-based ecosystems removal of policy biases against small approaches and sustainable farmers, and targeted programs production practices Middle East and North Africa Water scarcity Increase water-use efficiency in Improve competitiveness of Increase investment in watershed agriculture, and improve water agricufture by designing effective management (for soil and water resources management targeted food consumption programs conservation, as well as poverty reduction) South Asia Large numbers of poor rural people, Reduce poverty through reforms of Speed up completion of trade policy Improve water resources many landless antilabor policies, rural development, reform, including input and output management and dispute resolution and watershed management markets Marix 3.1 Improving strtegy formulaion and consensus building Objective: Better-integrated and more participatory strategies for lending and nonlending operations for rural development Collaborators Challenge What needs to be done? Who is accountable? Bank Outside Date Output or monitoring indicator In many countries the commitment to rural Each region has ident'fied at least two focus Country teams RDV FAO December 1997 Country commitment to development is weak, as expressed by the countries for thorough analysis and intensive RVP EDI IFAD improved rural strategies absence of a sound strategy, policies, ex- consensus-building efforts. Presidenf s Office UNDP penditure patterns, and viable institutions. WTO IMF Objectives for Bank operations, and the bal- Prepare rural strategies as inputs to the CAS, Country manager CODs IMF Phased with electoral Rural strategies integrated ance between Bank lending and nonlending with teams of economists, and nural and sector Country team SODs Other donors cycles and CAS in to all relevant CASs by programs, are poorly articulated. specialists. In strategy documents: articulate Country director Center EU process 2000 and rank critical strategic issues for rural growth, IFC WTO poverty reduction, and natural resources management; identify the degree to which country policies, institutions, and expenditure patters support this objective; and link the Bank's lending and noniending operations to resoMng the critical strategic issues. There is inadequate participation by country Involve national experts and civil society CODs, SODs, Field NGOs, Ongoing Reporting of participation in scholars and civil society groups and donors groups in ESW and rural strategy formulation. Regional directors, offices Ministers, the development of rural in ESW and the formulation of rural strate- Organize seminars and workshops in-country Field offices EDI Universities, strategies gies. to discuss the strategies. Other donors The BanK's analytical work and strategy In strategy documents specify the steps and Country teams EDI NGOs Ongoing Resources allocated for documents are not well used to promote con- methods for dissemination and consensus- ESD Ministers dissemination of strategic sensus building on rural strategies in partner building; allocate the necessary resources. EXT Universities documents countries and with other donors. The Bank has sometimes proceeded with The Bank will finance rural sector operations Country teams RDV Ongoing project lending in the absence of an appropri- only when the policy framework, the ate policy and institutional environment. institutional environment, and public expenditure pattems are good or at least improving. During the period of policy reform the Bank should confine its operations to nonlending services and pilot activities. Staff are inadequately trained for strategy for- The Center will teach a core course on rural RDV EDI IFPRI Course has been 33 percent of staff complete mulation and dissemination. Existing country- development strategy formulation for staff DEC FAO developed course by end of 1997,66 and sector-specific knowfedge is often poorly specializing in rural issues, macroeconomists, HDD UNDP percent by end of 1998, 90 integrated into rural sector strategies, CAS and other staff. The Center identifies and IFC, percent by end of 1999 process, and policy dialogues. disseminates 1-3 examples of best practice. IIGAP Our understanding of the polifical economy of Prepare and fund a research program. RDV DEC Universities January 1998 Research program initiated agricufture and agrarian relations is still weak. I Regions Think tanks CHAPTER 4 Improving the Existing Portfolio O tn December 31, 1996 the strictly agri- continue, and there is no place for compla- cultural portfolio consisted of about cency. 350 projects with a total commitment For the strictly agricultural portfolio, ongo- value of about US$20 billion (17 percent of the ing performance over the period 1993-95 has total Bank portfolio) of which nearly US$12 bil- been rated as follows: lion was not yet disbursed. The agriculture * Projects that are unlikely to attain their portfolio has the largest amount undisbursed development objectives: 14 percent, 1.9 of any sector. The nonagricultural rural port- percentage points worse than for all other folio, including projects classified in other sec- sectors tors but with rural components, represents an * Projects withimplementationproblems: 19 additional several billion dollars in commit- percent, 1.4 percentage points worse than ments for rural development. for all other sectors. In 1995 the performance of agricultural pro- How Poor Is the Performance of the jects was better than the Bank average, thanks Agricultural Portfolio and What to the steps taken to improve performance. But, Causes Poor Performance? this good performance will be difficult to sus- tain in the future without radical changes in In the past agricultural projects often fared the Bank's current practices. Carrying out the less well than other projects. Over the period following activities will make it likely that the 1981-89, the performance of agricultural performance of the agricultural and broad ru- projects was 10 percentage points worse than ral portfolio will improve on a sustained basis. the Bank average. However, the performance * Sector-specific reviews of the existing port- of agricultural projects has steadily im- folio proved since 1989, when 52 percent of com- * A substantial strengthening of the Banks pleted projects achieved a satisfactory rating. emphasis on monitoring and evaluation, Over the period 1990-94, OED rated 64 percent with particular emphasis on partner con- of completed projects as satisfactory, 5 percent- sultation age points worse than the Bankwide average. * Improved continuity and donor consult- In fiscal 1995, agricultural projects actually per- ation in implementation assistance formed significantly better than the Bank * The adoption of usefulprojectinnovations, average (78 percent of agricultural projects both in existing and new operations. rated satisfactory, versus 68 percent of all other The objective of the portfolio reviews and projects). While there is reason for optimism, other measures to enhance quality is to achieve it is not clear that this improving trend will OED satisfactory ratings for 80 percent of com- 52 Improving the Existing Portfolio 53 pleted projects by fiscal 2002 and beyond. A however, be adapted to reflect the fact that it recent OED analysis suggests that this is an is much easier to change projects during im- ambitious goal. Achieving it will require many plementation than at completion. In addition, measures, including significantly improving a watchlist has been developed, that includes quality at entry and project implementation, projects deemed to be especially risky, com- extensive use of piloting, and increased will- plex, or innovative. Projects placed on the ingness to restructure or cancel substandard watchlist are subjected to more frequent scru- projects. It will also require channeling lending tiny. The portfolio reviews started in April more to countries with favorable economic and 1996, with an initial focus on water projects, governance environments, and providing forestry, and research and extension. more nonlending services to others. Only with a dramatic shift from current practices will it Strengthen Monitoring and Evaluation be possible to achieve an 80 percent satisfactory outcome within the next five years or so. Recent OED analysis indicates that monitoring Matrix 4.1 describes a series of actions to im- and evaluation (M&E) is seriously deficient for prove the responsiveness of our business proc- all Bank operations, but slightly better than av- ess, and thereby our portfolio performance. erage for agricultural projects. The stronger Box 4.1 discusses ways to improve project performance of monitoring and evaluation in quality. agricultural projects may be the legacy of the considerable effort during the 1980s, Review and Revamp the Existing Portfolio when RDV contained a monitoring and evalu- ation unit that provided operational support in There is no way that the performance target the Bank and trained staff in partner countries. can be reached and sustained by fiscal 2002 Because of budget constraints, the unit was unless additional steps are taken to improve eliminated. the performance of the existing portfolio. Con- Since the 1980s monitoring and evaluation centrating only on improving quality at entry techniques have evolved significantly. Rapid would delay measurable impact on perform- assessment approaches and systematic client ance to the middle of the next decade. The Re- and stakeholder consultations have become gions, with assistance from the Center, are much more common. Significant work has also carrying out sectoral portfolio reviews, or com- been done on generating better quantitative pleting ongoing ones by the end of this fiscal. and qualitative performance indicators for a Agreements should be reached with borrowers range of different projects, and for measuring and actions by the end of fiscal 1997. the impact of rural Bank operations as a whole. The portfolio reviews need to evaluate There has also been a move to apply a whether projects are addressing the key devel- sharper strategic focus to World Bank opera- opment objectives effectively, including envi- tions in the rural and agricultural sector. In ronmental and social objectives. Broadly Latin America the Bank has assisted with the speaking, there are three possible recommen- creation of permanent capacity to monitor ag- dations: continue the operation largely un- ricultural sector policies by independent coun- changed, change the project, or cancel the try institutions such as universities. Other new project. Within the framework provided by a approaches are evolving that involve country reassessment of the risks that the project faces, institutions in monitoring the impact of pro- its relevance, efficacy, and efficiency as well as jects on the ground. For example, a team from its outcome, sustainability, and institutional the University of Zambia, which has immedi- impact will be evaluated or reevaluated. These ate access to data generated by the central sta- criteria are essentially the same as those used tistical office, is analyzing the performance of to judge a project at completion. They will, an agricultural sector investment project in that 54 Rural Development: From Vision to Action Box 4.1 Improving project quality What is meant by project quality? * Rigorous economic analysis Quality refers to quality at entry and, ultimately, * Thorough and realistic risk assessment benefits on the giound. The tests of quality are: * Effective monitoring and evaluation * Relevance. Project goals are consistent with * Sustained implementation support. country and sectoral strategies, and project de- sign is consistent with the Bank's standards and What is management doing to improve project institutional objectives. quality? * Efficacy. Project objectives are consistent with * Adjusting the portfolio to release resources for outcomes (or expected outcomes). quality improvement * Efficiency. Project inputs are consistent with out- * Working with clients and partners to enhance comes (or expected outcomes). their ownership of projects and policies * Institutional development. The project improves * Improving sector work the use of human, organizational, and financial * Improving economic and risk analysis resources. * Limiting new lending until conditions are right * Sustainability. Project achievements and benefits * Supporting innovation, pilot activities, mid- are likely to be long lasting. course corrections, and longer project pipe- lines What determines project quality? * Strengthening monitoring and evaluation, in- Quality depends on preparing and implementing cluding training staff in the use of performance projects that, from the outset, have a high probability indicators and log frames and in how to build of meeting the tests of quality set out above. Quality borrower capacity to undertake and use moni- depends on: toring and evaluation * Relevant, rigorous, and realistic sector work * Enhancing portfolio management by delegating * Stakeholder participation and commitment to staff and increasing their accountability * Flexibility in the project cycle * Strengthening staff skills and creating incen- * Application of logical framework analysis tives within the Bank that recognize quality. country. The team also has the capability to for support. The office has contributed greatly consult with stakeholders systematically. to the recent turnaround of the massive rural It is therefore proposed to build on success- development portfolio in that poor region of ful experiences and greatly expand the use of Brazil. And in Central America the RUTA fa- innovative new approaches through the sys- cility located in Costa Rica increasingly pro- tematic rebuilding of rural monitoring and vides implementation assistance to partner evaluation capacities in the Regions and in the countries. Center. Revise the Way of Doing Business Strengthen Implementation Support Changing our way of doing business is essen- Implementation support, or supervision, as it tial if we are to improve the performance of used to be called, suffers from three main the rural sector portfolio, and agriculture and weaknesses: there is little continuity of staff, natural resources projects over the longer term. there is inadequate consultation with stake- The Change Management Group is dealing holders and donors, and there are too few Bank more broadly with innovations in the project staff in-country. There are good examples in cycle of the Bank. Innovations are already be- the rural sector of innovative implementation ing made in the design and implementation of support. The Bank has a field office in north- the Bank's rural sector projects, which address east Brazil where locally-recruited and fully- key weaknesses of the past, such as lack of empowered staff respond quickly to requests participation and inadequate flexibility in pro- Improving the Existing Portfolio 55 ject design. For example, projects now often ments should be evident by the year 2000. allow for the phasing of implementation, be- It is expected that 80 percent of projects ginning on a small or pilot scale, then moving will achieve satisfactory ratings by 2002. to broader implementation. * The quality of the ongoing portfolio, which The benefits of structured learning are al- is reviewed by management annually ready available and can be applied. For exam- through the annual portfolio review proc- ple, the Participation Learning Group has ess, should show improvement starting in documented numerous innovations in pro- fiscal 1997. curement, disbursement, and accounting pro- * The quality at entry of new operations cedures for dispersed and participatory should increase substantially from fiscal projects that strengthen accountability through 1998, as new projects reflect the greater greater decentralization and participation of strategic focus and client commitment that the ultimate beneficiaries. Recent rural devel- will result from better consensus building opment projects in northeast Brazil and else- and participation as well as the incorpora- where have relied more on operational tion of new approaches and best practices manuals, rather than on legal documents to in project design. describe the detailed design features of pro- jects. Legal documents should define only Encouraging Innovation and Risk Taking the broad objectives and commitments of the projects. This emphasis on improving portfolio perform- ance is not intended to discourage innovation Monitorable Targets for the Portfolio and risk-taking in World Bank Group assis- tance programs. In fact, the rural sector strategy The proposed actions should lead to the fol- strongly encourages undertaking experimental lowing results: and innovative projects and programs. But it * The average OED success rating of rural proposes that innovative, risky projects and sector operations should decline slightly in programs be tested within an enhanced pro- fiscal 1997 as problem projects are closed gram of nonlending activities, policy reform, out. institutional development, and pilot activities, - Subsequently, with the introduction of nu- rather than as part of large lending programs. merous innovations to amended or redes- Experimental projects and programs that seem igned projects, performance should rise likely to succeed on a larger level can then be rapidly and be sustained. Marked improve- scaled up through project lending. Matrix 4.1 Improvinrg the existig rural development portfolio Objectives. Achieve a rating of satisfactofy by 80 percent of ccmnpleted prqects by fiscal 2002 and substantially improve the quality of ongoing project portfolio Collaborators Who is Ou4ut or monitoring Challenge What needs to be done? accountable? Bank Outside Date indicator Twenty-two percent of completed agriculture pro- Review existing portfolio and proes in the pipeline Regional RDV, OED, GAP Ongoing Reviews completed jects are rated unsatisfactory. in accordance with approved terms of reference. directors, division chiefs In consultation with govemment adjust, redesign, or Country DMsion chiefs, Ministers of: Ongoing Consubation with close nonperformirng rural sector projects, and teams, task regional directors finance, govemments completed proects in the pipeline. managers agriculture, environment Establish central capacity to monior and evaluate RDV Regions, OED Ongoing Control capacity rural sector projects and programs. cstablished Capabilities for monitoring and evaluating rural sec- Develop best practices and speifications for prqect RDV, OED Regions, EDI Universities in Ongoing Best practices and tor projects and programs are inadequate. management information systems, and disseminate dient countries specifications them. disseminated Design participatory mechanisms into execution and Task managers Division chiefs, Ongoing Impact assessment monitoring of projects and programs. country teams, report GAP Feedback from beneficiaries during implementation Develop watchlist of potential problem projects and RDV Country offices, Ongoing Watchlist developed 71as is weak. institute mechanisms for quick review to enable country adjustment, redesign, or closure without central and directors, RVPs Board approval. _ Mechanisms to deal quickly with problem projects Strengthen subregional or in-country Bank capacdy Country RDV Ongoing Resident mission are inadequate. to provkie implementation support. directors stengthening underway Other donors are not sufficiently involved in imple- Forge partnerships with other donors to support joint Division chiefs Country Ongoing Number of missions mentation. implementation. directors, EDI involving other donors Bank disbursement, procurement, and accounting Better disseminate innovations in practices. Appoint Division chiefs, RDV Ongoin,g Best practice list: procedures are still not sufficieatly flexible to support a task force of experienced pracitioners to RDV recommendations decentralized and participatory nural operations. recommend more flexible practices. issued and adopted Excessive detail in legal agreements makes it diffi- Place details of implementation arrangement into Task managers LEG Ongoing Monitor pradkces cult to implement projects flexibly in response to implementation manuals so that projects can be changing condidons and knowledge obtained dur- adjusted dunng implementation by mutual ing implementation. agreement between the Bank and borrower. There is insufcient piloting of new approaches be- Support plotinewgoalraowor eappcmacheswithin Task managers DMsion chiefs Ongoing Number of pilot fore adopting an approach into larger projects. existing pamns or in special plot ope ns Exand initiatives within or genAize thm i tey wm k by adstin waop l existing programs or in manual orcpoting thern ino new piqecs. special pilot operatiens Prepare a method for assessing success or failure OED RDV, regions December Guidelines issued of pilots through evaluaion and dient consultaon. 1997 CHAPTER 5 Using the International Arena to Generate Greater Commitment M any things can be done to raise in- the crops that feed the world-rice, sorghum, ternational commitment to rural de- wheat, maize, and dozens of little known velopment. Such actions will also crops-through three small exhibition farms help make access to international agricultural typical of Africa, Asia, and Latin America. and agro-industrial markets more open and Eight young scientists explained how food is stable. grown in the countries they represented, and how families spend their days. They also dis- Raising International Awareness cussed the role of the CGIAR and the Bank in economic development efforts. Through the There have been several specific opportunities richness of the exhibits that the Disney/World in 1996 during which the Bank articulated its Bank partnership provided, some 700,000 visi- vision for rural development and its strategy tors (one-third international) learned about in- for best achieving the vision. Further opportu- digenous farming systems and crops that have nities will arise in 1997 and beyond. The Presi- sustained people for thousands of years. At the dent's Office, the External Affairs Department, 1997 EPCOT festival, special emphasis was ESSD, DEC, IFC, EDI, and the Regions will col- given to issues of food security and environ- laborate closely on these activities. The strate- ment, and the work of the Bank and of the gic focus is to forge a consensus of approach CGIAR. (See box 5.3 for details on the Bank and urgency in the Bank, in the international Group's alliance with CGIAR.) community, with developing country govern- ments, and with the civil society. Conferences Events The Fourth Annual World Bank Conference on En- vironmentally Sustainable Development in Septem- EPCOT Gardening for Food around the World, ber 1996 focused on the theme of rural well- 1996 and 1997. This partnership with EPCOT being. This was a major, high-profile event provided a unique and powerful opportunity with broad reach in the environmental, natural to inform the general public of the vital role resource management, and agriculture and and activities of the World Bank and the rural development communities. it was an CGIAR in supporting the conservation of natu- opportunity for participants from many or- ral resources and development of sustainable ganizations and countries to share visions, agricultural production. Visitors learned about overall strategies, and specific rural develop- 57 58 Rural Development: From Vision to Action Box 5.1 A successful alliance: Consultative Group on Intemational Agricultural Research More than half the population in the developing agricultural policy, and strengthen domestic research world is rural, and agriculture is key to their devel- capacity in developing countries. opment prospects. With finite land and water re- The Bank has played a critical role in fostering sources, and continued population growth, these achievements, providing intellectual leader- developing-country farmers have a pressing need for ship and financial support for the CGIAR. Cur- new technologies to increase production, while pro- rently, the Bank provides the CGIAR with its tecting the natural resource base on which produc- Chairman and Secretariat, and with financial re- tivity depends. The Bank has a strong interest in sources for the Technical Advisory Committee and helping to maintain a vigorous and effective intema- the Impact Assessment and Evaluation Group. tional agricultural research system to continue creat- More importantly, the Bank guarantees a financial ing these technologies. contribution amounting to 15 percent of funding Building on successful institutions initially estab- for the research agenda (US$45 million out of lished by the Rockefeller and Ford Foundations, the US$300 million in 1996). It thereby leverages more Bank and nine donors established the Consultative than six times its own contribution from other Group on International Agricultural Research CGIAR members. (CGIAR) in 1971 to spread the benefits of intema- In May 1994 the CGIAR launched an 18-month tional agricultural research beyond Asia. Unprece- program of renewal to clarify its vision, refocus its dented harvests from new varieties of rice and wheat research agenda, broaden its partnerships, stabilize averted the threat of famnine in the late 1960s. The its finances, and tighten its governance and opera- CGIAR has grown to include 52 donors from both tions. To stabilize the CGLAR's finances, the Bank the public and private sectors, from developing coun- offered US$20 million of special funding to match tries, and industrialized countries, with the Bank, new commitments of other donors. Other CGIAR FAO, UNDP, and UNEP as cosponsors. The CGIAR members responded positively and the Bank's special supports 16 international agricultural research cen- funding was fully disbursed. As a result overall sup- ters in developing countries. Their research covers port for the research agenda rose from US$235 mil- crops that provide 75 percent of the calories and pro- lion in 1993 to US$268 million in 1994, and to US$270 tein requirements of people in developing countries. million in 1995. The rest of the renewal program was CGIAR-supported research has led to increases in also successfully completed. food production in developing countries by hun- The renewed CGIAR works with a broad range of dreds of millions of tons a year. New crop varieties partners to confront the challenges of sustainable ag- have enabled farmers to increase productivity with- riculture, food security, and poverty alleviation. out expansion of the cultivated area. The CGLAR has Through these activities the CGIAR will complement helped to preserve biodiversity, develop integrated the Bank's efforts to enable developing countries to pest management programs and biological control realize their full agricultural technology and produc- methods that reduce the use of pesticides, sharpen tion potential. ment experiences and approaches. It was also plan of action agreed by countries in advance an opportunity to build collaborative alliances. of the Summit. These principles and actions The World Bank/International Monetary Fund address issues well beyond agriculture and ru- Annual Meetings and the CGIAR's 25th Anni- ral development, stressing the need for educa- versary International Centers Week followed tion (especially for girls), measures to improve soon after the ESD conference. Mr. Wolfensohn environmental sustainability, and decentrali- highlighted the Bank's role and activities in zation and participation. The Bank is active in rural development at all three events. nearly all the areas discussed in the Rome Dec- The November 1996 World Food Summit, laration and rural sector strategy. It will ac- organized by FAO (and to which the Bank con- tively collaborate with the broadest range of tributed financially and intellectually), was an- partners to achieve, and hopefully exceed, the other highly visible event at which Mr. goals agreed to at the Summit. Wolfensohn appeared. The Bank Group presi- One of the major highlights of the Summit dent endorsed the principles and the broad was the unveiling of this rural development Using the International Arena to Generate Greater Commitment 59 strategy. NGOs sharply criticized the Bank for * Land Network. The Bank, IFAD, and FAO, its shrinking engagement in agricultural and are preparing an information and sup- rural development. Mr. Wolfensohn's speech port network for countries with programs announced a fundamental break from this of negotiated or market-assisted land trend, putting rural development once again at reforms. the top of the agenda. * The IPM Facility. The Bank, with UNDP, The culmination of a series of regional con- FAO, and UNEP have established a group ferences, the Summit presented a major oppor- to promote the adoption of integrated pest tunity to strengthen existing alliances and management. This alliance is being further build new ones. In addition to its long-standing strengthened through the involvement of partnerships with United Nations agencies and several bilateral donors. international institutions, the Bank strength- * Soil Fertility Initiative. The Bank, with FAO; ened its collaboration and dialogue with Club du Sahel; international research NGOs, actively participating in the NGO-spon- agencies, including the CGIAR Center for sored parallel summit. Agroforestry Research (ICRAF), the Inter- Over the past year several new alliance- national Fertilizer Development Center building initiatives have been initiated with (IFDC), and IFPRI; and bilateral donors, other actors. Because of lack of resources, these such as United States Agency for Interna- initiatives have not progressed far enough to tional Development (USAID), Belgium, show results. The activities include: the Netherlands, and France have created - Hunger and Poverty Knowledge Network. an alliance among institutions concerned IFAD with the Bank, SRISTI, FAO, and with soil fertility issues. NGOs are preparing a network devoted to * Land Quality Indicator Program. The Bank the exchange of civil society knowledge and its partners FAO, UNDP, UNEP, and and experience in fighting hunger and the CGIAR have initiated a program to poverty. The knowledge network will develop a set of harmonized land quality link together existing networks and facili- indicators for agriculture and managed tate the exchange of information and forest ecosystems. These indicators will views among civil society, policymakers, become part of a global information sys- donors, international organizations, aca- tem, needed to track changes over time in demics, and other groups from around the the quality of agricultural and forest land. world. The program also includes research activi- Box 5.2 FAO and the World Bank: an important alliance The Food and Agricultural Organization (FAO) of the tion has been nearly US$10 million for the past sev- United Nations is the Bank's oldest ally in rural de- eral years. velopment. The World Bank and FAO entered into a CP resources are allocated among the Regions as Cooperative Agreement in 1964, through which FAO part of the overall budget envelope, but the funds are established and staffed a Cooperative Program (CP) not fungible. Sector units develop their programs to help countries design and prepare projects, and with the CP. To strengthen its alliance with FAO, the help the Bank with sector work and, to a lesser extent, Bank is now drawing on FAO expertise outside of project appraisal. The CP is the largest unit within the Investment Center and developing joint work FAO's Investment Center, a multidisciplinary group programs. There are many opportunities for further of almost 100 professionals, covering the full range collaboration, for example, with the Food Security of disciplines needed to support work on agriculture Initiative for low income food deficit countries or in and natural resources management. The Bank pro- forest, soil, and fishery management in which the vides 75 percent of the funding for the CP, while FAO FAO has considerable expertise. Initial steps were provides the remainder. The Bank's annual contribu- taken at the Summit. 60 Rural Development: From Vision to Action ties, regional pilot studies, and capacity The overall objective of these activities is building. to strengthen indigenous capacity in policy Indo-Gangetic Rice-Wheat Initiative. The and institutional reform so that rural develop- Bank, together with the CGIAR Centers ment can play its vital role in overall eco- (International Rice Research Institute nomic development, poverty alleviation, food (IRRI) and International Center for Maize security, and sustainable natural resources and Wheat Improvement (CIMMYT)), bi- management. lateral donors, and the governments of In- To foster rural development, EDI has a num- dia, Pakistan, Bangladesh, and Nepal have ber of product lines: forged an alliance to address the declining * Agricultural policy and institutional re- yield response to fertilizers in some of the form most productive rice-wheat growing areas * Rural project analysis and management of the Indo-Gangetic Plain. * Water resource management * Collaboration to Control Natural Resource * Reforms and private sector participation Degradation of Arid Land in the Middle East. * Participatory irrigation management The Initiative brings together the Govern- * Biodiversity conservation. ments of Egypt, Israel, Jordan, West Bank Each of these product lines consists of aware- and Gaza and Tunisia, as well as a broad ness seminars for senior officials, sector man- range of bilateral donors, UNDP, FAO, agement seminars for policy managers and IFAD, and the United Nations Convention analysts, training of trainers workshops, and to Combat Desertification. study tours. All programs are presently expanding their outreach to include new Reports audiences (parliamentarians, journalists, the private sector, NGOs, and community organi- A future World Development Report (WDR) zations) and new media (television, radio, in- should focus on the rural economy. The Bank's ternet, and so on). For more information, see flagship document can be used to widely dis- appendix D. seminate the results of research efforts that are concluding over the next year or so. Current Improving International Coordination and recently concluded research pertinent to a rural WDR include natural resource account- The Bank Group must build and deepen part- ing, participatory approaches to project design nerships for rural development with the G7 and execution, decentralized rural develop- countries, the WTO, United Nations agencies ment, land policy and land reform, gender is- (especially FAO), the CGLAR, and bilateral do- sues, and the political economy of agriculture nors. Over the next few years donor coordination and agrarian relations. The WDR could also will become very important, especially in Africa, draw on information from OED's evaluation of to target assistance where it will do the most sector adjustment programs (SECALs) and good. Coordination should take place at both the parallel evaluations of the impacts of the re- Bank Group level and the Regional level. For cently conduded GATT negotiations, targeted example, the Africa Region plays a critical role food and nutrition programs, and policy dis- in fostering donor coordination in agricultural tortions on rural development. research through the Special Programme for African Agricultural Research (SPAAR). The ma- Economic Development Institute Training trices of the rural sector strategy (5.1 and 5.2) identify many specific initiatives and opportuni- The Economic Development Institute (EDI) of- ties for coordination with our partners. fers training in agriculture and natural re- International coordination is especially im- sources management to its partner countries. portant to deal with two cross-cutting issues. Using the International Arena to Generate Greater Commitment 61 Box 5.3 Helping countries take advantage of the WTO agricultural trade framework Prior to the Uruguay Round agreement, world trade gram with the United Nations Conference on Trade in agricultural products was in disarray. While the and Development (UNCTAD), supplemented by spe- General Agreement on Tariffs and Trade (GATT) had cific monitoring assessments of agricultural protec- succeeded in sharply curtailing protection on manu- tion policies in selected developing countries. This factures, it failed to do so on agriculture. The result work will form an important basis for evaluating pro- was an extremely costly regime of high and variable posals for reducing trade barriers during the next set protection, intense trade conflicts, and distorted and of agricultural negotiations under the WTO. unnecessarily volatile world markets. Developing- Current analytical work focuses on the special is- country agricultural exporters were excluded from sues of concern to countries that are liberalizing with many of the best markets. Even those developing Bank assistance, and for the roughly 30 countries cur- countries that benefited from the availability of sub- rently in the process of accession to the WTO. A col- sidized exports from the developed countries loquium on the special issues facing countries were subject to the vagaries of sudden swings in acceding to the WTO was held in mid-1996. A series world prices and changes in policies of the exporting of seminars will be held to help policymakers in Sub- countries. Saharan Africa use international rules and institu- The Uruguay Round achieved a great deal by tions to achieve better economic policies. bringing agriculture under GATT/WTO disciplines. Attention will now begin to focus on the range of New rules were developed to control import barriers, analytical issues involved in reaching a successful export subsidies, and the total level of support to agreement during the next set of agricultural nego- agriculture. Agreement was reached to reduce import tiations, beginning in 1999. Analysis of the prospec- barriers and export subsidies by 36 percent, and total tive gains from particular types of liberalization will protection by 20 percent. Unfortunately, there was be an important part of this research agenda. Particu- considerable slippage in actually reducing agricul- lar attention will be given to identifying problems tural protection. A World Bank study found that arising from the current agreement and proposing many of the tariff levels from which the agreed re- solutions to these problems. Another major focus will ductions began were set more than twice as high as be the evaluation of alternative approaches to agri- the previously prevailing rates of protection. cultural liberalization, including linkages with other Attention has now shifted to the implementation sectoral negotiations, such as the proposed negotia- of the Uruguay Round commitments. Rates of pro- tions on services trade scheduled to start at about the tection are monitored through a collaborative pro- same time. First, protectionist measures of OECD coun- The Bank was represented at a high level tries have restricted market access to the agri- at the WTO Ministerial Meetings in 1996 cultural and agro-industrial products of the and will be again in 1998. Its statements at client countries of the Bank, which in turn has these meetings should include major compo- reduced international prices and added to in- nents on the importance of freer and fairer ag- ternational price volatility. Incorporation of ag- ricultural trade and the progress achieved so ricultural trade into the rules of the WTO has far in the implementation of the Uruguay been a major achievement, but liberalization Round agreement on agriculture. The review must be substantially deepened. Without im- of the Uruguay Round agreement on agricul- proved demand for developing countries' ag- ture to take place in 1999 will include an as- ricultural products the agricultural growth sessment of the liberalization achieved under needed to generate employment and reduce the Uruguay Round and consideration of poverty in rural areas will not come about. what further commitments are necessary to Therefore, the World !3ank Group will actively achieve the objectives laid out in the agree- promote greater access to OECD country mar- ment. The meetings and review offer major op- kets for the agricultural and agro-industrial portunities for developing countries to seek products of its client countries, and support action. The Bank will endorse their calls for actions in the WTO to achieve this objective. improved market access and ensure that they 62 Rural Development: From Vision to Action have access to high-quality analysis to support Coordinated international assistance is critical their demands. when this happens. The World Bank Group Second, countries sometimes face hardships will continue its collaboration with the IMF, because of fluctuations in commodity prices. For the WFP, FAO, WTO, and bilateral donors to example, world stocks of cereals fell to all-time help countries manage the impacts of higher lows and world cereal prices rose by 56 percent prices (box 5.4). between June 1993 and May 1996. During timnes For most countries holding buffer stocks to of high prices, low-income, food-importing protect against domestic production short- countries may face serious fiscal, foreign ex- ages and high international prices is an ex- change, and household food security problems. pensive solution. It is usually much cheaper Box 5.4 Instruments to help countries cope with food shortages and world price spikes A variety of instruments are available to help countries nisms or through augmentation of access under cope with short-term food supply and price shocks. an arrangement. * Food aid. In 1993, about 17 million tons of food * World Bank assistance. During droughts the Bank aid, nearly double the grain production of the can assist countries to cope with food shortages entire Sahel region, was delivered to food-defi- by reaUocating funds in existing projects to fi- cit countries. About one-quarter of it went to nance actions to enhance food supplies. Generaly, feed vulnerable people in countries facing the funds are not used directly to finance food drought or war, such as Somalia, Rwanda, and purchases, but rather to finance transport, storage, some countries of the former Soviet Union. Bi- spare parts, or other goods or services important lateral donors distribute about two-thirds of to the movement or processing of food. The real- food aid, and the WFP delivers most of the re- location of Bank project funds helped southern mainder. Food aid falls well short of meeting Africa cope with its drought in 1992. real need. Furthermore, food aid has been de- Economic recovery loans are usually pro- clining in recent years, as government-held vided after an emergency, and are used to fi- food stockpiles have declined. nance transport, seeds, fertilizer, and other * World Food Programme. To prevent hunger and goods and services to help a country increase starvation, the United Nations WFP helps coun- its capacity to grow food. Ethiopia, Kenya, So- tries supply food to distressed populations at malia, and Sudan have used ERLs to recover the outset of an emergency. It also promotes from drought. long-term development by assisting with the Although its role is subordinate to the IMF, resettlement of refugees, conducting training, the Bank can also provide balance of payments and sponsoring labor-intensive work programs support to enable countries to import food, to build infrastructure. medicine, and other essentials. The economic * IMF balance of payments assistance. The IMF pro- recovery credit that the Bank provided to Zim- vides financing to help affected countries babwe enabled the country to import critically through two channels: the Compensatory and needed food. Contingency Financing Facility (CCFF) and * Donor coordination. Effective coordination of do- Fund arrangements. The CCFF provides finan- nor efforts during food emergencies can save dal assistance to members experiencing balance many lives. In anticipation of the 1992 food of payments problems arising from shortfalls in emergency in southern Africa, the Bank initiated export receipts or excess cereal import costs. To meetings with the IMF, FAO, WFP, Southem qualify, the excess in grain import costs must Africa Development Commnunity, USAID, and be temporary, largely beyond the control of the the United Nations High Commission for Refu- member country, and result in the need for bal- gees to exchange information about the situ- ance of payments financing. Algeria, Moldova, ation, identify instruments available to prevent and South Africa have recently made purchases disaster, determine needs, and organize timely under the cereal element of the CCFF. Fund donor meetings to ensure that projects were in arrangements can provide flexibility in the case place and the needed resources available. As a of unanticipated external terms of trade shocks result, the drought, while very serious, did not through the inclusion of contingency mecha- result in famine or loss of life. Using the International Arena to Generate Greater Commitment 63 to rely on trade, using financial reserves or in- to remain at lower levels than before. It is im- temational loans to make up shortfalls. Coun- perative that during periods of price volatility, tries can then earn interest income on their importing and exporting nations resist imple- financial reserves, rather than paying for stor- menting inappropriate policies, such as export age, storage losses, and interest on loans. Ex- controls or excess stock build-ups. The Bank ceptions should be analyzed on a case-by-case and its partners will collaborate in monitoring basis. price movements and in advising exporters Prices could be more volatile in the future and importers against pursuing inappropriate than in the past, since global stocks are likely policies. Matrix 5.1 Using the international arena to Increase commitment to agricultural growth and rural development Objective: Increase the commitment to agricultural growth and rural development of both client countries and donors Who is Collaborators Challenge What needs to be done? accountable? Bank Outside Date Output or monitoring indicators To reduce poverty, the world must produce much 1996 Fourth Annual World Bank Conference RDV, ESD Regions, CVPs, FAO, IFAD, September Media coverage more food in ways that are sustainable and more on Environmentally Sustainable Development IFC, CGIAR, EDI WFP, UNDP, 1996 remunerative for labor. focused on rural well-being. UNEP, WTO, GEF This simple message is being lost, as reflected in CGIAR 25th Anniversary Intemational CGIAR ESD NGOs, regional October Increased donor commitments the declining commitrnent to agriculural growth Centers Week celebrated past successes and Secretariat banks 1996 to CGIAR and rural development in both donor and partner emphasized the need for more resources for countries. research. The crucial role of global leadership embodied by 1996 FAO World Food Summit included RDV HDD, DEC CGIAR and November Media coverage, more the World Bank Group's president must be fully speech by Mr. Wolfensohn. members and 1996 effective parberships -recognized and utilized. donors, NGOs The analytical case for agricuftural growth and ru- Future World Development Report (WDR) will DEC RDV UNCSD Increased official development ral development must be continually updated and focus on agriculture and rural development. assistance to agricultural and disseminated. rural development in 2X00 Using WOR as major input, Bank jointly will RDV Academics, sponsor intemational conferences with: CGIAR, NGOs * FAO on rural development and land RDV FAO November Media coverage, more reformn 1998 effective partnerships . UNEP on sustainable natural resource RDV, ENV ESSD UNEP, FAO, May 1999 Media coverage, more management GEF effective partnerships * IFAD on targeted povarty reduction. RDV DEC, HDD IFAD November Media coverage, more 1999 effective partnerships Matrix 5.2 High-profile nitiatives in coordination with other actors Objective: Build and deepen partnerships for rural development with G7 countries, W1O, United Nations agencies, regional banks, bilateral donors, and NGOs Who is Collaborators Challenge What needs to be done? accountable? Bank Outside Date Output or monitoring indicators Protectionist measures of OECD countries have The Bank Group will promote greater access DEC RDV, IFC WTO, EU, USA, Periodic GATT negotiations result in restricted market access to the agricultural and to OECD markets for the agricuitural and agro- Japan, Cairns freer and fairer agricultural agro-industrial products of the Bank's client coun- industrial outputs of its client countries and Group trade tries. This has reduced international prices and support actions in the WTO to achieve this added to price volablity. Incorporating agricultural objective. The Bank will be represented at the trade into the rules of the WTO has been a major WTO Ministerial meeting in 1996 and 1998. achievement, but further market access is badly needed (1999 WTO Review). Bank staff and client countries' staff will be DEC, RDV, EMT WrO, Clients Fiscal 1997 At least two workshops and trained in WTO rules and opportunities. EDI four seminars held ONi Like-minded NGOs will be identified and a DEC RDV, IFC NGOs, October Effective network in place joint information campaign will be launched. academics 1997 World stocks of cereals fell sharply, and world ce- The Bank coordinated with other actors to DEC RDV IMF, FAO, WFP, Continued No inappropriate policies put real prices rose 50 percent in 1995. During these discourage exporters and importers from WTO throughout in place events sharp price increases were possible if ma- pursuing inappropriate policies. 1996 jor exporters rstricted exports and importers built up stocks excessively. The Bank produced an assessment of the RDV, DEC FAO, IFPRI October Workshop, report concluded long-term world food situation. 1996 Low-income, food-importing countries at times The Bank collaborates with the IMF, WFP, Country RDV IMF, FAO, WFP Ongoing Prompt responses to requests face serious fiscal, foreign exchange, and house- FAO, and bilateral donors to help countries teams for assistance obtained; hold food securiy problems because of higher avoid crisis. innovative targeted food prices. During these times coordinated intema- subsidy programs tional assistance is critical. implemented CHAPTER 6 Areas of Concentration and Future Directions R ural strategies, country assistance cluding biodiversity), forestry, fisheries strategies, and the implementation and aquaculture requirements of the existing portfolio 4. Water allocation and management: water define the mix of nonlending and lending serv- use efficiency and allocation, irrigation ices or products that the Bank provides in each and drainage and water management country to support rural development. The 5. Local and conununity development and Bank has institutional priorities, subsector rural infrastructure: community-based policies, and best practices that guide the de- development, land policy and land re- sign of specific services or products. These are form, and rural infrastructure (including briefly described in this section. water and sanitation, and rural roads). Rural development also involves several Areas of Concentration cross-cutting groups, including portfolio de- sign and monitoring and evaluation, portfolio Many subsectors are involved in rural devel- management, global information systems, opment. The rural strategies will determine the gender, indigenous peoples, and institutional priorities for each country and the subsectors reform. of concentration for Bank assistance. These There is a significant overlap of activities subsectors, identified as thematic groups, can among these clusters. Strategy and policy pro- be grouped into five clusters: vide the foundation for work in all other areas. 1. Rural strategy and policy formulation: ru- Agricultural intensification cannot occur with- ral strategy formulation; agricultural pol- out careful attention to natural resources man- icy; food and nutrition policy; markets agement and the environment. And natural and agribusiness; and rural finance resources management is often best carried out 2. Agricultural systems intensification: agri- by community groups-so the work in this cultural research; extension, rural infor- area must be integrated with that of local and mation, and agricultural education; and community-driven development. The group- plant systems intensification (including ings thus involve a certain arbitrariness. Nev- soils and pest management); and animal ertheless, partner countries often group their systems intensification (including pasture work programs and organize their ministries management) and institutions along these lines. The clusters 3. Management of natural resources and for- also correspond loosely to the way the Bank estry: natural resources management (in- organizes its work program. Moreover, work- 66 Areas of Concentration and Future Directions 67 ing effectively in each thematic group requires * The public sector complements the private specialized skills which are acquired by pro- sector. longed work and field experience. An experi- . There is competition in input, output, and enced strategist and policy analyst is rarely factor markets. able to provide useful advice on the institu- * There is a level playing field for all types of tional issues and broad program design in farms. natural resource management or agricultural The Bank's agricultural policy operations are intensification, or the technologies required for now performing much better than in the past. these broad tasks. The considerable overlap After starting with timid reforms in the 1980s, among the groups has implications for the the Bank is now supporting much bolder pro- Bank's organization, suggesting that work pro- grams, encouraging trade and price reform, grams would best be managed by networks and market orientation (box 2.2). In addition and task forces, rather than by units with fixed much more attention has been paid to consen- boundaries. sus building prior to starting operations. Fi- The following sections summarize the main nally, to assure that the poor and vulnerable issues and future directions of work for rural are protected during the period of transition, development in its many components. Staff the Bank is paying more attention to the pro- from all parts of the Bank defined the key chal- vision of safety nets. lenges and the best approaches for meeting As a consequence many of the Bank's agri- them. What is presented represents the consen- cultural adjustment programs in Latin America sus of many people. Detailed discussion and and Africa have contributed to significant agri- action matrices with monitorable indicators for cultural policy reform and agricultural growth. each of the key components can be found in And its programs in Eastern and Central "From Vision to Action in the Rural Sector" Europe also show great promise for stimulating (March 27, 1996). agricultural output and raising rural incomes. Strategy and Policy Thefuture. The Bank will continue to support program models that have proven successful. It To foster rural development and reduce pov- will focus heavily on the agricultural dropouts erty, most countries must improve their rural in Africa, where the needs for better agricultural strategies and policies. Countries may require performance are especiallylarge. Itwill continue assistance in any or all of the subareas (agri- its programs in Eastern and Central Europe, cultural policy, food and nutrition policy, mar- where a more open agricultural trade regime, kets and agribusiness, rural finance, and land farm privatization, and the formulation of policy and land reform) (box 6.1). Some coun- sound land policies can stimulate output and tries, such as countries in transition, require improvefarmers'incomes, while contributingto assistance formulating a strategy and policy global food security. In Latin America and Asia, framework that integrates all these areas. where much progress has been made in recent years, the Bank will assist in building domestic Agricultural Policy: An Improved capacity for policymaking and help consolidate Mainline Business reforms. Finally, it will strengthen its alliances with WTO, FAO, regional banks, and others. The ideal agricultural policy is well defined: * Foreign exchange, trade, and tax regimes are Integrating Household Food Security and Nutrition not biased against agriculture or rural areas. Policy into Rural Development Operations * There is no urban bias in public expendi- ture, and there is efficient use of resources The number of people in the world who are within the public sector. undernourished is disgraceful. While agricul- 68 Rural Development: From Vision to Action Box 6.1 Is it better to focus on food crops or export crops? This is becoming an increasingly unimportant ques- tions overall, not just their export crop opera- tion. Countries should focus on producing the crops tions. that they can grow most profitably. The International . Employment (including of hired labor) and Food Policy Research Institute hasundertakenexten- incomes rise, and child nutrition often im- sive research on this question. The main findings of proves. the research are: Thus, what matters most for improved household . Countries that treat agriculture and rural areas food security is income growth. It rarely matters favorably tend to do well in producing both whether the source of income growth is higher pro- food and export crops. duction of food crops or export crops. * Where smallholders shift some land to export crops, they continue to produce high levels of Source: International Food Policy Research Institute, various staple foods. years. See especially work on Gambia, Guatemala, Kenya, . Smallholders use their increased purchas- Philippines, and Rwanda. ing power to improve their farming opera- tural growth has reduced the threat of starva- better incorporate food policy and nutrition ac- tion for many countries, particularly those in tivities into its lending activities, specifically in- Asia, almost one in five people in the develop- cluding them in pilots, adjustment operations, ing world do not get sufficient calories or nu- sector investment loans, and safety net operations. trients to maintain a healthy life. The three Third, the Bank must include in its non-lending critical elements of food security are multi-sec- assistance to partner countries policy advice that toral and multidiscplinary: availability of sup- addresses consumption effects of removing price ply, either from domestic production or and exchange rate controls, ending subsidies, lib- imports; access through income generation, eralizing trade, and ending parastatal marketing poverty reduction, or food programs; and food boards. Often, strong safety nets will be needed utilization through decent nutrition programs. during a transitional period. In most countries responsibilities for critical elements of such a policy are scattered across Markets and Agribusiness: Expanding many departments. Consumers and the poor Opportunitiesfor the Entire World Bank Group have little political voice. The Bank, working with its partners, is Agricultural markets and agribusiness are the pri- deeply engaged in supporting efforts to reduce mary link between the rural economy and the urban hunger and malnutrition. It has made particu- and export economies. The degree to which pub- larly strong progress in the area of nutrition, lic sector investments in agriculture actually where analytical work and the lending portfo- contribute to poverty alleviation, productivity lio have expanded rapidly in the past several gains, food security, and growth depend criti- years. However, only recently have food secu- cally on the proper functioning of input and rity concerns been systematically integrated commodity markets, and the performance of into agricultural policy dialogue and reform. agribusiness enterprises. Agribusiness provides the inputs to the farm Thefuture. Much remains to be done to inte- sector and services, such as handling, process- grate food security objectives into the design of ing, transportation, financing, and marketing all Bank activities in rural development. First, the of farm-based products. The agribusiness sys- Bank must better integrate its food and nutrition tem delivers market signals and incentives to policy into rural sector strategies and country- primary producers, assists in balancing market- assistance strategies. Second, the Bank must related risks, balances commodity supply and Areas of Concentration and Future Directions 69 demand, and stimulates consumer demand right." Strengthening the systems so that com- and producer response. Agribusiness is thus a petitive markets reach the family farmer is es- potentially significant catalyst or agent for sential. This often involves the deepening and change. extension of policy, regulatory (very often the Developing of efficient agribusiness systems "petty regulations" are the most critical), legal, helps to increase farmers' incomes, while at the and institutional reforms. Human skill devel- same time reducing urban consumers' food opment is essential after so many years of re- costs-therefore providing a "double" devel- pressed entrepreneurship initiatives. opment and poverty alleviation impact. It will reduce postharvest losses and add value to ag- Thefuture. There is a need for close collabora- riculture products, both commodities and tion between the Bank, the IFC, and the Multi- high-value crops. Without the development of lateral Investment Guarantee Agency (MIGA). this system progress in crop diversification to The role of IFC is different from that of the Bank noncommodity specialized (high-value) crops (see box 2.1). IFC's mandate requires it to fi- will remain severely constrained. nance private sector projects that are catalytic In most developing countries, most agricul- and have demonstration effects. There is, rea- tural processing, trading, and distribution op- sonably, no expectation that IFC's activities erations range from microenterprises to should have a sectorwide impact. There is a medium-size enterprises. Private sector devel- reasonable expectation that Bank's efforts in opment in the rural economy normally consists marketing and agribusiness would include of small-scale agricultural input supply, equip- smaller-scale operations and have at least a ment repair, food processing, and other agri- regional impact, with a sectorwide impact business services. The usually urban-focused being a reasonable goal in small and medium- industrial and private sector policies have size countries. Therefore,, there is a critical role proven not to have the focus necessary to ac- for the Bank in this essentially private sector count for, or support, the special characteristics activity, where success requires both the of rural entrepreneurial operations. provision of public goods that are "market Market reforms, stimulated through the appropriate" and support of emerging rural Bank's structural adjustment programs, have entrepreneurs. opened up domestic food markets to competi- Collaboration with external actors in the tion from imports, and stimulated changes in multilateral and bilateral donor communities, consumer demand. In many instances local ag- and in the private sector is also necessary. ribusiness firms have been poorly equipped to There are major rural development and pov- meet this changing demand and import com- erty alleviation benefits from the promotion of petition, lacking requisite skills in product de- domestic agribusiness, and foreign direct in- velopment and marketing. vestment in agribusiness where these invest- After years of antientrepreneurial policies of ments have large externalities. To date, most many of our borrowers (across all our regional of the foreign direct investments in developing operations, not just in the transition economies), countries' agribusiness target exports, contrib- the recent adjustment processes have stimu- ute to dualism in the sector, and do not achieve lated the emergence of a class of rural entrepre- adequate rural economy linkages. neurs, whose initial point of market entry has been into food marketing and the agribusiness A new tool box. The Bank needs to develop a chain. This transformation process from a state- new tool box of analytical techniques and in- dominated system to a private-sector system is vestment components to make the needed con- only now beginning, and needs more stimulus tributions to the CAS process, nonlending and support beyond just "getting the prices activities and, most of all, actual investments. 70 Rural Development: From Vision to Action There are a wide range of public goods and * Rural financial systems and institutions quasipublic goods, for which the Bank could must be judged by outreach and self- provide assistance, as well as in the financing of sustainability. the rural private sector, and the nurturing of There is also consensus on the characteristics rural entrepreneurs and their agribusiness en- that make rural finance institutions successful. deavors. The tool box could range from facili- Successful institutions are: tating the public private dialogue on the * Rural-based but not specialized on agri- development of agribusiness; methods of ana- culture lyzing of the urban bias in regulafions and * Autonomous discriminatory taxation of marketing and agri- * Able to charge market interest rates business; assessing adequacy of rural infra- * Able to mobilize savings and reduce reli- structure (roads and telecommunications) for ance on donor or state funds rural-to-urban market linkages; developing * Able to collect on loans and have few public goods (for example, grades and stand- losses ards, public market infrastructure, market in- * Able to provide staff incentives. formation); promoting exports; strengthening trade and commodity associations; tracking the Future activities. Building on its recently com- development of international commodity mar- pleted best-practices paper for rural finance, the kets; providing "matchmaking" services to pro- Bank will help countries develop appropriate mote foreign direct investment and the transfer policy, legal, and institutional frameworks for of agricultural technology and the en- rural finance (Yaron, McDonald, and Piprek trepreneurship culture; and providing adult 1997). In addition the Bank will support the education in entrepreneurship and agribusi- strengthening of a plurality of formal and infor- ness management training. mal institutions that can perform the roles of A number of new products are now being intermediation and outreach. Finally, the Bank developed. The Bank Group needs to learn will help rural financial institutions graduate to from these experiences, and from others, and commercial sources of refinance. give the success stories wider dissemination. Regrettably, the low levels of dialogue with Sustainable banking with the poor. One of the our dients in this area (with some regional most promising new mechanisms for provid- and country exceptions) reflects both the scar- ing credit to the poor are the microfinance op- city of staff expertise in this area, the absence erations modeled after the Grameen Bank and of a systematic analysis and dissemination others (see World Bank 1996c). The World Bank of best practices, and the consequent limited is now actively supporting the development of basket of products to offer our clients. A spe- these institutions. In particular the Bank will cific marketing and agribusiness focal point work to remove legal and regulatory con- in the rural development family will correct straints for small, often informal and unsecured this. loans; help build social infrastructure; promote new ways of managing microfinance (for exam- New Approaches to Rural Finance ple, FAO's micro-banker); and link the CGAP initiatives systematically to Bank operations There is a growing consensus on rural finance: (boxes 6.2 and 6.3). * Credit cannot compensate for urban bias. * Credit subsidies almost never reach the What the Bank will not do. Also important are poor. activities the Bank will not support. The Bank * Providingfinancialservicestopoorpeople will not lend where financial sector policies, can be good business. legal frameworks, and agricultural incentives Areas of Concentration and Future Directions 71 Box 6.2 The Consultative Group to Assist the Poorest: a microfinance program The Consultative Group to Assist the Poorest the CGAP Secretariat to support eligible microfinance (CGAP) is a multidonor effort to systematically in- institutions. CGAP will provide grants to eligible fi- crease resources in microfinance to broaden and nancial institutions, such as NGOs, credit unions, co- deepen the success of the work of pioneers in the operatives, and banks that meet the established field. The objectives of CGAP are to strengthen do- criteria. The funds may be used for a variety of pur- nor coordination in microfinance, disseminate best poses such as to: capitalize loan funds for on-lending, practice for delivering financial services t: the poor fund guarantee schemes, fund technical assistance, on a sustainable basis, mainstream microfinance in and to fund institutional development. It is intended World Bank operations, and support microfinance that eligible financial institutions develop to the point institutions. where they can access funds from local capital mar- CGAP formally began operations in June 1995, kets, loans, or equity. with the participation of 9 donors, now expanded to To be eligible for funding, institutions must be able 23, who jointly pledged US$200 million to CGAP's to demonstrate that they are reaching large numbers portfolio. Most of that funding is being administered of poor people, women make up at least 50 percent directly by the participating member donors. The of their client base, they are operationally self-suffi- World Bank has provided US$30 million, which is the cient, they are likely to be financially self-sufficient, basis of a three-year core fund being administered by and they can use additional funds effectively. are not supportive; for credit lines rather than Research institution building; to government-owned ru- ral financial institutions that are unwilling to Rapid technological change implemented on change; and where there is inadequate monitor- the hundreds of millions of farms in the devel- ing of outreach and sustainability. oping world is essential for agricultural and rural income growth (box 6.4). The Bank has Agricultural Systems Intensification been a leader in fostering technological change both through its support to the CGIAR and as Increasing farm productivity requires the de- the world's largest financier of national agri- velopment and application of new and im- cultural research institutes. Each year the Bank proved technology from research and provides about US$45 million to the CGIAR, extension, private sector investment, and better and loans US$220 million for national agricul- management of the natural resources on which tural research institutes. production and productivity depends. Technological change is a complex process, in- In the past programs of agricultural intensi- volving farmer education and training, informa- fication, such as research or extension, were tion, institutions, technology, policies, and usually domninated by government institutions infrastructure. In the future Bank operations in that received most bilateral and multilateral research and extension will be designed to donor assistance. Many programs focused on strengthen and take advantage of the emergence technical issues and specific crops, without suf- of the global research system, as well as the in- ficient concern for policy, private sector incen- formation revolution. Particular emphasis will tives, sustainable resource management, be placed on giving a strong voice to farmers commodity diversification, or decentralization (especially smallholders) and other resource us- and participation of farmers and other rural ers in setting research priorities, conducting re- dwellers in decisionmaking. Many of these search programs, and validating research results. programs bypassed rural women. Sustainable The Bank will support reform of public research intensification of production systems therefore and extension institutions to help them become requires new approaches. less bureaucratic, more flexible, more agile, and 72 Rural Development: From Vision to Action Box 6.3 Village credit funds in Albania The dismantling of Albania's agricultural coopera- livestock (65 percent); seeds, fertilizer, and farm ma- tives in 1992 created 380,000 farms, averaging 1.4 hec- chinery (25 percent); trade and services (6 percent); tares each. This resulted in rapici recovery of food and crafts (4 percent). Interest rates have been raised production and averted a major agricultural crisis. But from 6 percent to 10 percent in local currency (leks). because of the disarray in the financial sector, the new Inflation in Albania was 8 percent in 1995. landholders were unable to obtain the credit they Three main lessons can be drawn. First, village- needed to invest in agriculture and animal husbandry. based credit funds can succeed in delivering financial To address this problem, the government of Alba- services to small-scale farmers. The social structure nia is helping villages establish village credit funds, of villages in Albania is remarkably strong, even after as part of the IDA-supported Rural Poverty Allevia- 50 years of centralized control over farming, so vil- tion Pilot Project. The Albanian Development Fund, lage credit funds can build on existing social institu- an autonomous government foundation, is responsi- tions. Second, funds are much more likely to succeed ble for implementing the project. Democratically when villagers actively participate in their design and elected village credit commnittees manage the funds. when the village credit committees maintain open Credit officers, who are recruited and trained by the communication with the villagers and government Albanian Development Fund, participate in village officials. Third, using a multipurpose project unit credit committee decisions, and are extending the with a soft budget constraint to implement the project network of village credit funds. makes it more difficult to achieve the goal of financial If a borrower fails to repay a loan, the line of credit self-sufficiency. to the whole village is suspended. Since only a frac- Therefore the objectives of the follow-up Rural De- tion the village's households receive loans for a given velopment Project, which began in 1995, are to: create period, persons waiting to receive loans in the future 720 village credit funds by the year 2000; integrate exert strong social pressure on debtors to repay their savings with credit services, once a cooperative law loans on time. is passed that provides a legal framework for fund Ninety-three village credit funds had been created operations; transform the credit department of the by December 1995, and 4,300 loans had been dis- Albanian Development Fund into an apex institution bursed, with an average size of US$350. Nearly 100 subject to the banking law, and insulate it from po- percent of the loans that have come due have been litical interference; and move the new rural financial repaid. The loans have been used mainly to purchase institutions toward financial self-sufficiency. more accountable to users. Active collabora- and 6.6 for more on the Bank's work in agri- tion with the private sector, universities, cultural research and extension.) NGOs, community organizations, and farmer organizations will be encouraged, as well as Extension and Rural Information Systems regional collaboration among national research systems and more effective partnerships with The demand for extension services is grow- CGIAR centers and other advanced research ing rapidly. Both men and women are seek- organizations. ing advice on a wide variety or farm and Building on the positive experience of the nonfarm productive activities. Currently, SPAAR, the Bank will continue to emphasize about 80 percent of the world's extension greater and more effective donor collaboration services are publicly funded and delivered as a means to overcome the damage caused in by civil servants. However, serious questions many countries by the fragmentation of donor have arisen about its fiscal sustainability; support. The current effort of ESDAR in this coverage-type, gender, and numbers of domain will be pursued, and other donors will farmers reached; and responsiveness to farm- be invited to join the current members of the ers' needs. More sustainable and responsive group. Finally, the Bank will continue its approaches have been piloted successfully strong financial and institutional support to the and need to be mainstreamed. For instance, CGIAR system (box 5.1). (See boxes 2.4, 2.5, fiscal sustainability has been increased by Areas of Concentration and Future Directions 73 Box 6.4 Issues in setting research priorities Research is essential to improving the productivity low food prices for rural and urban consumers. of agriculture. However, given scarce resources, pri- How should we weigh this goal against that of orities must be established. The following are just a reducing poverty in marginal areas where few of the difficult issues that must be faced in de- many rural poor live, relying on subsistence termining how to use resources for research: crops for their meager livelihoods? * How should resources be distributed among local, * How should resources be distributed between tradi- national, regional, and international research? tional and nontraditional crops? The Sahel is one Should every country have its own research of the most difficult environments of the world. system? How much more should donors con- What is the best approach to raising the pro- tribute to the CGIAR? ductivity of poor farmers in this region? Should * How much should be focused on research for new investments be made to improve the yields of technologies, as opposed to research on removing traditional crops-millet and sorghum-or to impediments to applying known technologies? This improve the stress resistance of higher-yielding, is not a trivial question. It is estimated that if nontraditional maize? How much should be de- the average developing-country farmer pro- voted to developing new export crops? duced at the level of the average Iowa farmer, * How should resources be distributed between the the world could feed 10 billion persons on the integration of traditional knowledge and modem land currently under production. science? Traditional knowledge, including * How should resources be distributed between pro- identification of indigenous species, must be duction processes and postharvest technologies? To- documented before it is lost. It must be inte- day, as much as 15 percent of production is lost grated in a two-way exchange of ideas with between the farm gate and the consumer. Fur- modem science, and small-scale farmers; who thermore, the transportability and storage of are the custodians of this knowledge, should food will grow in importance as the number of benefit from these efforts. How much of the urban consumers grows. available resources should be dedicated to this * How should resources be distributed between favor- effort? able and marginal areas? Focusing resources on favorable areas means higher food output-and Source: Serageldin 1996. balancing public support with farmer contri- The Bank's support to extension is changing. butions, by creating competitive markets for There is widespread-but by no means univer- advisory services, and by cost-effective con- sal-agreement that the Bank must promote tracting of extension. Coverage has been in- greater diversity in advisory services and creased by using mass media, and by changesininstitutionalapproachestoreachan farmer-to-farmer extension and NGO involve- increasingly heterogeneous population of ment. And responsiveness has been improved farmers and other rural entrepreneurs. A plu- through decentralization of public services, ralistic system of complementary extension community communication centers, increased services does not exclude the state. On the con- farmer ownership of extension, and more par- trary, the state will continue to play a crucial ticipatory assessments of the needs of the rural role in financing advisory services that are im- population (box 6.5). The information technol- portant, but not financially rewarding for the ogy revolution also provides opportunities private sector-such as advice on the manage- to reach farmers much more quickly and cost- ment of natural resources, integrated pest man- effectively than in the past. Especially impor- agement, or advisory services to the very poor. tant are approaches to reach women farmers In addition the state also has a critical role to and rural entrepreneurs, who, in many coun- play in establishing markets for commercial tries, play key roles in agriculture, but whose and farmer-to-farmer extension services, ensur- needs have not, until recently, been explicitly ing rural communication infrastructure, and considered. developing human resources. 74 Rural Development: From Vision to Action Box 6.5 The decentralized approach to extension While in Africa the emphasis has been on improving The project in Colombia has progressed well in the the successful training and visit (T&V) approach to past five years. Some 1,040 municipalities out of a extension (box 2.4), in Latin America countries are total of 1,050 are participating in the project, employ- experimenting with delivering extension services ing 3,500 technicians and professional staff. These through decentralized systems, building on major na- agents are providing extension services to 450,000 tional decentralization initiatives that are common in small farmers out of an estimated total of 1.6 million. the region. In Colombia municipalities are responsi- By contrast, the centralized system reached fewer ble for implementing extension services. Beneficiaries than 125,000 small farmers per year. participate with municipal govemments in managing The project in Venezuela is just getting started. extension services. Financing of the decentralized ex- Results in five pilot municipalities have been encour- tension system is shared on a matching-grant basis aging. Three municipalities have contracted univer- by the federal government (partially financed sities to form teams and manage extension services. through the World Bank loan), state governments, The two others have contracted NGOs to form teams municipalities, and beneficiaries. An important objec- and to administer services. Field visits confirm that tive of the approach is to make extension services the client farmers place a high value on the very much more responsive to farmers' needs than in the personal and practical attention that they are receiv- past. ing from extension agents. The Bank is: signed to protect the fertility of soils. The Bank * Supporting communication and capacity is in a unique position to promote changes building at the rural community level, ex- for increasing productivity through new man- ploiting the increasing potential of infor- agement-intensive approaches. The Bank will mation technology help build awareness and commitment from * Promoting more holistic and participatory partner countries and funding agencies assessments of farmers' technological, through policy dialogue. In addition it will educational, and organizational needs support the implementation of pilot projects * Working to ensure that farmers' needs are to discover which technical and institu- translated into realistic actions, resulting in tional approaches will work best to protect the a more diverse system of complementary productivity of soils in different parts of the public and private advisory services world. • Negotiating the use of performance indica- tors that focus on impact, rather than input, Environmentally Sound Pest Management: while promoting the use of monitoring Frontier Area of Bank Involvement tools by the farmers * Increasing awareness among Bank staff The Bank has long had a well-defined pesticide and others on the tremendous potential policy that governs the use and financing of and cost- effectiveness of interactive in- pesticides in Bank projects. In addition the formation technology for rural develop- Bank is promoting integrated pest manage- ment. ment in agriculture, forestry, and animal health, which has lowered the cost of pest con- Managing Soil Productivity: High Priority, trol, reduced the risk of major outbreaks, de- Especially in Africa creased the development of resistance to pesticides and drugs, and reduced environ- There is an increasing body of experience, mental and public health risks. Participatory particularly from Latin America, the United approaches, drawing on traditional knowledge States, and Australia, demonstrating the im- and techniques, also improve the chances that mense potential of farming practices de- lending programs will succeed. Areas of Concentration and Future Directions 75 The major instruments available for promot- suitable institutional frameworks and in- ing environmentally sound pest management vestments for technology generation and are policy dialogues; cooperative pilot efforts dissemination through the public sector. with NGOs, FAO, and others; and project lend- ing. Policy dialogues must include assurance Management of Natural Resources that macroeconomic and fiscal policies (such and Forestry as pesticide subsidies) do not encourage the use of environmentally damaging substances. In the past natural resources management was In addition they will require an assessment of deficient and even reckless. This was not terri- environmental policies and the regulatory bly important as long as resources were abun- framework, especially with regard to pesticide dant. However, the economic and social costs registration, safety regulation, and farmer and of natural resources mismanagement are now worker training. Pilot projects, followed by increasing rapidly. Often, these costs are borne project lending, can target research, education, by the poorest. Fortunately, there are enor- and the implementation of integrated pest mous win-win opportunities in policy reform management. and program design, which can lead to both sustainable intensification of production and New Approaches to Livestock Development, environmental improvements. But there are Rangelands, and Pasture Management also many instances of trade-offs, which will need to be identified and managed through In arid and semi-arid regions sustainable man- cost-effective interventions. agement of rangelands to increase livestock production and processing is the best option The future. Improving natural resource man- for income growth. Livestock production com- agement while intensifying production re- plements crop production in poor areas by pro- quires many interrelated actions: viding alternative employment and income, * Encourage the use of economic incentives for better nutrition, better seasonal distribution of resource management, instead of command labor needs, and manure to improve soil struc- and control. When people benefit eco- ture and soil nutrients. nomically from sound resource manage- ment, they are much more likely to work Future activities. The Bank will encourage in favor of management objectives. Fur- more appropriate policies and institutions for thermore, economic instruments are more the subsector, and support reforms with invest- likely to allocate resources efficiently than ments in livestock development, and pasture are regulations. and rangeland management. Specifically, the * Encourage equitable benefit sharing, which re- Bank will: flects trade-offs between alternative uses . Assist in overall policy dialogue, espe- of natural resources. cially in improving the efficiency of natural * Ensure equitable access to land, while recog- resource use and the biological efficiency nizing traditional natural resources man- of livestock production and processing agement systems. * Assist in arid land and pastoral develop- * Decentralize decisionmaking. In many cases ment, especially using its experience in local people know best how to manage and land tenure and in decentralization to sup- sustain their natural resources, since they port independent self-sustaining pastoral depend on them. When controls are placed organizations on the use of natural resources in the na- * Identify and support more appropriate tionalinterest,localcommunitiesshouldbe roles for the public and private sector in involved in decisions about how to manage veterinary research and extension, and resources to achieve national goals. 76 Rural Development: From Vision to Action Enhance capacity for monitoring changes in An intersectoral effort is currently underway the quality of natural resources through at the World Bank to mainstream biodiversity standardized information systems. conservation in environmentally sustainable The Bank is involved in many projects that development activities. Mainstreaming biodi- are supporting intensification and, at the same versity in agricultural development will mean time, promoting better natural resources man- addressing some strategic elements that arise agement based on these principles. Projects from understanding the incentives driving currently underway include social forestry and land-use decisions made by millions of indi- watershed management projects in Asia and vidual farmers. Any decisions to change land Africa, watershed management programs use should weigh the benefits obtained from in the Loess Plateau in China (box 6.6), and that change against its costs. Win-win policies community-based resource management pro- often exist, since policy distortions that exacer- jects in Burkina Faso. bate damage to biodiversity also tend to be economically inefficient. A basic principle of Mainstreaming Biodiversity in Intensive such reforms is to discourage agricultural Production Systems: the Potential is Great extensification and encourage agricultural in- tensification. Improvements to available tech- Most of the world's biodiversity is concentrated nologies could go along way toward both in the tropical and subtropical regions of devel- reducing conflicts between agriculture and bio- oping countries, and some of it is at risk of being diversity, and increasing the sustainability of irretrievably lost. Agriculture is both a threat to agricultural development. biodiversity and a key to its survival. With global demand for food and other agricultural Forestry and Agroforestry products expected to about double over the next 30 years, much of the planet's remaining There is growing recognition of the diverse natural habitats will be lost unless future needs contributions that forest resources make to can be met from areas already cultivated or development, providing not only wood, but grazed. The productivity of existing farms and nuts, fruits, soil and water protection, flood rangelands will have to increase dramatically control, recreational opportunities, carbon in a sustainable manner if the twin challenges sequestration as a means of offsetting global of improving living standards and enhancing warming, and perhaps the most complex and the environment are to be met. extensive source of biodiversity habitat. The fates of agriculture and biodiversity are However, capture of the benefits from forest intertwined. Wildlife habitats provide environ- cover-especially by people living in or near mental services to agriculture, such as protect- forests-is frequently impeded by tenure and ing water sources for irrigation. Relatively forest-use policies. The lack of effective mecha- undisturbed habitats also contain wild popu- nisms to transfer compensation from those lations of domesticated plants and animals, who benefit from sustainable use and conser- and these populations contain useful genes vation of forests (including the international that are often absent in the domesticated gene community as a whole for carbon sequestra- pool. It will be possible to secure at least some tion and biodiversity preservation) to those of the remaining habitats that are home to en- who can gain more from conversion of forest dangered plants and animals only if agricul- land compromises sustainability. In many ture is intensified in a sustainable manner. countries forests remain severely underval- Doing so should reduce pressure on forests, ued, because of the combination of strong grasslands, and other habitats important for rent-seeking behavior by commercial users conserving biodiversity. How can agriculture be and forest officials, and highly centralized intensified while protecting biodiversity? and bureaucratic forest services. This leads Areas of Concentration and Future Directions 77 Box 6.6 The environment is key to raising incomes for 1.2 million people in the Loess Plateau in China Over thousands of years erosion and irregular rain- have been issued. Farmers strongly support this fall have kept the productivity of farmland in the arrangement, and say that they are more willing Loess Plateau in China very low. Farmers in the re- to maintain and care for their land than in the gion are among the poorest in China, with annual past. per capita incomes of only US$35-50. * Emphasis on delivering on-farm benefits. The pro- IDA is now supporting a project to increase agri- ject was able to deliver tangible benefits to cultural production and incomes of 1.2 million people households very quickly. By retaining water, on 15,600 square kilometers of land in the Loess Pla- terracing allows a substantial increase in yields teau. The project involves the extensive planting of almost immediately (maize yields can double trees and grasses, construction of small dams and or triple in the first season). Farmers support barricades, and terracing of hillsides to prevent the activities that so clearly raise their incomes. fertile topsoil from washing away. Since the project They are also more willing to consider land became effective in October 1994, grain production management practices that provide less imme- has risen significantly in nearly all 400 communities diate or direct benefits such as afforestation and participating in the project. This is so even though grassland development. the project area was affected by a persistent drought * Political support at county, prefecture, and provin- in 1995. In 1996, with better rainfall, yields have been cial levels. Community leaders fully support the two to three times higher on terraced land than on project. This is largely because the project fur- neighboring sloping lands. Using their increased in- thers the individual ambitions of many leaders come, villagers are now building health clinics, to reduce rural poverty, an effort for which they schools, roads, and water and sanitation infrastruc- had inadequate funds in the past. ture to improve their lives. Observing these changes, * Widespread public participation. The project man- villages in areas adjacent to the project area have agers have widely disseminated information expressed an eagemess to participate in the project. about the project through public briefing mate- Four aspects of project design appear to have been rials, videos, radio, television, and traditional especially important to its success: methods such as parades, drum corps, puppet * Security of land tenure. Local govemments must shows, dance, and theater. As a result, farmers, grant long-term land-use contracts to farmers herders, and even school children are aware of in order to participate in the project. More than the project objectives and their responsibility in 100,000 contracts, typically 30-50 years long, achieving them. to inadequate forest management and protec- tional strengthening, investment in new plant- tion, and a stifling of local communities' par- ings, and preservation of intact forest areas ticipation in the use and protection of the with high biodiversity value. In particular, the resources. Finally, the measurement of defor- policy commits the Bank to take a precaution- estation and forest degradation, and the valu- ary approach to forest utilization and expressly ation of biodiversity, carbon sequestration, and prohibits direct Bank financing of logging of many other nonmarketed outputs from forests primary moist tropical forests. In pursuit of remain problematic. these objectives the policy requires govern- In 1991 the Bank adopted a widely discussed ments to: adopt policies on conservation, sus- forest policy that aims to: reduce deforestation tainable use, and local participation in forestry of the world's remaining natural forests, and to set aside some forest areas to conserve through cross-cutting initiatives in population biodiversity and protect the interests of forest control, agricultural intensification, creation of dwellers; develop and adopt environmentally employment opportunities, and control of po- sound plans for forest utilization and conser- tentially negative impacts from investments in vation; undertake social, environmental, and infrastructure and land use; and promote sus- economic assessments of forests under consid- tainable forestry, policy reform and institu- eration for commercial use; and establish insti- 78 Rural Development: From Vision to Action tutional capacity to implement and enforce though support for the necessary research and these conditions. infrastructure to ensure that these activities are In 1994 the Bank reviewed implementation efficient, well-controlled, and sustainable will of the forest policy. Although relatively few continue to be important. The Bank will also projects formulated under the new policies continue to incorporate agro-forestry and trees were implemented by the date of review, some into operations in other agricultural subsectors, positive developments were noted: agricul- and to more effectively integrate forestry activi- ture, energy, and infrastructure projects had ties and issues into broader natural resource been modified to meet the new requirements; and land-use operations. the GEF was supporting biodiversity conser- In addition the Bank will increase its assis- vation; and policy dialogue and investments tance to countries for the development and were supporting reforms, tree planting and implementation of sound and sustainable re- natural forest preservation. However, the re- source strategies, policies, and programs. In- view pointed out that much remains to be done creasingly, especially in countries in which the to fully implement the policy, and that the forest sector is large in relation to the economy alarmingly high rates of deforestation had not as a whole, this will involve mainstreaming abated. The review proposed increased target- forestry, biodiversity, and conservation issues ing to alleviate poverty, more efforts to recon- into the macroeconomic dialogue and negotia- cile conservation and forest-use objectives, tions accompanying adjustment operations. promotion of increased sector investment (of the right type), and greater attention to miti- Small-Scale Fisheries and Aquaculture Provide gating the adverse impacts on forests of non- Additional Options forest projects and lending. The Bank reviewed the forest portfolio again Bank lending in fisheries and aquaculture has in 1996. While it is too early to draw firm con- been growing recently (box 6.7). Fish prod- clusions, it appears that there has been a sig- ucts are a major source of animal protein for nificant decline in lending in the sector since hundreds of millions of the world's poorest 1994. Thus there are relatively few successful people, including in those in South and South- models that are directly applicable to most east Asia, and most of Africa. But, the stocks forested country situations. A political consen- of coastal and ocean fish are rapidly declin- sus among major stakeholders on the goals and ing, because of overfishing, pollution, and the directions of forest development has not yet destruction of spawning grounds. There is been achieved. This is an area in which the Bank considerable-and growing-interest among should play a leadership role in the future. Bank partner countries to develop aquaculture and protect coastal fisheries through better The future. As in the past five years, the Bank management. will increasingly be involved in forest conserva- To sustainably manage fisheries, they be tion, alternative livelihoods, watershed man- transformed from open-access resources into agement, and specific actions to promote limited-access resources, whether state property, sustainability. A particular effort will be made communal property, or private property. Suc- to broker new and innovative financing pack- cessful approaches generally include a high de- ages in conjunction with the private sector, do- gree of participation by local users in the nors, and others. Higher technical standards in management of the resource. This involves the forestry operations will be given even more pri- establishment of new local management struc- ority in project design and supervision. Less tures in which the main stakeholders are key emphasis will be given to direct financing of players. harvesting and new planting (which are increas- The Bank is a leader in implementing com- ingly matters for private sector investment), al- prehensive approaches to the management of Areas of Concentration and Future Directions 79 Box 6.7 Aquaculture: providing food and income for displaced farmers It is Bank policy that people displaced because of are used optimally and with minimal conflict the construction of reservoirs are given access to among competing uses. resources that enable them to maintain, or improve, * If access to resources is open to everyone, peo- their previous living standards. The 1,400 mega- ple do not have an incentive to invest in them watt Shuikou Hydroelectric Project on the Min or manage them for future benefits. To ensure River in China, 84 kilometers from Fuzhou, will that the reservoir fisheries are managed sustain- inundate about 2,000 hectares of agricultural and ably, it is essential to establish-and enforce- forest lands, and displace about 67,000 persons liv- rules regarding who may use the resources. ing in 87 villages and 16 townships in Fujian Prov- * Success is much more likely if practitioners of ince. A major source of income and food for the aquaculture have access to expert advice on all resettled people is expected to be the fisheries of aspects of fisheries management, including the the newly created reservoir. With proper manage- rapidly evolving technologies and practices. ment, the reservoir fisheries can employ 1,500 peo- Technical assistance is needed for advice on pen ple and produce 5,900 tons of fresh fish per year. and net placement, size, composition, and The Bank is working with provincial, country, and stocking density of fingerlings, fingerling pond municipal governments to design and implement construction, feeding regimes, pond fertiliza- a resettlement plan that gives displaced farmers tion, disease control, harvesting, storage, finan- exclusive access to the fisheries resources of the cial management, and marketing. new reservoir, and that provides them with finan- * While aquaculture can be highly profitable, cial resources, training, and technical assistance for substantial initial investment is required in fisheries management. equipment, fingerlings, and food supplies. Aquaculture projects work best when the follow- Lack of access to credit was the primary com- ing conditions are met: plaint of resettled farmers in China. * Reservoir resources must meet many different * Pollutants from sewage systems, and industrial needs, including power generation, navigation, plants, and runoff from farms can destroy the environmental protection, irrigation, fish pro- productivity of fisheries. In successful aquacul- duction, and water supply. Comprehensive ture operations, water quality is monitored management plans, which address the needs of regularly, and problems are addressed as soon all stakeholders, can help ensure that resources as they arise. coastal zones, and lake and reservoir aquatic and environmental costs of developing new systems. Protection of biodiversity, small-scale supplies rises, so does the need to find ways fishery management, and coastal aquaculture to allocate existing water supplies more effi- management are all integral parts of coastal ciently. The issue of water allocation is ex- zone and lake and reservoir management. tremely important for rural development (box The Bank will collaborate with its partners 6.8). (especially FAO and regional development banks) to initiate new projects (including pilot Irrigation and Drainage: Continuing a projects). It will support research on commu- Mainline Business within a Comprehensive nity-based fisheries management and support Water Management Framework (through the CGIAR) techniques to raise the productivity of fisheries, for example, disease Irrigated farmland provides 60 percent of the control, stock assessment, and quality control. world's grain production. Of the near doubling of world grain production that took place be- Water Allocation and Management tween 1966 and 1990, irrigated land (working synergistically with high-yielding seed varie- Water is becoming an increasingly scarce re- ties and fertilizer) was responsible for 92 per- source, requiring careful environmental and cent of the total. Irrigation is the key to economic management. As the engineering developing high-value cash crops. By helping 80 Rural Development: From Vision to Action Box 6.8 River basin management and smallholder irrigation improvement project in Tanzania Among predominantly rural countries, Tanzania is infrastructure of traditional smallholder irrigation one of the poorest. To increase incomes and reduce schemes. Major elements of the project include: poverty in Tanzania, it is essential to increase agri- * Strengthening the legislative framework on cultural productivity. One way to do this is to in- water use and pollution control by increasing crease irrigated agriculture. But, Tanzania has scarce penalties and water-use charges, broadening water resources, and the withdrawal of water for ir- participation in management of water re- rigation is already causing serious problems for the sources, and establishing a framework for pre- production of hydropower. The main power stations venting and resolving conflicts among in the Rufiji and Pangani basins-which supply 80 competing users. percent of the nation's electricity-are downstream * Upgrading water quality and hydro-meteoro- of the irrigation water abstraction points. Without logical monitoring capabilities. better management and allocation of water resources, * Improving the analysis and understanding of water scarcity will become a serious constraint to ag- hydrology and its interaction with other natural ricultural growth in the country. resources, such as soils and forest cover. Tanzania is now undertaking an IDA-supported * Developing village- and community-based in- US$26 million river basin management and small- stitutions to facilitate the participation of all holder irrigation project to improve the management stakeholders in water resource planning. and allocation of its water resources. The project will * Rehabilitating and upgrading traditional small- strengthen the capacity of national institutions to holder irrigation infrastructure, and improving manage water resources comprehensively in the the capacity of user groups to manage the Rufiji and Pangani river basins, and will upgrade the schemes. guarantee consistent production, irrigation panding irrigation systems has become in- spawns agro-industry. Finally, irrigation cre- creasingly difficult. There has been a progres- ates significant rural employment. sive loss of irrigated land to waterlogging, soil The Bank has been a major actor in the ex- salinization, and urbanization. Many aquifers pansion of irrigation systems. Since 1950 the are becoming contaminated or depleted. Many Bank has loaned US$31 billion (constant 1991 of the problems are the result of inappropriate dollars) for irrigation, which leveraged an ad- institutional frameworks for water allocation ditional US$53 billion from partner countries and management. In the future the irrigation and cofinanciers. More than 46 million farming and drainage sector must be part of compre- families have benefited directly from the hensive water resources planning, involving Bank's irrigation activities. all stakeholders. Institutions capable of coordi- However, irrigation is the world's major user nating the implementation of plans will be of water, responsible for about 70 percent of needed. The introduction of transferable water the water used by people. But water is becom- rights and water charges will also be required ing an increasingly scarce resource, especially in many places to prevent further deterioration in the Middle East and North Africa. And with of the resources. Finally, maintaining and de- population growth and urbanization in de- veloping irrigation systems and correcting veloping countries, there is increasing com- problems in drainage will require massive in- petition for irrigation water. Furthermore, vestments. irrigation may cause envirornental problems such as salinization or waterlogging of soils. Thefuture. The first priority for the Bank (and Therefore, it is imperative to create much more countries) is to improve the reliability and eq- efficient and environmentally sound irrigation uity of existing systems. The goal is to upgrade systems. and modernize, not just restore the status quo. The irrigation and drainage sector faces Furthermore, it is essential to complete mainte- enormous challenges. Maintaining and ex- nance that has been deferred, and invest in Areas of Concentration and Future Directions 81 drainage and flood control, and in water reuse opment on these issues. The Bank will also sup- schemes. This will not be possible without giv- port efforts to use water charges, transferable ing much greater responsibility to farmers' as- water rights, and water markets to improve sociations to manage their own systems. The water allocation, and encourage private sector Bank therefore supports institutional reforms involvement. In mobilizing additional re- that give responsibility for irrigation manage- sources, closer collaboration with regional de- ment to the people who benefit from the sys- velopment banks will be essential. tems (box 6.9). Focusing on a more comprehensive ap- The second priority is to attract private sector proach to water allocation will require mecha- finance to the sector. The funding requirements nisms for allocating water across sectors, full for rehabilitation, drainage, and water reuse in- participation of stakeholders, and effective vestments are very large and cannot be met frameworks for resolving disputes. The Bank without private sector involvement. The Bank is providing leadership in establishing the will seek greater complementarity of public and Global Water Partnership (GWP), which in- private funding, and encourage the devolution volves the UNDP, the regional development to, or cofinancing from the private sector. This banks, other multilateral agencies, bilateral do- is a complex agenda, because appropriate con- nors, and NGOs. The GWP will support the ditions do not yet exist in most places, and the comprehensive management of fragile water solutions are not obvious. Therefore, the Bank resources and will be used as a vehicle to main- will support research and best-practice devel- stream the management of water resources Box 6.9 Mexico's success in decentralizing irrigation spreads worldwide Experience shows that when farmers actively partici- tion agency was restructured; a well-defined train- pate in designing and managing irrigation systems, ing and communications program was implemented, the systems are more likely to work efficiently, be aimed at agency staff and water users; and formal financially sustainable, and deliver services that are agreements (concessions) between the agency and more equitable. user organizations were developed. In addition water Some East Asian countries, such as the Philippines, abstraction fees were raised by 60 to 180 percent. As with the support of the Ford Foundation and, later, a result more than 80 percent of the transferred pro- the World Bank, have been leaders in involving users jects became financially self-sufficient in 1992-94. in managing irrigation systems. These countries have Some 80 percent of farmers surveyed 2-3 years after focused mainly on transferring small and medium- the transfer, said that they were satisfied with the scale schemes to user associations. Latin American improvement in services, although they were con- countries, including Colombia, the Dominican Re- cemed about rising water charges. public, Peru, and recently Mexico have pioneered the Turkey is now following Mexico in transferring its transfer of large schemes to users. The transfer in irrigation systems to users. In 1993 and 1994, at the Mexico has been particularly successful. initiative of the Bank, 60 irrigation officials from the In the late 1980s Mexico initiated a radical program headquarters and regional staff of the Turkish irriga- to transfer management of many of the state-owned tion agency visited Mexico to learn about Mexico's irrigation systems to water-user organizations. Over experiences. Turkey has now transferred about a period of four years, the government transferred 960,000 hectares to 176 user associations. irrigation systems covering nearly 2.5 million hec- In 1994 the EDI embarked on a new program of tares-80 percent of state-owned irrigation systems- "Participatory Irrigation Management" to dissemi- to 320,000 farmers organized into 316 water-user nate the lessons from Mexico and Turkey to major organizations. In addition "Societies of Limited Re- borrowing partner countries, first in South Asia sponsibility" were formed at the system level in some (Pakistan, India) and then in the Middle East irrigation districts to administer and operate the main (Egypt, Morocco). It will assist countries in devel- irrigation and drainage network. oping their own strategies for transferring irriga- To support the transfer of irrigation systems, a new tion design and management responsibilities to National Water Law was enacted; the national irriga- farmers. 82 Rural Development: From Vision to Action into the development planning process. The . The development of social funds in Latin GWP will have four main features: integrated America and Africa programs at the regional and national levels . Decentralization trends in rural infra- that adopt the Dublin/Rio de Janeiro princi- structure ples on water resource management; capacity * Decentralization studies and projects in building to improve the way institutions op- the Bank (in RDV and LAC) erate and collaborate; sustainable investments, * Research on participation in the Bank, re- especially those that deal with competing sulting in the Participation Handbook demands from various user groups; and dis- * Local management of contracting and pro- semination of information about the best irri- curement in Bank operations. gation and drainage practices worldwide. The Decentralization is no panacea, however. GWP will also help countries to resolve inter- The scope for bottom-up decisionmaking will national water allocation and management depend on the capacity to advance rural devel- issues. opment at local and community levels. This capacity may indeed be limited. But, often, la- Local and Community Development tent capacity is constrained by the lack of an and Rural Infrastructure enabling framework-that is, political, admin- istrative, and fiscal decentralization-and the Promoting local and community development lack of an empowering framework for commu- is one of the most important activities in which nity participation. In centralized structures the the Bank is engaged. Experience has shown main challenge is to establish demand-driven that projects are much more likely to reflect rural investment funds and to fine-tune frame- people's priorities, reach their goals, and be works to make them work even better. sustainable when they are designed and exe- Demand-driven rural investment funds are cuted with a high degree of influence from a new mechanism for funding rural develop- beneficiaries. Local and community-driven ment projects. They provide beneficiaries with development therefore addresses the failed ap- a high degree of influence over project choice, proaches of the past, which were too central- design, financing, and execution (box 6.10). ized and statist to effectively reach poor rural Starting in Latin America, where they have re- communities. vitalized rural development programs in Bra- While rural services (productive, social, natu- zil, Colombia, and Mexico, these flexible ral resources management, and local infrastruc- lending instruments are spreading to other re- ture) will remain publicly financed, delivering gions and countries, such as Indonesia. them will be largely the responsibility of local governments and beneficiary comrnunities. All Thefuture. The Bank will support policies and areas of natural resource development will also programs that will help local governments and increasingly be the responsibility of communi- communities carry out their responsibilities. In ties, producer organizations, or local govern- particular, the Bank will help local govern- ments. Local community involvement is also ments and communities find ways to finance necessary for banking with the poor, land man- services and local infrastructure, both through agement, and redistributive land reform. The own revenues and well-designed fiscal transfer objective of the Bank is therefore to strengthen mechanisms; develop appropriate legal author- the capacity of local governments and commu- ity to enable local governments to be effective, nities to manage their own development through legitimate, and accountable; strengthen admin- decentralized, participatory mechanisms. istrative and technical competence; and de- Separate routes have led to local and com- velop participatory mechanisms for assessing munity-driven development approaches preferences, project design, project execution, including: and project cofinancing. Areas of Concentration and Future Directions 83 Box 6.10 Demand-driven rural investment funds The demand-driven rural investment fund (DRIF) is the community-driven approach is that communities a new instrument for improving the design, imple- decide for themselves what type of technical assis- mentation, and sustainability of rural development. tance they need and receive resources to pay for the The DRIF is a mechanism through which central gov- technical services. emments transfer funds to local governments and Monitoring and evaluation. The need to manage and communities to use to address their own priorities supervise many small subprojects makes traditional within a carefully defined set of guidelines. Benefici- management procedures inoperable. The DRIF must aries are communities or groups of poor people, such therefore have a strong and clear set of operating as neighborhood associations, women's groups, par- rules and eligibility criteria, to ensure high project ent associations, producer associations, or coopera- quality from the outset. Computerized monitoring tives. DRIFs are similar to social funds, but operate systems are essential to identify trends and generic in a much more decentralized manner. They delegate problems quickly, so that rules and incentives can be responsibility for project design, execution, and fi- modified if necessary. Monitoring and evaluation nancing decisions to local organizations. should be carried out by independent technical units. Community projects funded by DRIFs must meet Resistance to the establishment of DRIFs in many specific eligibility criteria. Typically, a project may countries has come from central govemments and do- not exceed a cost limit and must be implemented nors concemed that the funds will be spent improp- within a given time frame. For example, projects erly or appropriated mainly by local elites. These funded by a DRIF in Mexico may not exceed problems can be minimized by taking care to inform US$50,000 in cost and must be implemented within the broad public about the fund, including its size and one year. Beneficiary communities are required to allocation rules. Steps can also be taken to strengthen contribute a portion of the project cost, in cash or democracy and participatory mechanisms. in-kind, depending on the type of project. In Mexico While DRIFs are still new and their impacts still communities must contribute a minimum of 20 per- uncertain, results from Mexico and Brazil have been cent of project cost, but must contribute 30 percent impressive. In Mexico local govemments and com- of the cost of road paving, and 40 percent of the cost munities have implemented 30,000 subprojects in of building leisure facilities. These rules provide in- three years with average costs 30-60 percent less than centives for local groups to undertake projects in line projects implemented in the traditional way. In Bank- with national priorities, while permitting them to financed projects in northeast Brazil the percentage pursue their own. of project funds reaching communities has risen from Technical assistance. Local organizations almost al- 45 percent to more than 90 percent. Local people are ways have much more latent capacity to design and much more satisfied with the projects, which now implement projects than is recognized by govern- meet their needs much better than in the past. The ments with centralizing tendencies. Still, communi- sustainability of the projects is also higher, since local ties sometimes require technical assistance with groups are now more committed to maintaining project design and implementation. A key feature of them. Issues of decentralization should be ad- lished for rural and urban areas and, within dressed in country strategies for rural devel- rural areas, what further differential for areas opment. The guiding principle should be to with a higher incidence of poverty? With rules delegate decisionmaking to the lowest possible of the game in place, decisionmaking at the level, and to create enabling and empowering lowest possible level would be demand-driven institutional frameworks where they are lack- and priced to reflect the public-good character ing. Nevertheless, for decisions on large pro- of the options. jects, the lowest possible level may be regional The Bank will continue to do research on de- rather that local, or even national. centralization and participation to gain a better Rules of the game should be set at a national understanding of the characteristics of environ- level. What cost-sharing arrangements should ments and programs that provide the greatest be established for, say, primary school con- hope of success. It will also continue seek- struction? What differential might be estab- ing mechanisms for intersectoral and inter- 84 Rural Development: From Vision to Action disciplinary cooperation. And it will dis- Land reform and broad changes in land pol- seminate innovative project designs that work. icy require consensus to work. Therefore, Bank activities in land reform and land policy start Land Policy and Land Reform: Rapidly with securing wide agreement in countries on Increasing Demandfor Services land policy and land reform. A major example of successful interinstitutional collaboration in There is strong evidence that when a nation's land policy formulation, piloting, and lending agrarian structure is dominated by family has occurred in the case of Russia, where after farms, farmers produce food more efficiently a slow start, there have been some recent suc- and are less likely to be poor. With the collapse cesses with land reform (box 6.11). of the Soviet Union, the new political climate The Bank is supporting the long-term sus- in South Africa, and the move toward markets tainability of land reform programs by everywhere, there is now considerable interest strengthening land administration. Programs in countries to strengthen land administration currently underway in El Salvador, Nicaragua, and undertake land reform. New approaches and Bolivia to strengthen land administration of land reform rely on voluntary and negoti- have led to important land policy and institu- ated transactions between willing buyers and tional reforms in these countries. sellers, while providing grants to the landless In addition the Bank is supporting land ti- poor to enable them to purchase land. tling programs in many countries, including Box 6.11 Land policy in Russia Although rich in land and human resources, Russia Development of Mortgage Crediting-clarified the lags behind other industrial countries in crop capac- rights of land shareholders to sell, lease, transfer, or ity, livestock breeding, and labor productivity. Agri- bequeath their land shares, and affirmed the rights of cultural growth in Russia is vital to both the landowners to mortgage their land. The rights of land well-being of the rural population and the economic shareholders are to be protected through formal legal recovery of the country as a whole. In Russia security agreements between the individual owners of land of land rights and farm reorganization are necessary shares and the collective farm organization, and the conditions for more productive farms. agreements are to be registered with the local land Since 1990 the World Bank Group has supported committee. All subsequent transactions of land shares work of the Russian government in implementing are to be made on the basis of contracts, which are land reform policies. The principle of private land also to be registered with the local land committee. ownership is now protected by the constitution, and The Bank and IFC are now helping the government private family farming has become accepted in the to further improve methods for defining and exercis- countryside. The IFC and the Bank have helped de- ing individual ownership rights, and to remove ob- velop procedures for clarifying ownership and use stacles to farm restructuring. The actions being rights to land, and reorganizing the collective initiated include: farms-and procedures for members of the farm * A campaign to inform land shareholders of community to register their ownership rights. their rights Further progress was made when, in the fall of * Completion of the process of registering land 1995, two critical land policy objectives were incor- shareholders porated into the structural reform portion of the * Elaboration of standard forms of contract for all IMF's Extended Fund Facility for Russia. These were major land transactions clarification and protection of land rights for the ten * Dissemination of best-practice experiences in million members of the large collectives, and intro- farm restructuring in Russia and elsewhere in duction of mechanisms to mortgage land. the region These policy objectives were achieved during the * Analysis of the impact of current farm debt on first three months of 1996. Two Presidential de- the process of farm restructuring crees-On Guaranteeing the Constitutional Rights to * Allocation of land shares to members of se- Land of Citizens and On Additional Measures for the lected collective organizations. Areas of Concentration and Future Directions 85 Bolivia, the Dominican Republic, Indonesia, that are founded on strong analysis of costs Nicaragua, and Thailand. Land titling can and benefits. The Bank is helping design new generate many benefits, including improved approaches to financing (for both initial invest- efficiency of land markets, reduction in con- ments and recurring expenditures), which in- flict over land, enhanced access to credit, and volve the private sector, mobilize local improved incentives to invest in agricultural resources, and use central government trans- production. fers more efficiently. Finally, recognizing that The Bank will assist with redistributive land the sustainablility of rural infrastructure is reform in countries with unequal distribution of strictly dependent on a sense of ownership and land. The Bank helped South Africa over 1992-94 responsibility at the local level, the Bank is to design a redistributive land reform program, helping to develop mechanisms and institu- which relies on voluntary and negotiated trans- tions that foster local participation and owner- actions between buyers and sellers, while pro- ship (box 6.12). viding grants to the landless poor to enable them to purchase land. This approach, called "negoti- Good Rural Water and Sanitation Improves ated" or "market-assisted" land reform, is also Health and Productivity being piloted in Colombia, Brazil, and Guate- mala. All three countries are preparing projects Despite the growing level of investment in ru- for land reform with Bank assistance. Finally, ral water and sanitation over the past decade, the Bank with its partners, FAO and IFAD, is an increasing number of people lack access to supporting the development of a network to fa- these services in rural areas. Technology and cilitate the sharing of country experiences with increased investments are not enough. Projects negotiated or market-assisted land reform. failed to sustain themselves because not enough attention was paid to developing the Adequate Rural Infrastructure Benefits Farmers capacities of institutions and communities that and Consumers must manage and pay for them. Economic and financial analysis of the impact of the systems When there are adequate communications net- that were put into place was insufficient, and works, roads, storage facilities, and electricity, local communities and individual users were farmers can obtain the information they need not consulted about the services they wanted to grow the most profitable crops, store them, and for which they were willing to pay. Based move them to market, and receive the best on these experiences, a clear set of principles prices for them. Today, up to 15 percent of has emerged that sets out the framework for production is lost between the farm gate and delivering improved services on a sustained the consumer because of poor roads and stor- basis: age facilities-reducing incomes to farmers * Water is an economic good, as well as a and raising costs to urban consumers. As cities social good, and should be managed as grow, the need for infrastructure becomes all such. the more important. * Water should be managed at the lowest Yet in most countries rural infrastructure has appropriate level, with users involved in received very little attention, forming a serious the planning and implementation of pro- impediment to rural development. Helping jects. countries build the infrastructure they need Managing water as an economic good re- has long been a core Bank activity, and will quires careful attention to issues related to the continue to be so. Along with providing invest- allocation of water among users and between ment capital for infrastructure, the Bank is sectors, such as water supply and irrigation. It helping countries develop rural infrastructure also implies that projects must be designed to strategies, with clearly articulated priorities provide incentives for the efficient and effec- 86 Rural Development: From Vision to Action Box 6.12 Award-winning Africa Road Maintenance Initiative In many countries it is easier to build roads than main- is encouraging groups of rural district councils to tain them, although maintenance often provides much contract out their planning and management func- higher payoffs. The team managing the Africa Road tions to local consultants, who then act as their agents Maintenance Initiative-comprising Bank staff, con- for purposes of preparing and implementing their sultants, other donor agencies, and country coordina- road maintenance programs. This approach, which tors and associates-is trying to change this by has been successful in Zambia and Tanzania, gives focusing on the issue of maintenance, getting road the district control of the effort, but also provides users involved in managing roads, and encouraging sufficient scale economies to give districts access to governments to introduce explicit road tariffs linked high-quality staff. as closely as possible to the actual use of the roads. The team is also supporting community participa- Due to the success of the team's efforts, many African tion and empowerment by encouraging villages to governments have set up or are in the process of set- form road cooperatives for the purpose of managing ting up road funds, are restructuring their road agen- their roads, tracks, and footpaths. Governments are cies, and are formally involving road users in also being urged to enact legislation to regularize management of roads. Governments are also learning these arrangements so that central-local cost-sharing from each other and are spreading the concept of com- can take place. The cooperatives define which roads mercialization to other parts of the world. An over- and tracks are important, register their interest in view of developments in Africa-together with a these facilities, and nominate one of their members detailed description of the Zambia National Roads to be trained as a road supervisor. The villagers then Board-formed keynote presentations at a recent maintain and improve their roads under their direc- World Bank/ESCAP seminar on management and fi- tion. The road fund provides the money to pay the nancing of roads for the Asia region held in Bangkok. supervisor and to purchase materials. In Zambia, so- In its work the team is drawing on the lessons cial funds provide money for capital works only if a learned in many individual projects. For example, it maintenance program is in place. tive use of facilities. There must be a balance * Technical options and service levels. Commu- between the cost of providing services and the nities should be activelyinvolved in select- prices charged for them. The aim is to achieve ing service levels. A range of options water uses and investments in which the value should be offered and the cost implications that users attach to a given service is equal to or made clear. exceeds its cost, and therefore is a service for * Cost-sharing arrangements. The basic princi- which they are willing to pay. Decisions about ples of cost-sharing should be specified appropriate levels of services should be made by and community responsibility for cost the communities themselves. The role of higher- made clear at the outset. These principles level government agencies should be to establish should aim at negotiated cost-sharing ar- institutional rules, regulations, and processes rangements in which the local community that encourage effective and efficient community chooses the level of service for which it is choices, and reduce transaction costs. willing to pay. Translating these principles into action re- e Responsibility for investment support. Par- quires that project planners establish rules and ticular emphasis should be placed on procedures. These can be distilled into four responsibility for the sustainability of in- broad and interrelated categories: vestments. Rules should be set regarding Eligibility criteria. Planners should not asset ownership, operations, maintenance, draw up a list of communities that should and the recovery of system costs. be served, but rather a set of eligibility The main project stakeholders must be ac- criteria that communities must meet in or- tively involved in developing the rules and be der to participate. Communities should committed to their enforcement. The best set take the initiative to improve their services. of rules is the simplest: transparent and not Areas of Concentration and Future Directions 87 subject to interpretation. Rules should be velopment. Projecting demand is problematic widely disseminated, understood by all, and where demand from countries and country consistently applied by stakeholders. Sector program managers will increasingly guide re- policy must support the rules at the national source allocation in the Bank. Demand will ul- level. timately be generated through the CAS process and be reflected in business plans. A key rec- Thefuture. The Bank will work with countries ommendation of the rural sector strategy is to to help them design and implement projects improve rural strategy and policy formulation based on these principles. It will also be actively as part of the CAS process. If this is successful, involved in learning from project experiences, demand should rise considerably. In the mean- and measuring results in terms of implementa- time, an approach relying on the judgment of tion costs and sustainability of services. It will regional managers was used to project de- monitor project rules and procedures, and mand. The principal findings are: modify them as required. It will also support In the aggregate, demand by product line the analysis and exchange of experience among breaks down relatively evenly, with about 20 countries as part of its efforts to learn what does percent for each. But, with the exception of East and does not work in rural water and sanitation Asia and the Pacific, the regional differences projects. by product line are very striking: o Africa projects that 39 percent of its work Managing Bank Resources program will be in agricultural systems intensification. If the Bank is to have an impact on rural de- * Europe and Central Asia projects that 36 velopment, it must alloca-;e its resources effi- percent of its work program will be in rural ciently. This requires matching demand with strategy and policy formulation. staff capacity, better managing the portfolio, . Latin America and the Caribbean empha- and keeping unit costs down. sizes natural resources management, and local and community development/infra- Projected Demandfor Rural structure, which together account for 69 Development Services percent of its demand. * South Asia (42 percent) and the Middle As discussed at the beginning of this chapter, East and North Africa (34 percent) both rural development issues addressed by the project high demand for services in water World Bank Group can be grouped into five allocation, irrigation, and drainage. clusters, or product lines. The five areas are: Thus the even breakdown of overall demand 1. Rural strategy and policy formulation among the five product lines masks highly dif- 2. Agricultural systems intensification ferentiated demand patterns across regions. In- 3. Management of natural resources and deed, the projections of future demand by forestry managers are highly concordant with the di- 4. Water allocation and management verse priorities identified in the regional rural 5. Local and community development and sector strategies. The distribution of staff will rural infrastructure. need to be adjusted to correspond to these While there is some overlap among these demands. five product lines, they are rufficiently distinct to be meaningful for projecting demand for ru- Staff Capacities and Needs ral development services, assessing current staff capabilities, identifying skill gaps, and de- A comprehensive inventory of existing staff termining a human resources strategy to equip capabilities, projected retirements, and attri- the World Bank Group to revitalize rural de- tion, has been undertaken. Combined with 88 Rural Development: From Vision to Action the demand projections, conclusions can be Trends in the Portfolio and Lending drawn about skill gaps and future recruitment needs. There is a large undisbursed balance in the There are currently about 470 staff working portfolio of rural development projects- on rural development, including more than 100 US$12 billion-which was 16 percent of the long-term consultants. A very high percentage Bank's total outstanding commitments on De- of the staff have the necessary technical skills cember 31, 1996. (The transportation portfolio and are fully competent, according to their and the electric power portfolio each have managers. The Sector Board will emphasize around US$11 billion in undisbursed commit- maintaining and improving staff skills, and ments). matching the special technical skills of staff Lending for rural development has declined members to the areas where they can contrib- substantially over the past decade, from an av- ute the most. erage of US$6.6 billion (61 new projects) in fis- While staff competency is strong, more than cal 1985-86 to an average of US$2.7 billion (39 one-third of experienced staff are likely to be new projects) in fiscal 1995-96. Over the same lost through retirement or attrition over the period, there has been a decline in the number next five years. This turnover provides an op- of projects under supervision, from an average portunity to make the necessary changes in of 563 in fiscal 1985-86, to 386 in fiscal 1995-96. staff skills to match changes in future demand The loan/credit amount per project has also for skills. Preventing an erosion of the Bank's gone down over this period, from an average skill base will require a major recruitment of US$108 million to US$69 million. By fiscal effort, which has significant upfront costs. 1996 rural development accounted for only 12 Therefore: percent of the Bank's annual lending, com- * The Sector Board will make staff capacity pared with 29 percent in fiscal 1986. building and recruitment a top priority, The most immediate way to foster rural de- along with strengthening the knowledge velopment is to implement the ongoing pro- base. In collaboration with the Human grams and disburse the existing portfolio. In Resources Vice Presidency, the Sector accordance with the Wapenhans recommenda- Board will develop a four-year recruitment tions, over the past three years several of the program. Regions have carried out thorough portfolio * Demand is expected to rise significantly reviews and reevaluated their pipeline of pro- for expertise in two areas: water allocation, jects. Selected portfolio reviews have been car- irrigation and drainage; and local and ried out under the guidance of the Quality community development and rural infra- Assurance Group in the areas of forestry, and structure. Demand is likely to remain sta- irrigation and drainage. A review of the re- ble at current levels for agricultural search and extension portfolio is just getting systems intensification; and natural re- under way. sources management and forestry. De- mand is likely to grow for expertise in the Actions to Reduce Unit Costs subarea of markets and agribusiness. * To improve expertise in strategy and pol- Costs of rural operations have always been icy formulation, a core training program higher than those of other operations because has been initiated. In addition a special of the spatial dispersion and heterogeneity of program to recruit and train economists rural areas, and the multiplicity of government and other social scientists for work on rural and nongovernmental institutions involved. development strategy and policy issues is The average preparation cost per approved planned. rural development project in fiscal 1996 was Areas of Concentration and Future Directions 89 19 percent higher than the Bankwide average. in the short run, they will lead to lower costs The cost of preparing rural development pro- for supervision in the long run. Important cost- jects was second only to that of preparing en- saving measures are also being taken through vironment projects and substantially higher ongoing portfolio reviews, which should lead than that of preparing human development to the closing or restructuring of poorly per- projects. By comparison, average supervision forming projects. costs for rural development projects in fiscal For the future the sector strategy calls for a 1996 were about the same as the Bankwide more strategic approach to lending, with average. greater analysis, country and program selectiv- Reducing the cost of preparing rural devel- ity, piloting, and consensus building than in opment projects presents significant challenges the past. While these activities will require ad- for program design and coordination. Costs ditional staff and budgetary resources, the re- are high in part because of the greater need to sources required should be considerably less carefully incorporate environmental concerns than those absorbed by failed project starts and into project design and fully involve local peo- the supervision of problem projects. Africa will ple in project design and implementation. further increase its use of locally hired staff to Cost containment has been a major objective work with highly experienced staff from re- for rural operations ever since the Bank began gional hubs. operating in a more restrained environment, Resources saved through the measures taken with containment of budget growth a focus. and proposed should be used to improve the The number of rural development staff is con- quality of services to clients, including consult- tinuing to decline, as several units are in the ing with farmers and other stakeholders dur- process of eliminating positions. There has also ing the preparation and implementation of been a substantial increase in the use of local projects, and improving project analysis, moni- staff, particularly in South Asia and Africa Re- toring, and evaluation. It is therefore unlikely gions. Staff and related administrative costs that resource savings can be used to expand have also been cut by merging units in Latin the volume of operations. America and the Caribbean, Europe and Cen- tral Asia, and Africa and the Agriculture and Priority Actions Natural Resources Department. There has been successful, but limited, expe- Enhancing portfolio quality. The Regions have pri- rience with placing highly competent staff in mary responsibility for portfolio management. countries to work with local staff and consult- No additional resources are required for this ants in project design and implementation task. The Sector Board will undertake two special (without the burdens of more general tasks that portfolio reviews each year through fiscal 2000. reduce the cost-effectiveness of many staff as- The increased effort that is needed can be signed to field offices). This helps achieve the funded through an expected decline in the rural joint goals of enhancing the quality and cost- development portfolio from around 400 pro- effectiveness of operational work. In Central jects in fiscal 1999 to around 300 by fiscal 2000. America, cost-effectiveness has been achieved by assigning staff to the regional unit (RUTA), Enhancing knowledge management. It is ex- which has worked with national governments pected that the rural development family will to enhance their capacities to prepare projects. eventually manage up to 15 knowledge nodes, In Africa, and the Middle East and North including 5 or 6 jointly with other families. The Africa many poorly performing projects have nodes will rely heavily on staff from the Regions been dropped, and the project pipeline cleaned to supply substantive materials. Region staff out. While these actions have increased costs may manage some of the nodes (for example, 90 Rural Development: From Vision to Action Europe and Central Asia may manage markets If resources remain at current levels, it should and agroindustry). be feasible to implement the first four priorities. 5. Initiate an enhanced recruitment drive to Strengthening alliances. While preparing the prevent the anticipated sharp erosion of rural sector strategy, the Bank has consulted staff skills, and hire staff with critical skills. extensively with existing and potential part- 6. Accelerate implementation of focus ners. The alliances that have been built need to programs. be maintained and made stronger over the com- Implementing the first six priorities will be fea- ing years, for which some additional upfront sible only if resources become available for ad- investment is envisaged. ditional upfront investments. 7. If capacities are built and demand rises as Revitalizing the research program. The pre- a result of the implementation of the rural viously active research program in rural devel- development strategy, lending could ex- opment has declined sharply during the 1990s pand by up to 50 percent. Budget re- because of a general decline in research across sources for this expansion would be made the Bank and the decision to allocate the shrink- available from country budgets through ing resources to areas other than rural develop- a demand-driven process. ment. The rural sector strategy gives high priority to revitalizing the program. Conclusion: What Are the Key Actions Proposed? Budget Priorities This rural sector strategy is not business as Reversing the decline in lending and strength- usual! It proposes a new way of doing business ening the quality of nonlending services will to meet the critical challenges of providing require adjustments in the Bank's allocation of food for all, raising rural incomes and reducing resources. The activities to be pursued will de- poverty, and sustainably managing natural re- pend on the resources available. The following sources. The key recommendations are: is a list of seven key activities for the sector in * We need a broad ruralfocus. We will no longer descending order of priority: use the narrowfocus. The rural sector strategy 1. Achieve impact on the ground by care- focuses on rural sector strategies as crucial fully managing and further improving for promoting rural growth. We will no the performance of the portfolio under longer look only at irrigation and drainage, implementation. but also at water resource allocation and 2. Initiate core functions of the rural devel- comprehensive management. We will not opment family, such as disseminating ex- deal with agriculture, forestry, or livestock isting knowledge on best-practices, and separately, but with the management of providing all staff with core training. natural resources in sustainable produc- If resources available for rural development tion systems. We will look at rural en- continue their recent modest decline, it will still trepreneurship instead of agricultural be possible to implement the first two priorities credit, off-farm employment, agro indus- by using resources previously absorbed by tries and marketing in isolation. And we preparation of ultimately-dropped projects will integrate human capital develop- and the supervision of problem projects. ment, infrastructure, and social develop- 3. Pursue the focus programs within the ex- ment into rural development strategies and isting resource constraint. programs. 4. Increase economic and sector work, and * The entire World Bank Group must be involved reestablish a forward-looking research in promoting rural development. Coordina- program. tion among the different actors must be Areas of Concentration and Future Directions 91 greatly improved to ensure that efforts are strategy proposes is that 80 percent of projects not duplicated or hampered. receive ratings of satisfactory by fiscal 2002. * We must work with partner countries and the The rural sector strategy does not set targets broader international community to integrate for nonlending and lending outputs, empha- rural development in overall country develop- sizing instead the process of formulating na- ment strategies. The rural sector strategy tional rural strategies and building consensus stresses the formulation of country assis- for rural development. Nevertheless, one result tance strategies as critical to building con- of successful consensus-building efforts with sensus both within the Bank and among countries would be increased lending volume stakeholders in countries. in focus countries and in others. This increase * We will address long-ignored issues. We must may well be offset by a complete or nearly not be timid on issues such as land reform, and complete withdrawal from countries where we must greatly increase our commitment to consensus-building efforts fail. food consumption and nutrition policy. Gender will bea relevant cutacross manyofthese issues. Implications for rural development. The major We must continue to tackle the "anti- outcome of the rural sector strategy will be trader" bias in many borrowers' regulatory greater commitment to rural development by frameworks. For many of our partner coun- international donors and our partner countries. tries land reform, better land policies, and Action matrices for the subsectors of rural de- improved rural entrepreneurship would velopment provide detailed monitoring indica- provide the incentives for investment and tors for specific activities (the matrices are growth needed to raise food output and included in the March 1966 version of the rural rural incomes. With appropriate policies all sector strategy). These will enable staff and man- citizens could be made better off. agement to monitor the many diverse actions * We will address old issues in new ways. The needed to achieve this overarching goal and to Bank has acquired considerable knowl- evaluate their results. For example, increased edge about what works and what doesn't. international commitment should be reflected in We will implement more widely the prom- increased financial commitment by donor and ising new approaches. To name just a few: client countries to the international agricultural 3 We will revitalize rural development at research system. Bank-assisted national institu- local and community levels. tions and independent scholars will monitor o We will involve stakeholders in the de- country-specific progress in policies, institu- velopment and execution of projects tions, and expenditure patterns for rural devel- through all stages. opment, as well as the associated outcomes. o We will deliver rural financial services to the poor using new approaches. Three major outcomes. The success of the rural o We will involve the private sector in sector strategy must ultimately be judged by delivering infrastructure and other three main outcomes. First, will the Bank by services. fiscal 2000 be seen as a leader in the fight to o We will promote sustainable resource reduce rural poverty and improve the manage- use through community-based manage- ment of the natural resource base, both in the ment. international community and in partner coun- tries? Will it be seen as a key ally of the rural What Will the Outcome Be, and How poor and a major force in sustainable natural Will It Be Monitored? resource management? This outcome can be evaluated through systematic client consult- Implications for the Bank. The one broad quanti- ations, as well as by other indicators of Bank tative target for the Bank that the rural sector leadership. 92 Rural Development: From Vision to Action Second, will there be the complementary Third, will the rural underperformers and progress toward freer and fairer world agri- dropouts have changed their ways, joining the cultural trade and toward developing inter- countries of most of East Asia, which have had national coordination mechanisms to ensure remarkable success in reducing rural poverty? that countries can safely rely on interna- This is a major goal of the rural sector strategy. tional markets for food security and for prof- Monitoring this impact will require evidence itable outlets for their enhanced production? from several sources, including poverty assess- Progress under the high-profile international ments-the main instrument used by the Bank initiatives proposed will be monitored care- to identify social and economic priorities for fully. low-income and vulnerable groups. APPENDIX A Focus Programs by Region 94 Rural Development: From Vision to Action Contents Latin America and the Caribbean Northeast Brazil 95 Guatemala 95 Mexico Southern States 97 Regional Unit for Technical Assistance in Agriculture 97 Africa Guinea 98 Madagascar 99 Malawi 101 Mali 102 Uganda 103 Middle East and North Africa Morocco 105 Water Resources Management 105 Europe and Central Asia Ukraine 106 European Union Accession 107 South Asia Bangladesh 108 India 109 East Asia and the Pacific China 110 Philippines 111 Vietnam 112 Worldwide World Trading Organization and the World Trading System 112 94 Focus Programs by Region 95 Northeast Brazil to take the lead in land purchases and develop- ment. Based on voluntary transactions between Program Focus willing buyers and sellers-and a government role limited to ensuring land titles, verifying Northeast Brazil contains the highest concen- transactions prices and providing beneficiaries tration of poor rural people in Brazil and in all with financial resources-the project adopts an of Latin America. This Region contains 30 per- innovative, market-based approach. The Bank cent of Brazil's 148 million people, more than provides financing for complementary produc- half of the country's poor and almost two- tive and infrastructure investments, essentialfor thirds of its rural poor. successful land reform. The Brazilian government is faced with the dual challenge of achieving greater public sec- Ruralfinancial development. Through in-coun- tor efficiency and reducing the dire rural pov- try sector work and pilot programs as well as erty in the northeast. The Bank, which has a study tours with state and local officials, users long-term partnership with the Brazilian gov- and practitioners, the Bank's initiative in rural ernment in the northeast and a knowledge financial development would build upon the base developed from extensive experience lessons learned in Brazil and elsewhere to de- working in the region, can help develop and sign and test projects in small-scale rural sav- implement ground-breaking initiatives in rural ings and credit. development. Results Program Activities The performance and impact of these activities Northeast Rural Poverty Alleviation Program. This would be gauged by specific monitoring and program places resources in poor rural commu- evaluation systems built into the design of each nities through small-scale community projects program, and would be summarized and ana- that encourage local participation and cost- lyzed in their totality throughout the annual sharing. Communities identify, plan, and im- CAS updating process. The monitoring and plement priority investments and are respon- evaluation of the country/region focus pro- sible for their operation and maintenance. gram would benefit from the supervision from The high degree of commitment that comes the field from the Bank's Recife Office and local with this approach, greatly enhances the staff placed in Brasilia. prospects for long-term sustainability of these investments. Next Steps Water Resources Management Program. In order Once additional resources are confirmed, the to improve water resource management in the Bank will work with the government to de- semi-arid and drought-prone northeast region, velop in detail the three-year country/region this program would increase the capacity of focus program for Brazil. This will be followed government and final users to allocate water by its immediate implementation. efficiently and would finance necessary infra- structure rehabilitation to ensure optimal re- Guatemala source utilization. Program Focus Land Reformn and Poverty Alleviation Project. This project seeks to address the unequal dis- Guatemala is an ideal focus country because of tribution of land in Brazil and the resulting the high level and concentration of rural pov- rural poverty by empowering communities erty; the concentration of indigenous peoples; 96 Rural Development: From Vision to Action the recent peace accords, in which rural devel- tion of investment programs; and nonlending opment has a central role to play; and the pro- products, including not only traditional fessionalism and high degree of commitment ESW, but innovative activities similar to the of the current government to the implementa- "Ancianos" meeting with Mayar elders, gov- tion of the peace accords and to poverty alle- ernment officials, other donors and NGOs, viation more generally. which the Bank sponsored in September 1996. In addition implementation of the focus coun- Program Activities try program would benefit from coordination with activities of the RUTA-Agricola offices in The proposed Guatemala rural development Guatemala, and at RUTA-Agricola headquar- and agriculture focus program would cover ters in San Jose, Costa Rica, as well as with the three years and include the following activities. recently established Bank resident mission in In addition there are other rural infrastructure Guatemala City. projects relevant to rural development not listed here, such as the proposed Basic Educa- Results tion m and Rural Roads Projects. The desired results of the Guatemala focus Already programmed activities country program would be an acceleration of * Preparation and start-up of a land admini- the activities called for under the 1996 peace stration project accords related to rural development, and es- : Preparation and start-up of a social invest- pecially indigenous peoples. Specific objectives ment fund project would be more rural employment and higher incomes due to increased private and public Activities that could be accelerated due to focus rural investment; alleviation of some of the country designation social and human consequences of rural pov- * Preparation of a countrywide, multisec- erty by improved access to safe rural water; tor indigenous peoples development and improved local decisionmaking in rural plan areas as part of a more general decentralization - Execution of Institutional Development program. Fund grants for indigenous issues and The results of each activity would be moni- women's activities in rural areas tored by specific monitoring and evaluation programs built in to the design of each activity Proposed incremental activities due tofocus coun- and summarized and analyzed in their totality try designation through the annual CAS update process. In ad- * Preparation and start-up of a rural finan- dition monitoring and evaluation of the coun- cial services and rural development pro- try focus program would benefit from the ject presence of the recently established Bank resi- * Update of the 1993 Guatemala irrigation dent mission in Guatemala City. study and preparation of an investment program for rural water and sanitation Next Steps suitable for external assistance * Preparation and start-up of a FONAPAZ * Confirm government interest in proposed decentralized and local community in- focus country program activities vestment project in selected indigenous * Confirm availability of incremental Bank areas budget to carry out program activities Focus country activities would be imple- . Subject to the above, work with govern- mented through preparation and implementa- ment to prepare a detailed three-year focus Focus Programs by Region 97 country program for Guatemala and begin tary funding sources for private invest- its execution ments in the two states (starting in mid- 1997). Mexico Southern States Results Program Focus The initiative would facilitate (a) new private In Mexico the level and concentration of rural investments, expanded outreach to rural poor poverty, indigenous peoples, and food insecu- of research and extension, and accelerated land rity is particularly high in the two states of titling and registration; (b) development of ru- Chiapas and Oaxaca. ral financial markets; (c) provision of better productive infrastructure, development of for- Program Activities est-based community enterprises, upgraded skills and retrained labor; (d) improved quality The initiative is based on a multisectoral, and accessibility of basic education, health, multi-institutional action plan with several water, and sanitation services; and (e) im- components, to be implemented between proved nutrition and strengthened state and 1996 and 2002 (details documented in a municipal institutions. draft proposal, "Mexico: The Southern States initiative," April 1996). Key components Next Steps are: O Ongoing relevant projects covering basic The proposal was presented to the government infrastructure, labor market, education, in September 1996 and agreed to in principal health, sanitation, and strengthening of at that time. Implementation of the action plan local institutions (11 projects, the rele- will begin by the end of fiscal 1997. vant parts of which total about US$350 million) will be refocused on Chiapas Regional Unit for Technical Assistance and Oaxaca to facilitate immediate initia- (RUTA) in Agriculture tion of the initiative (beginning in March 1997) Program Focus * About 11 new investment operations (relevant parts totaling about US$347 mil- RUTA is a cost-effective and client-oriented lion), already under preparation and ex- service unit based in Latin America that assists pected to be effective in fiscal 1997-98, will countries with project preparation and imple- indude specific components focused on mentation, institutional strengthening, the de- Chiapas and Oaxaca, primarily support- velopment of trade policy, and training. The ing infrastructure investments comple- establishment of RUTA, with funding from mentary to private sector investments and seven different multilateral and bilateral activities to enhance agricultural produc- sources, has helped greatly in addressing the tivity needs of rural people in Central America, and * A task force including govermnent, busi- is a major success. ness community, and civil society will be RUTA's most important function is to serve organized to identify and tackle specific as a focal point for partnership for the Bank, constraints to development of productive several multilateral and bilateral institutions, activities. The CGAP, the IFC, and the and borrowing member governments. Reliance Inter-American Development Bank are on RUTA has enabled the Bank to meet rapidly planning or implementing complemen- growing client demands in Central America at 98 Rural Development: From Vision to Action reduced cost. RUTA's non-Bank sponsors- Next Steps FAO, IFAD, UNDP, Inter-American Develop- ment Bank, and bilateral donors (induding Detailed program proposals in each of the ar- Norway, which has contributed expertise on eas above have been drawn up. With confir- gender issues)-stress its value in strengthen- mation of partial funding from the Bank, ing their partnership with the World Bank. The additional assistance from other partners will Central American governments, in turn, are be sought. appreciative of the client-orientation and direct attention received from RUTA. Several govern- Guinea ments are undergoing economic and social re- forms and are seeking guidance or technical Context assistance from RUTA. The Africa Region's main foci in promoting Program Activities rural development will be: * Improved policy regime: creating an The Bank intends to continue support for enabling policy environment for entre- RUTA at current levels. Support for RUTA preneurship and agribusiness develop- thus comprises a much increased propor- ment tion of a reduced departmental budget. * Technology development and adoption: While these resources are sufficient to per- promoting technical progress at farm level, mit continuation of current preparation and and strengthening researcher-extension- supervision activities, they are not suffi- farmer linkages cient to meet the demand of the client coun- * Natural resource management: improving tries for increased support (in the form of the sustainability of production systems institutional strengthening and technical throughbetter management of soils, water, assistance) from the Bank in areas of trade pasture and forests policy, gender and ethno-development, and * Rural infrastructure: establishing rural natural resources management and envi- roads, water supply and sanitation, electri- ronmental economics. The Bank would like fication, social services, and improving to augment RUTA's capacity in these areas urban-rural linkages through the hiring of the equivalent of one * Empowerment of rural people: increas- long-term consultant (in practice, the funds ing farmer participation in the develop- would provide leverage to solicit additional ment process and resource allocation and support from the Bank's partner institu- management, and developing farmer tions in these thematic areas). Augmenting organizations. RUTA's staff would cost 20-40 percent less than placing persons with similar skills at Program Focus headquarters. * Guinea is well endowed with rich soil and Results minerals and has good potential for agri- cultural growth. Recently, the country The benefits would be monitored through the achieved a 5 percent agricultural real GDP degree of satisfaction of client governments; growth rate since 1994, amongst the high- better sectoral performance in the key areas of est in Sub-Saharan Africa. trade policy, gender and ethno-development, * Agriculture is to play an important role in natural resource management and environ- the need to decrease the dependency of the mental economics; and willingness to obtain economy on mining, an enclave sector, for services from RUTA. a more balanced growth. Focus Programs by Regwon 99 * Social indicators: mortality of children five infrastructure maintenance policy and years or younger is 223 per thousand live strategy births or twice the rate for low-income countries; only 10 percent of rural dwellers Results have access to adequate sanitation and 33 percent to safe water, compared with 24 * Improved institutional and capacity build- percent and 70 percent respectively for ing for the provision of key support serv- their urban counterparts. ices to farmers * Notable successes were achieved in liber- * Increased agricultural production and alization of markets and prices and elimi- productivity nating direct public sector involvement in * Decreased rate of deforestation due to in- crop production, yet there is a need for a tensification wide range of civil service reform in the . Increased rural gender equity agricultural sector and to rationalize the * Expansion of agricultural markets patterns of sectoral public finance. a A sustained high agricultural GDP growth rate of at least 4 percent annually Program Activities Next Steps • Strengthen and build on existing capacity to improve accessibility and quality of serv- * Obtain agreement with the country team ice delivery in the agricultural sector by on an action plan formulating and implementing the sectoral * Confirm borrower interest in focus pro- strategy, furthering private sector develop- gram, targeting rural community-based ment and reviewing and rationalizing ex- public works and infrastructure isting institutional structures * Strengthen the generation and dissemi- Madagascar nation of improved crop and animal husbandry by building the scientific Program Focus and managerial capacity of the agro- nomic research institute and extending * Almost 75 percent of Madagascar's people the coverage of agricultural extension are poor. services * Reducing the proportion of the population * Strengthen donor coordination by under- living in poverty to less than 33 percent taking joint supervision of major agricul- within a generation will require massive tural sector operations new foreign investment and improve- ments in the delivery of social and eco- Activities to be accelerated as a result of Guinea nomic services to the rural population. being afocal countryfor rural action plan * A particular challenge is to raise agricul- * Use the future agricultural services opera- tural productivity to yield an additional tion to demonstrate usefulness of support US$450 million of agricultural output over for broader sector and subsector invest- the next decade (from about US$1.3 billion) ment programs with a policy content (fis- and to develop ecotourism with spin-off cal 1997 and fiscal 1998) effects for rural communities while pro- * Further the dialogue on the preparation of tecting the country's unique habitat. a follow-up program in rural infrastructure * Constitutionally mandated decentraliza- (especially rural road, health, water and tion presents a challenge and an opportu- sanitation), within the context of a subsec- nity to empower local communities to tor investment program focusing on an tackle their development needs. 100 Rural Development: From Vision to Action * Maintenance and rehabilitation of local in- center to achieve levels and quality of serv- frastructure such as irrigation, soil conser- ice delivery to be defined and monitored vation and rural roads, together with from the center. The project would also investments in health, education, and concentrate on capacity building and sup- water supply (only 29 percent of the popu- port for some critical investments in 30-60 lation has access to clean water) are key to of the largest communes with at least improving the productivity of the rural 10,000 inhabitants (accounting for over 60 poor. percent of the population). * The macroeconomic reforms and meas- * Providing the resources to effectively empower ures "to get prices right" are either rural communities and support a rural road completed or underway; development network. A rural infrastructure project challenges now revolve around increasing would aim to empower the rural commu- the incomes of the poor by increasing their nities to improve public services in accord- productivity. ance with the rules of the game defined under the decentralization project. The Program Activities larger rural communes covered under the decentralization project would be able to Rural development is one of the main foci of "double dip" provided they have well-jus- the Madagascar Country Assistance Strategy, tified uses for the funds (this approach is (drawing on the poverty assessment and pri- in line with the need to support rural com- vate sector assessment). The Bank will support munities that have been largely neglected decentralization to ensure that public expendi- up to now). One large area of emphasis ture can be reallocated to provide real re- would be to ensure the availability of ade- sources to local governments. Currently the quate funds for rehabilitating and main- central government provides over 80 percent taining rural roads. Coordination with the of resources available to local governments. central government will be critical to en- However these funds amount to only about sure that a national network emerges from US$1 per capita while total central government the decentralized approach. expenditure is about US$40 per capita. The key * Improving the effectiveness of key rural invest- challenge is to help the government define a ments and services. The Bank is adopting a strategy over the next 6 months (to be reflected comprehensive approach to deal with in the 1998 budget). The strategy would begin wide-ranging constraints: heavy govern- restructuring both public expenditure and lo- ment intervention; inadequate develop- cal government finance so that local govern- ment and transfer of improved ments are provided real means to provide technologies; insufficient access to inputs services. Some combination of block grants and and credit; problems with security of land matching grants will be needed together with tenure; poor rural infrastructure; inade- a mechanism for quality control and auditing quate development of farmer organiza- by the central government. tions and private animal health services; Bank interventions would build on the de- and weak local capacities for planning and centralization process through four channels: implementation. The key investments and * Defining the rules of the game and capacity services (except for roads to be financed building. A decentralization project would under the Rural Infrastructure Project) are support the definition of the appropriate already in the portfolio: irrigation, agricul- local government finance framework for tural research, extension services, dams all communes. The system will aim to en- and other water-retention structures; live- courage the mobilization of local resources stock; rural finance; and soil conservation by augmenting them with funds from the measures. The environment program and Focus Programs by Region 101 a restructured agricultural portfolio would ing poverty and reforming the economy. The aim to ensure that these activities have a country appears relatively stable and macroe- greater impact. Investments and delivery conomic performance has shown marked im- will be contingent on community demand provements. Second, there are extensive rather than supply-driven from central ongoing and newly planned agricultural and ministries, which should make programs rural development programs plus programs of and projects much more responsive to social infrastructure. Third, there have been community needs and sustainable. positive developments in food and agricultural Improving rural well-being through provision policies for which there is evidence of supply of social services. The education, health and response. Fourth, our support includes a water projects under execution or prepara- strong community focus, including a Social Ac- tion would be looked at closely with a view tion Fund to support community actions. Fifth, towards transferring resources to local Malawi poses one of the toughest challenges communities with capacity for managing for success in rural development due to its their resources, away from central govern- skewed asset distribution, absolute poverty in ment implementation units. The Bank will rural areas and erosion of basic natural re- need to work closely with beneficiaries, source base. local governments, sector ministries and The rural development program is fully in- other donors to devise national programs, tegrated with the CAS of March 1996 through standards of service delivery, procedures the emphasis on growth, targeted poverty sup- for releasing resources and audits and ar- port program, and improved capacity building rangements for filling in for a transitional program. In addition both have put special em- period for those communities that are not phasis on the need for agricultural diversifica- able to organize themselves to take charge tion and generation of nonfarm employment. of their affairs. Program Activities Expected Results Activities to be given special attention over the * More public services through enhanced next three years revenue mobilization . Improved policy regime particularly re- * Higher rural incomes, better social indica- lated to land tenure and to the develop- tors and lower poverty incidence ment of input and output markets. * Improvements in the growth elasticity of * Technology development and adoption poverty reduction (currently at about 1.5 through improved research and extension versus 2 in Indonesia) development (through the implementa- • Reduction of ethnic tensions between the tion of the Agricultural Services Project relatively prosperous Antananarivo elites and Smallholder Food Security Project, of Indonesian origin and the coastal poor and increased attention to irrigation, crop of African origin diversification and livestock. * Natural resource management through the Malawi implementation of ongoing soil fertility management, soil and moisture conserva- Program Focus tion activities and through the new environ- ment support program. The latter will Malawi has been selected as a focal country for introduce a more environmentally friendly a number of reasons. First, a major political policy framework for natural resource man- change has taken place and there is evident agement, including supporting initiatives in commitment by the new government to reduc- key areas of environmental degradation. 102 Rural Development: From Vision to Action * Programs in education, health and social * Replicable lessons for other countries in safety nets to improve the welfare of rural the region and to refine agricultural action people. plan for Africa * Village community and group develop- * More sustainable and efficient use of natu- ment through the implementation of the ral resources proposed Malawi Agriculture and Live- Results would be summarized in a separate stock Investment Project (MALSIP) and focus country report to be prepared as an input ongoing Agricultural Services Project and to the annual Portfolio Management Review to Smallholder Food Security Project. be discussed witht government. * Enhanced monitoring and evaluation of the ongoing projects and of the policy re- Next Steps form process, including the setting up of more specific performance indicators. * Agreement of country director and techni- * Accelerated agribusiness development cal manager to draft country focus plan through training, technical assistance and and budget other means. * Agreement of Government of Malawi to focus program, including their participation Incremental activities to be undertaken with addi- * Implementation tionalfinancial support * Land policy reform Mali a Drought mitigation and management 3 Water allocation/management/irriga- Program Focus tion * Developing the off-farm rural economy, Mali been chosen as a focus country for several small scale processing and trading activi- reasons. First, the needs are pressing: 73 per- ties, agribusiness-smallholder linkages, cent of the population live below the poverty and financial services for the rural poor line. Second, the challenges are enormous. Mali . Improved monitoring and evaluation, in- is experiencing severe natural resource degra- cluding periodic reviews of trends in dation; has limited and erratic rainfall; has a market development (grain and other low level of technology use and sluggish agri- commodities), prices cultural growth (with modest growth since The above activities would be implemented 1994), this despite large external support; a as part of portfolio implementation and super- relatively low level of education (20 percent vision, the proposed growth options study, adult literacy, 25-30 percent primary enroll- supplemental surveys and consultancies, and ment vs. 65 percent for Sub-Saharan Africa); the MALSIP. low domestic savings (only 8.8 percent of GDP); and weak implementation capacity Results within the public services. But there is hope. The government is committed to poverty alle- . Accelerated sustainable growth in the ru- viation, reforms, and empowerment. There is ral sector (4 percent over 3-5 years) great potential for cotton, rice and other cereal * Improved impact on poverty alleviation production, and livestock. (including food security), and the capacity to monitor this Program Activities * Improved understanding for need to re- solve regional interdependent develop- Put the local stakeholders in charge. Help them ment issues (for example, water, food develop a local consensus on priority objectives security, agribusiness investments) and a clear operational strategy to get there Focus Programs by Region 103 * Complete the unfinished reform agenda: * Increased food security by reducing vari- trade and market liberalization, re- ability of agricultural output through bet- duced agricultural taxation, and land ter management of climatic risk policy * Increased production and income due to * Concentrate limited government resources improved agricultural incentives, know- on critical services and investments how, better domestic resources mobili- * Create local capacity for monitoring zation, access to markets and basic changes in the sector agricultural services (5 percent minimum * Develop a weather-risk management strat- agricultural growth) egy to be mainstreamed in government assistance to the sector Next Steps (fiscal 1998) Fit our own assistance strategy to the above by: o Agreement with government for the * Measuring aggregate results (quantitative and ualiatie) troug setorwde mni-preparation of an Agriculture Sector In- aindqualitative) thbrough sectorwide moni- vestment Program through a wide partici- toring (as in Zambia) and systematic client patory process consultation * A rural CAS workshop organized by the * Moving toward national programs focus- governent with all partners to begin Ag- ing on the following clearly established riculture Sector Investment Program priorities: preparation process • Agriculture Sector Investment Program * Agreement for the restructuring of portfo- (fiscal 1998), including agricultural re- lio search, extension, support to farmers' no i support of a pre-Agriculture Sector organizations, institutional and policy InvestmentProgram phase reforms, and capacity building Uganda o Rural infrastructure (fiscal 1999): rural g roads, irrigation, rural water supply a Natural resource management (fiscal Program Focus 1999) o Private irrigation promotion (fiscal Uganda is selected as a focus country because it 1997): promoting services to private has: irrigators * Carried out comprehensive structural and o Immediately restructuring our ongoing institutional reforms designed to deregu- portfolio around these four areas for in- late the economy (trade, payment systems, creased focus, better integration and en- prices) hanced synergy, and strengthening the * Eliminated direct public sector involve- decentralization and capacity building ment in all but the essential public focus services • Increasing donor coordination and pro- * Achieved notable success in stabilizing the ject supervision. economy and in economic reforms * Undertaken, and is in the process of, im- Results plementing a wide-ranging civil service reform, public expenditure reform, paras- * Better ownership, focus of investments on tatal reform and privatization program, national priority, transparency and effec- and financial sector reform tiveness in execution * Implemented agricultural sector policy re- * A more sustainable utilization of the natu- forms to enhance efficiency and private ral resource base sector participation. 104 Rural Development: From Vision to Action In addition the government has demon- through analytic work and strategy formu- strated its commitment to reduce poverty and lation carry out rural development initiatives. * Ensure that there is a multisectoral strat- egy for development in rural areas, and Program Activities coordinate donors * Increase and balance government support Strategies for achieving rural growth and reduc- to rural areas. Improved efficiency of gov- ing rural poverty errnent service delivery * Create an enabling environment for enter- * Implement incremental activities as part preneurship and agribusiness development of the portfolio improvement plan, su- * Promote technical progress (through tech- pervision, proposed sector strategy and nology development and dissemination) policy preparation, new studies, pro- at the farm level posed government poverty action plan, • Increase beneficiary participation in the and Agriculture Sector Investment Pro- development process, resource allocation gram and management, and developing farmer organization Results * Improve the sustainability of the produc- tion systems through better management * Greater national and international com- of soils, water, pasture and forests mitment to rural development * Improved incomes and participation of the Activities to be accelerated as a result of focal poor and marginal groups country designation * Improved and sustainable agricultural * Move towards broader sector and subsec- growth tor investment programs with policy con- tent (concentrating on land tenure, rural Monitoring indicators finance), capacity building, participation . CAS content of stakeholders * Financial commitment by donor and the * Improve and strengthen policy analytic government to key activities and formulation capability . Level of participation in the development * Enhance the policy/program impact; of rural development strategies (country monitoring/evaluation capability scholars, civil society groups, donors) * Strengthen technology generation and dis- * Number of new pilot initiatives within on- semination, particularly, the extension- going projects research-farmer linkages * Number of projects adjusted/restructured • Expand and target support to small farm- to improve existing rural development ers, and expand the gender dimension portfolio of the support to ensure impact on poverty . Quality of analysis, ownership, timeliness * Promote private sector development and of policy reform rural finance * Training programs and modules, work- * Expand off-farm rural economy, small shops, seminars scale production and service activities * Analytic reports and policy notes * Carry out analysis of land and rural prop- erty issues and increase pace of reform Next Steps Modalitiesfor implementation * Country Director and task manager agree * Ensure that CAS captures the renewed to prepare draft country focus plan and focus for rural sector development, budget Focus Programs by Region 105 Agreement between Bank and govern- cus status. Bank and Moroccan budgets per- ment on focus country designation and mitting, certain projects, such as pilot rural de- what is expected of each party velopment programs and relevant large-scale follow-on initiatives, and the agro- marketing Morocco and services initiatives will be accelerated by two years. Program Focus Results Morocco is at a crossroads in which challenges and opportunities demand fundamental stra- * Improved rural poverty indicators (for ex- tegic reorientation. A continuing large rural- ample, potable water, female literacy, in- urban gap threatens sociopolitical stability and fant mortality) the foundations of high growth. This problem * Higher cost recovery in water manage- is exacerbated by poor rural infrastructure, ment, especially irrigation costly subsidies on food and a centralized bu- . Greater role of private sector in provision reaucracy. In addition the GAIT and recent of agricultural services (phyto, veteri- free trade agreements with Europe have sub- nary, quality) stantially eroded traditional preferential access * Greater diversity of export products and to European Union markets. markets Overdesigned projects in the Bank portfolio * Establishment of reliable statistical moni- suffer from government budget stress and the toring capacity achievement of CAS objectives requires mak- ing the rural development a priority. Objec- Next Steps tives should be to restore macro stability, stimulate competitiveness, reduce social dis- Preliminary discussions with the government parities, strengthen human resources develop- began in mid-1996. Follow-up discussions with ment, improve natural resource management senior government economics and finance of- and modernize the public sector. ficials took place in late 1996. Detailed discus- sions with a wider audience in Morocco began Program Activities (fiscal 1998-99) in 1997. The Bank should propose dedicating at least one-third of its lending to rural devel- The problem calls for a truly "integrated" ru- opment and rural poverty initiatives in fiscal ral development strategy that cuts across tra- 1998. ditional sector boundaries both in Morocco In addition coordination with major do- and the Bank. Lending must be focused to nors is needed to ensure consistency of goals include projects that establish integrated and complementarity of financing. In Mo- water resource management (demand and ef- rocco a major effort should begin in early ficiency); expand potable water supplies; up- 1997 to ensure the government's fiscal 1998 grade agro-marketing and agricultural budget reflects its priority of rural develop- services and redefine public/private roles; ment. rehabilitate medium and small-scale irriga- tion schemes; promote pilot rural develop- Middle East and North Africa ment initiatives focusing on participation, human resource development, and rural Program Focus: Water Resources Management women; and improve rural infrastructure. Key to this effort will be public expenditure Regionwide, the Bank will focus on estab- reallocations since no additional Bank re- lishing better water supply and demand man- sources have been provided as a result of fo- agement (particularly at the river basin level) 106 Rural Development: From Vision to Action promoting efficient use of water in the rural nors; and a meeting of senior technical repre- and urban sectors, and improving rural infra- sentatives of the countries of the region. The structure and services. aim of the donor meeting will be to review the effectiveness of external support for the water Program Activities allocation and management, to reach consen- sus on strategic priorities, and to consider The Middle East and North Africa Water Pro- mechanisms for better coordinated and en- gram will have a regional dimension and a hanced levels of support for the countries of specific and concrete country aspect. The ac- the region. The meeting with the country rep- tivities will include dissemination of lessons resentatives will also be used to establish a con- from policy dialogue, pilot projects, and se- tinuing mechanism for their leadership and lected flagship operations through confer- participation in the program. ences and seminars. Through awareness building, training, and pilot projects, the Ukraine program will encourage new initiatives and investment throughout the region. An impor- Program Focus tant feature of the program is the estab- lishment of a Middle East and North Africa Ukraine has been selected as a focus country Regional Water Partnership through which for the following reasons: initiatives and innovation can be supported. * Food and agriculture have greater eco- The program will be implemented over the nomic potential in Ukraine than in any period 1997-2000 in partnership with the other former Soviet Union country, due countries and the concerned multilateral and primarily to its favorable agro-climatic bilateral donors. conditions and fertile soils. The country traditionally has been a net Results exporter of food and agriculture products, but current performance of agriculture is The program is expected to result in the imple- far below potential. mentation of a number of significant pilot and * Recent reforms (supported by the proposed full-scale investment operations, including a Agriculture Sector Adjustment Loan) pro- number of public-private sector partnerships in vide a framework for recovery. If these re- the urban and rural sectors. Target countries forms are successfully implemented, will include Egypt and Morocco (rural water Ukraine can become a prime example of supply); Morocco (river basin management); using widespread agricultural reform to Tunisia (strategic planning, and conjunctive use spur the growth of rural income and em- of surface and ground water); Jordan, Yemen, ployment and to strengthen the constituency and Palestine Authority (improved urban water for economic reform generally. supply efficiency, and private sector participa- * As the agricultural powerhouse of the re- tion); and Morocco, Tunisia, and Jordan (in- gion, Ukraine's agricultural reforms could creased efficiency and returns to water serve as a model to other countries that are in agriculture, and reuse of treated waste less advanced in agricultural reform (par- water). ticularly Russia). Next Steps Program Activities Two key events will be organized to launch Under the Agriculture Sector Adjustment this program: a meeting of all concerned do- Loan, the focus will be on streamlining and Focus Programs by Region 107 accelerating land reform and agro-industrial Cross-Country Focus Program: privatization procedures. Demonopolization European Union Accession of agro-industry and execution of govern- ment purchases of agricultural products Program Focus: European Union Accession through competitive tenders are also key re- form steps. The Region has chosen the cross-country pro- gram regarding European Union accession be- Results cause this is the first priority for our client countries in Central Europe and the Baltics. Monitoring of agricultural policy reform The overall objective of this initiative is to help implementation will be done by the our clients achieve their aspiration for Euro- National Agency for Reconstruction and pean Union membership while strengthening Development with assistance from the In- policies likely to lead to long-term sustainable stitute of Agrarian Economy. The analysis development. The reasons the Bank should un- to establish benchmark indicators is being dertake this initiative are fourfold: concluded by the Institute of Agrarian . The Bank has a comparative advantage in Economy under a Policy and Human Re- advising on agricultural policy because of source Development Fund grant for the its broad experience in this area. preparation of the agriculture sector ad- * Becoming members of the European Un- justment loan. Follow-up of these bench- ion will induce tremendous structural mark indicators will focus on tracking changes in these economies. Appropriate convergence of domestic market prices to rural development strategies will be border prices and monitoring the scope needed to address problems arising from and pace of agro-industrial privatization, regional disparities in income-earning op- demonopolization, and farm restructur- portunities and infrastructure. Integration ing. The over-arching theme will be on with western markets will bring greater the development impacts of the policy competition to these economies, bringing reforms. many advantages, but also posing consid- * The Bank will conduct an agricultural erable challenges for producers to become policy review update as part of project su- more efficient. Integration will also pervision, together with continued moni- increase access to investment and better toring of land reform developments. technology with which to meet these chal- Communication of the benefits of Ukrain- lenges, but taking advantage of these op- ian agricultural reforms to other countries portunities will be hardest in backward in the former Soviet Union will be con- rural areas with a low base of human capi- ducted through the network of former tal and poor social and physical infrastruc- Soviet Union agricultural institutions. ture. There is a real danger that these areas will be left behind. This initiative will put Next Steps the Bank and our clients in a better position to design and implement appropriate rural The Agriculture Sector Adjustment Loan was ap- development programs to ensure that the proved by the Board in October 1996. Both the accession contributes to the goal of rural, National Agency for Reconstruction and Devel- as well as urban, development. opment and the Institute of Agrarian Economy * To maximize the benefits of European Union need to hire additional personnel to help imple- membership and minimize the adjustment ment and monitor policy reforms supported by costs will also require investments that are the Agriculture Sector Adjustment Loan. expected to be financed by the Bank. 108 Rural Development: From Vision to Action * Because it has work programs in all coun- largely plateaued in Bangladesh. Hence the im- tries in the region and a working relation- portance of a rural action plan. ship with the European Union, the Bank will be able to coordinate work on Euro- What does it mean for South Asia? The triangle pean Union accession to avoid redun- formed by Nepal, Eastern India, and Bangla- dancy and maximize complementarities desh holds a large share of the world's poorest and to ensure that country programs are population, with per capita income less than consistentwiththecommonruraldevelop- $250 per annum. Hence, success of policies and ment policy now being developed by the programs in Bangladesh under a rural action European Union. plan would contribute directly to regional and Bank priorities on poverty alleviation. Program Activities How will the rural action plan relate to the Bang- We will work closely with our borrowing coun- ladesh CAS? The Bangladesh rural action plan tries and European Union authorities on any will be prepared expressly as a direct input for structural issue which we might jointly judge the fiscal 1998 Bangladesh CAS. The fiscal 1996 important for European Union integration. In CAS envisaged increasing our attention to the order to assist the accession countries, the Bank rural economy, in preparation for which we set in has to learn more about European Union crite- motion several ESW pieces that will now com- ria, standards, and processes. Then the Bank prise the key elements of the rural action plan. can be of significant help to client countries by providing them with advice and investment to Program Activities improve rural infrastructure and enhance the competitiveness of agricultural production. What is likely to be included in the rural action plan? Through the rural action plan we will Bangladesh develop a conceptual framework that will inte- grate our lending and analytical activities in Program Focus rural areas, thus potentially increasing their ef- fectiveness. It would make use of ongoing and Bangladesh has the highest density of poverty in planned work in lending and nonlending serv- the world. Despite some progress on reducing ices in SAl and DEC, ESD, PSD, and from the poverty, inadequate economic growth and con- outside. It would also change how we function tinued population growth have kept nearly half as a department, since the rural action plan the population of 120 million below the poverty would permit staff to work on rural issues line. And the number of poor continues to grow. across divisional boundaries and establish links with resident missions, donors, local institutes Why the rural economy? The rural economy and NGOs. The timeframe for completionof the and agriculture loom large in any view of Bang- rural action plan is within the next year, since it ladesh. With 87 percent of the population resid- will feed into the next Bangladesh CAS. ing in rural areas-over half living below the poverty line-no growth and poverty allevia- Results tion strategy for Bangladesh can succeed with- out a vibrant rural economy. Agriculture We expect results from an internal reorienta- dominates the economy, accounting for about tion of how we work on related rural develop- double (31 percent) the share of industry (18 ment to allow us to better integrate our efforts percent) in GDP. The rural economy also fuels on issues such as rural roads, electrification, urban agglomeration and poverty through mi- agricultural marketing, and the provision of gration. But agricultural productivity has primary health and education services. Focus Focus Programs by Region 109 programs will encourage us to take advantage will serve as an input to the elaboration of of the synergy between these areas and permit the full CAS prepared in fiscal 1997. us to fill the gaps that will be revealed. The success of the policies and programs would be Program Activities monitored through outcome indicators on pov- erty, access to credit, social services, infrastruc- The first activity is to build consensus for a ture and energy, and agricultural growth and strategy-and its implementation-to acceler- productivity. ate rural growth and poverty reduction. The outcome of the consensus-building exercise Next Steps will be reflected in the Country Economic Memorandum on rural development. Activi- The idea of preparing a rural action plan has ties are likely to include: already been discussed with the Prime Minis- * Completing and disseminating the sector ter of Bangladesh. She is very committed to work on individual commodity marketing rural development and welcomes Bank assis- performance (cereals, sugar, oilseeds com- tance and that of other donors. plex, cotton, textiles, livestock, tea, futures markets) to build consensus with central India and state governments to reform food, nu- trition, and safety net policies and their Program Focus implementation. This activity may also in- volve study tours by concerned govern- India has been chosen as a focus country for ment officials and private sector many reasons: representatives (for example, China, grain * About one-third of the world's poor live in marketing; Australia, sugar industry; food India, and 80 percent of them live in rural stamps, Central America). areas. . Analyzing the impact of the subsidy * India is the second largest consumer and program on the fertilizer industry and de- producer of food in the world. signing a reform program in collaboration * Agriculture has been growing slowly with the government. compared to other Asian countries and * Elaborating an action program with the its potential; its productivity growth is Government of India's Working Group on declining. rural finance reform. * Although India has removed its macro- . Developing a menu of options, (including policy bias against agricultural growth, identification and design of pilot opera- two main policy factors prevent Indian ag- tions and state-level investment opera- riculture from performing better: tions), to raise the effectiveness, efficiency, a Over-regulation of domestic trade, and sustainability of public expenditures agro-industry, and rural finance on local and community development. a Public expenditures in agriculture and This would be done through dissemina- rural development that are fiscally ex- tion of international and Indian experi- pensive, poorly allocated, and ineffec- ence, with decentralization and grassroots tive. participation in agricultural and rural * The recently elected government is India's development programs, and close policy first to consider agricultural reforms as dialogue with client state and central gov- part of its political agenda since the onset ernment agencies. of adjustment reforms (1991). * A dialogue on long-term, strategic op- . The next Country Economic Memoran- portunities and challenges facing the dum will focus on rural development and national agricultural research and exten- 110 Rural Development: From Vision to Action sion system through workshops and indi- sustainability and food security by providing vidual studies. policymakers with a transparent framework of scenarios and policy options to ensure long- Results term food security in China. ESW and nonlending outputs. Country Eco- Program Activities nomic Memorandum on rural development; Country Assistance Strategy; and sector policy This study is consistent with the structural re- notes (for example, rural finance, cereal grain form focus CAS; the underlying objective is to marketing). The objective would be to build provide advice that will enable government to consensus with federal and state governments, disengage from centralized grain marketing, to and donors, about a comprehensive, integrated reform grain policies and institutions, rely more reform action program for agriculture and rural on domestic and international market forces to development. guide private sector decisions in grain market- ing and distribution, and define an appropriate Lending outputs. The focus program is ex- food security role for government. The corol- pected to assist the department, and the agricul- lary is to determine how China can most effi- ture and water operations division in particular, ciently meet grain deficits in the twenty-first in the reorientation and design of its lending century. Secondary objectives of the study ad- program for agriculture and rural development. dress the poverty and infrastructure bottle- At the federal level, the focus program would necks foci of the CAS. Two elements related to assist in the identification and design of lending poverty will be addressed; the potential devel- operations to support the deregulation and opment of additional resources (land and modernization of food commodity markets, and water) for agriculture and the possible upgrad- related improvements of food, nutrition and ing (or discontinued use) of marginal lands. The safety net policies; the reform of the rural finan- principal hypotheses to be tested are: cial system; the liberalization of input markets, * Marginal increases in domestic grain pro- in particular fertilizer. At the state level, the duction can be efficiently achieved. focus program would assist us in the identifica- . Incremental domestic grain production tion and design of investment operations to will be more constrained by technical fac- strengthen local institutions, and to raise the tors than by policy. effectiveness, targeting and sustainability of * China's incremental grain requirements public expenditures programs in agriculture can be provided by the international mar- and rural development. ket without excessive long term world and domestic price increases. China Results Program Focus: Long-term Food Security Study While performance indicators will be some- China is the world's largest consumer and what difficult to establish, even a marginal im- producer of food. But agricultural productiv- pact on China's long-term food security policy ity growth is slowing down, and domestic (perhaps through more efficient resource allo- grain production is increasingly supple- cation in grain production, or a rejuvenation mented by imports. This is a growing concern of China's agricultural research effort) will to Chinese policymakers, but also to the rest have a major impact on the ground. A realistic of the world. policy action plan will be developed together The proposed study will contribute to the with the Chinese counterparts and regularly Bank priorities of addressing poverty reduction, monitored. Focus Programs by Region 111 Philippines * Agrarian Reform Communities Develop- ment Project Program Focus * Community-Based Resource Management Project (fiscal 1998) The high growth rates which the Philippines * Mindanao Integrated Rural Infrastructure economy has been registering in recent years Project (fiscal 1999) do not reflect the persistent sluggishness of the rural sector. With almost half of the population Results continuing to reside in rural areas and a rural poverty incidence of about 50 percent, the govern- Among the short-term impacts to be expected ment has directed attention at the opportunities are the following: and constraints of the rural economy. The Bank * Turnaround of problem project status of has just completed a rural development strat- the smallholder coconuts project through egy which identifies key policy, institutional improved project management and field and investment requirements and is currently orientation under discussion. Follow-up work, lending * Development of government under- and nonlending, would be facilitated under the standing of market-assisted options for the action plan, particularly with regard to trade pol- agrarian reform program, especially for icy, rural infrastructure, water resource manage- farm sizes of 5-24 hectares ment, agricultural extension and research * Establishment of appropriate instru- and sustainable uplands agricultural systems. ment for channeling donor and central government funds to rural communi- Program Activities ties, which enhances local demand-driven approach Nonlending services * Initiation of key studies for water resource * Dialogue with government on access to development planning and opening of dia- markets and implications of international logue on institutional reforms agreements (fiscal 1998) a Exchange of views on concerns with re- * Support on institutional rationalization in gard to opportunities and constraints of agriculture sector (fiscal 1998) international market access * Support on market-assisted approaches to * Expansion of rural finance sources through agrarian reform (fiscal 1998) wholesaling operation * Agreement on a plan for development of Implementation and monitoring of approved lending rural communities in Mindanao following * Smallholder Coconut Farms Development peace agreement * First Water Supply, Sewerage and Sanita- tion Project (rural water and sanitation) Next Steps * Environment and Natural Resource Man- agement Project (sector adjustment loan) The lending program has already been dis- and Conservation of Priority Protected cussed with government and initial talks Areas (GEF) have been held on the priorities for follow-up . Communal Irrigation Development Pro- work to the rural development strategy. The ject II next steps concerning confirming the priori- * Irrigation Operations Support Project II ties for nonlending activities, clarifying the . Rural Finance I costs and timing for these activities and potential contribution in terms of financial Preparation and approval of new lending and human resources, especially within the * Water Resource Development Project Bank. 112 Rural Development: From Vision to Action Vietnam marketing regime to access international markets Program Focus * Clearer understanding of the rural-urban linkages, in particular migration pressures The selection of Vietnam as one of East Asia's on urban centers focus countries is based on the importance of * Realistic assessment of the limits of rice the rural economy in promoting the nation's production and the opportunities for growth and alleviating its poverty. During fis- diversification cal 1998-99, a comprehensive program of lend- * Development of appropriate social, ing and nonlending activities will be directed economic, and technical packages for at rural development. Designation as a focus vulnerable populations, especially in envi- country is expected to enhance the analyti- ronmentally sensitive areas cal/policy work to be undertaken through * Agreement on the preconditions for sus- greater partnership between EAP, RDV and tainable microcredit EDI. This in turn will lead to more effective * Initiation of a system of wholesaling country dialogue and improved design and and related accreditation of financial insti- monitoring of lending operations. Policy and tutions to support and expand rural analytical activities in 1998 will include a study finance on the sources of agricultural growth, an EDI * Testing of joint central/local strategy for seminar on agricultural growth strategies, and tertiary canal development and operation identification of vulnerable populations. and management of irrigation systems a Establishment of viable method of local Program Activities planning, design and execution of rural infrastructure Implementation and monitoring of approved * Application of a basin approach to water lending resource development a Agriculture Rehabilitation Project * Irrigation Rehabilitation Project Next Steps - Rural Finance Project - Rural Transport Project The lending program has already been dis- cussed and confirmed with government and Preparation and approval of new lending initial talks have been held on the priorities for * Agriculture Diversification Project (fiscal policy/analytical work. The next steps indude 1999) confirming the timing and costs of the program * Forest Protection and Barren Lands Devel- and the potential contributors inside and out- opment Project (fiscal 1998) side the Bank. * Mekong Water Resources Development Project (fiscal 1999) World Trade Organization and the World * Coastal Wetlands Protection and Develop- Trading System ment Project (fiscal 2000) Program Focus Results Agricultural products are for the most part Among the short-term impacts to be expected highly tradable and distortions to international are the following: trade are among the more important obstacles * Greater recognition at the macro-level to efficiency in the sector and to poverty alle- of the policy constraints on the agricul- viation in rural areas. The WTO is a major tural sector and the need for a trade and player in the management of agricultural trade Focus Programs by Region 113 policies, and to a lesser extent domestic poli- tems. Through its analytical capability, which cies. It has a full work program in monitoring the WTO lacks, the Bank can inform debate and the implementation of agreed reforms, includ- define agendas. For example, it was the Bank ing their effects on food-deficit and least devel- first quantified the small extent of liberaliza- oped countries, and preparing for future tion in the Uruguay Round; current work is negotiations in 2000. uncovering some distinctly illiberal elements The World Bank can aid this process in a in the implementation of the Round. number of ways, thereby helping to keep it up Analyzing the world trading system and to speed and responsive to developing coun- maintaining the relationship with WTO are tries' needs. By strategic interventions, for ex- mainstream tasks for DEC through the inter- ample at the WTO's Ministerial Meetings and national trade division. However, agriculture its Committee on Agriculture, it can press de- is only one of many topics that must be covered veloped countries for reform. In developing by a small staff. If the international dimension countries the Bank can encourage trade policy is to play an appropriate role in rural strategy reforms and help policymakers to take advan- and policy, incremental resources will be tage of developments in the world trading sys- needed. APPENDIX B Regional Summaries D iversity among regions is striking, as education, health, roads, and water supply and sani- shown in appendix table B.1. Diversity tation. within regions is also striking, as illus- The leadership, drive, and responsibility for trated in appendix table B.2 for Latin America sustained agricultural growth must be in the and the Caribbean Region. hands of the Africans. Therefore, a major chal- lenge is to ensure that there is a strong African Africa Region Rural Strategy commitment to agriculture and rural develop- ment. A second major challenge is for the The overwhelming development imperative in African countries to increase productivity Africa is to increase food production and raise through improved seed, fertilizer, and weed incomes in rural areas. Sustained agricultural control technologies and through better soil growth of at least 4 percent annually will contribute and moisture conservation. This will necessi- significantly to reduction of poverty and chronic tate measures to improve research, extension, food insecurity, while increasing the incomes of and seed systems. The third major challenge is those involved in agriculture. But to improve the to make agriculture competitive and profitable quality of living in rural areas, this effort needs to be through policy changes, stronger institutions, combined with investments in people through and improved services. The fourth major chal- Appendix table B.1 Regional differences East Asia and Europe and Latin America Middle East and Africa the Pacific Central Asia and the Caribbean North Africa South Asia Total Agriculture Percent of GDP 1993 30a 17 Oa Oa 20a 30 15 Growth rate 1980-93 1.7 4.0 -0.2 2.1 4.4 3.1 2.2 Rural population Percent of total 1993 70 69 35 29 45 74 62 Growth rate 1980-93 2.2 0.6 -0.7 0.7 2.0 1.7 1.0 Agriculture in trade Percentof exports 1992 32 15 n.a. 30 5 21 18 Percent of imports 1992 16 15 n.a. 16 21 21 17 Notes Low- and middle-income countries as in World Development Report 1995 (Word Bank 1995b). a. Estimated. n.a. not available. 114 Regional Summaries 115 Appendix table B.2 Intraregional differences (Latin America and Caribbean example) Latin Amerca and the Diversity within Latin America Caribbean average Regional rank and the Caribbean Region Agriculture Percent of GDP 1992 10 5 25 percent in 4 countries Growth rate 80-93 (percent) 2.1 4 3 percent in 6 countries Rural population Percent of total 1993 29 6 50 percent in 5 countries Growth rate 1980-93 (percent) 0.7 5 2 percent in 5 countries Agriculture in trade Percent of exports 1992 30 2 50 percent in 11 countries Percent of imports 1992 16 3 Little variation Notes. Data for 21 countries of Latin America and the Caribbean with populations over one million, not induding Cuba. Regional rank. 1 = highest; 6 = lowest lenge is for African countries to improve the of the Region's GNP, 40 percent of exports and sustainability of production systems through 70 percent of employment. About 70 percent better management of natural resources. of Africa's poor live in rural areas and depend The Bank will be more selective in its support on agriculture and agribusiness. to countries, focusing on those demonstrating But African agriculture has not performed to commitment to appropriate agricultural policy its potential. Agricultural production in this re- and investment program. The Bank will assist gion has grown at about 2 percent a year over such countries to develop comprehensive agri- the past 25 years, compared with an average culture and rural development strategies. annual population growth of 2.8 percent dur- Within these countries, the Bank will concen- ing the same period. Under existing demand trate on a few selected national systemic and supply trends, cereal imports and food aid programs of high impact. Infrastructure, are expected to rise to 30 million MT in 25 health and education components would be years, a threefold increase from the current supported through non-agricultural opera- level. In Africa, agricultural productivity for tions in the framework of a rural develop- both food and cash crops remains low. Pres- ment strategy. Finally, the Bank will support ently, less than 15 kilograms per hectare of fer- region-wide African efforts such as by GCA, tilizers are used in the region compared to SPAAR, SG-2000, and other institutions to more than 50 kilograms per hectare in South mobilize commitment within Africa. These ef- Asia. Also, less than 6 percent of the cropped forts will seek to develop a donor consensus area is now irrigated in the region. as well. Africa's agricultural exports have also de- clined, harming Africa's ability to pay for Assessment of African Agriculture needed imports of equipment and inputs for agriculture and industry. This is partly because Sub-Saharan Africa is a diverse region in terms of national policies which have discriminated of physical environment, sociopolitical and against agriculture, including direct agricul- economic characteristics, and resource base. tural taxation, monopolistic practices and im- Many African countries are still at the pre-take- perfect domestic marketing arrangements. But off stage of development. Overall, Africa's eco- it is also because of policies in OECD countries nomic growth and poverty reduction are which limit agricultural imports from African dependent on agricultural performance. This countries. The rural strategy includes propos- is because agriculture accounts for 35 percent als to improve access to the markets of OECD 116 Rural Development: From Vision to Action countries, which, if successful, will especially incorporates the key elements of the T&V ex- benefit African countries. tension systems. In these projects, an existing The growing number of people in rural areas public sector extension service is restructured of many African countries need farmland which so that trained African agricultural staff teach they create by converting forest and grazing land farmers improved agricultural techniques in to farmland. This often results in considerable farmers' fields. Studies of agricultural exten- environmental damage: soil erosion, loss of soil sion projects in Burkina Faso, Kenya, and fertility, water degradation, and deforestation Mali, financed by the World Bank, show high are problems in virtually all Africa. economic rates of return and millions of people Unlocking the door to agricultural develop- benefiting. Increasingly, these projects help ment requires a closer look at the diversity of women, who are Africa's principal food pro- experience within Africa. African countries ducers. The World Bank presently finances with poorly performing agricultural sectors some 27 such projects in Africa. Currently, fol- share common characteristics. For instance, in lowing the findings of the OED review, the Angola, Democratic Republic of the Congo, focus is on making national extension systems Ethiopia, Liberia, Mozambique, Somalia, more responsive to the needs of the farmers, Sudan, and others social and political break- more cost effective, and more participatory (in- downs have prevented development projects cluding farmer groups, NGOs, and the private directed at agricultural and economic growth sector). from being effective. In other countries over- On balance, the long-term sustainability of valued exchange rates, government price con- agriculture in African countries will depend trols, restrictions on private investment, poor largely on political stability, strong govern- technical advice provided to farmers, and in- ment commitment, improved capacity to plan adequate infrastructure hinder private invest- and manage, strong private and cooperative ment and growth. sectors, and stakeholder participation in the However, there are pockets of success in development process. The success of agricul- Africa. Kenya's agricultural sector has grown be- ture will determine the success of African so- tween 3 and 4 percent a year for the past 25 years. cieties in meeting the needs of poor people and Other countries that have experienced a turn- in moving onto a sustainable growth path. around in agriculture in the past few years in- However, such success does not depend on ag- clude Benin, Botswana, Burkina Faso, Mali, ricultural investment alone. It requires a con- Tanzania, Uganda, and Zimbabwe. The agricul- certed effort towards the decentralization of tural sector in Ghana, Cote d'Ivoire, Malawi, and service delivery and building of management Zambia is looking better. In these countries, the capacity in communities at all levels, as well as governments have improved economic manage- complementary investments in the provision ment, kept exchange rates at an even keel, kept of key services such as education, health, water budget deficits down and the quality of public supply and sanitation, rural roads and mar- investment high, invested in rural infrastructure kets, financial intermediation, and the promo- and in rural education and health. Each has also tion of small and medium-sized enterprises in supported the development of agricultural tech- rural areas. nology that farmers use. Good economic and ag- ricultural policy makes farming profitable and African Development Imperative gives farmers incentives to invest and expand production. These countries have much more to Goal. Target a real agricultural growth rate of do to keep agriculture growing, but their relative at least 4 percent annually through improved success points the way for the rest of Africa. technology and increased productivity focus- One type of agriculture project that is promi- ing on impact crops. Push more countries into nent in African countries is extension, which this category within a decade. Regional Summaries 117 Strategic interventions. Place emphasis on * Technology development and adoption: multi-sectoral development in rural areas with promoting technical progress at the agriculture evolving as the impact sector to im- farm level, and strengthening researcher- prove the livelihoods of people in rural areas. extension-farmer linkages African countries need to: * Rural infrastructure: establishing rural * Establish high commitment for agriculture roads, water supply and sanitation, electri- * Make agriculture profitable and competi- fication, social services, and improving tive urban-rural linkages * Involve empowered farmers and other * Empowerment of rural people: increasing stakeholders farmer participation in the development * Create enabling political and macro- process and resource allocation and man- economic environment agement, and developing farmer organiza- * Implement high impact investments (agri- tions cultural services, infrastructure, natural re- * Natural resource management: improving sources management) the sustainability of production systems * Address "nexus" issue-population/agri- throughbetter management of soils, water, culture/environment/poverty linkages. pasture, and forests. Improving the welfare of the rural popula- The above strategy is rural economy-oriented tion will involve (a) supporting investments in and multisectoral. Its emphasis is on pluralism agriculture, rural infrastructure, human health, based on public sector interventions, market- and education; (b) ensuring that agriculture oriented approaches, and popular participation. evolves into a business activity in an enabling The strategy promotes rural development that is environment; (c) providing economic opportu- equitable and environmentally sustainable. nities that promote entrepreneurship and en- In each country the Bank will focus on a few courage investments; and (d) improving selected national programs of high impact. The quality of life by making households self-suf- key areas of support in agriculture would con- ficient in basic needs. centrate on systemic solutions, including re- search, extension, animal health, and natural Bank Strategy and Action Plan for Africa resources management, plus one or two other areas (irrigation, rural finance, marketing, or Mission. Poverty reduction and improvement private sector development). The Region will in the quality of people's lives in African coun- finance only time slices of these long-term na- tries. tional programs and eliminate financing of op- erations that fall outside the core areas. This Objective. Get results on the ground. Promote approach will eventually lead to financing of development impact to: integrated sector programs. * Increase food production and farm income In research, extension, and animal health the * make households' food, water, and en- focus will be on technological transfer that will ergy secure augment productivity and farm income, and * Restore and maintain the natural resource on pluralism by involving major stakeholders base. in planning, development, and provision of services for beneficiaries. In natural resources Strategy. The Bank's agricultural strategy in management the emphasis will be on soil and Africa has five key elements: water conservation, recapitalization of soil fer- * Improved policy regime: creating an tility, agroforestry, and integrated water and enabling policy environment for entre- forest investment programs. Special attention preneurship and agribusiness develop- will be given to community capacity building ment and support to smallholders in agriculture. 118 Rural Development: From Vision to Action The Region will continue to support policy pert manner. We are exploring how these reforms, capacity building, and good sector hubs might include not just Bank staff, but management in agriculture. In the area of pol- also staff form alliance partners, such as icy changes more attention will be given to FAO and IFAD. (a) land tenure and property rights; (b) market * Intensified efforts in five high-potential liberalization; (c) natural resource pricing; countries: Guinea, Madagascar, Mali, (d) financial sector reform in rural areas; and Malawi, and Uganda. We want to demon- (e) cooperative development and strengthen- strate in these countries that, through a ing of farmers groups/associations. Infrastruc- concerted effort of the government, the ture operations, health, and education will be Bank, and alliance partners, it is possible to supported through non-agricultural opera- significantly accelerate the pace of rural tions under a common strategy for develop- growth and poverty reduction in Africa. ment in rural areas. Donor coordination and * A shift to program lending away from in- partnership will be an important element in the dividual project lending. National pro- Region's approach to agricultural develop- grams will often be preceded by piloting, ment, particularly as the Region moves toward participatory sector work, and consensus a broader sector approach in providing sup- building in the countries and with other port to agriculture. The Region will promote donors, until scaling up of successful of policy dialogue with a broad range of stake- experiences becomes possible. The scope holders, including other multinational institu- of program loans maybe defined narrowly tions, bilateral donors, private sector groups, on a subsector basis, for example, agricul- and local and international NGOs. Special tural services or rural primary health care, emphasis will be placed on improving coordi- or include a broader slice of agricultural nation with the IFC, CGAP, and MIGA. A col- and natural resources management issues, laborative initiative between the Region, the as appropriate for specific country condi- Center, and other international organizations tions and capacities. to find ways of improving soil fertility in Africa * Strengthening our alliances in the area of is already underway. The Region will maintain rural development in Africa with civil so- and expand its presence in regional fora such ciety organizations, FAO, IFAD, AfDB, the as SPAAR and the Conferences of African Ag- EU, and bilateral donors. We are actively ricultural Ministers for West and Central involved with NGOs and are well- Africa, and Eastern and Southern Countries. advanced in restructuring our relation- ship with FAO and IFAD. Priorities. The Region has the following priori- The task is difficult, but these agreed upon ties for rural development: priorities will get us a long way towards in- * Further improving the performance and creased impact on the rural poor of Africa, who impact of the present rural development have waited far too long for improvements in portfolio. their lives (appendix table B.3). * Development, synthesis, and building con- sensus on coherent rural development East Asia and Pacific Region Rural Strategy strategies and policies, which in turn, are clearly reflected in our country assistance The main characteristic of East Asia and Pacific strategies. is fast growth, including fast agricultural * Increased client and field orientation. In growth (4 percent per year since 1980), and particular, we will develop hubs in several good social service provision nationwide. Ex- African locations from which the needs of cept for Indochina and the poorer areas of our clients and our locally-recruited staff China, East Asia and the Pacific countries are can be served in a flexible, timely and ex- not IDA-eligible and have to borrow in IBRD Appendix table 9.3 Africa Region: Rural Development Action Plan priority actions Timetab(e for remaining Item Required action Actions completed and ongoing actions Responsible entity Country Assince Stateges Develop strategies for rural de- Develop multisectoral strategy for development in rural Agricultural sector strategy notes prepared for most countries, but FY98 CDs with inputs velopment as key input into areas with agriculture as a focal sector (Target: Burkina integration required with other components such as infrastructure, from Technical CASs. Include rural infrastruc- Faso, Congo, Ghana, Kenya, Madagascar, Malawi, health. Rural strategy cornpleted for Mali and being completed for Departments ture, health, education, and pri- Senegal, Uganda, Zambia). Involve African stakeholders Congo, Guinea, Guinea-Bissau, Mauritania, Sao Tome. Growth (TDs) in the vate sector development in preparation prospect studies underway for Ethiopia, Malawi, and Zambia. Region and the Center Next crifical step is to ensure that CASs include rural strategies with FY98 CDs/TDs multisectoral focus and comprehensive treatment of agriculture. Special attention will be given to the focus countries: Guinea, Madagascar, Malawi, Mali, and Uganda. Incorporate agricultural policy Move toward broader sector and subsector investment C6te d'lvoire and Malawi adjustment programs feature core sector FY98 CDstTDs reform in the policy dialogue programs with policy content (concentrating on market reforms. Integrated agricultural sector investment programs (ASIPs) and in adjustment liberalization, land tenure, resources pricing, and rural underway in Zambia and proposed for Kenya, Lesotho, Mali, finance), capacity building elements, and participation of Mozambique, Senegal, Swaziland, Tanzania, and Uganda. Other stakeholders including donors (target: 20 percent of the important work planned include Congo Privatization Review fand five-year Lending Program, FY96-FYO0) Institutional Review in Nigeria and rural finance initiatives in Mali and Senegal. Commitment and Capacity Building Help generate commitment to Establish an African Agricultural Council in collaboration Further dialogue and discussions took place with the Africans through FY98 TDs rural development by African with other donors and with the two regional conferences the Global Coalition for Africa Conference in November 1996 and the governments and civil society on Ministers of Agriculture two Regional Conferences of the Ministers of Agriculture to establish a Council. The ESD Conference SG 2000 Workshop in September 1996 provided fora to discuss and develop a common approach to agricultre development in SSA. Support Special Program of African Agricultural Research Guinea, Mali, and Senegal selected as pilots to strengthen national FY98 TDs in collaboration with International Agricultural Research research systems and linkages with IARCs. Emphasis on institutional Centers and CGIAR reforms, priority setting, improved donor coordination, and better research, extensions, and farmer linkages. Ongoing capacity building initiatives in Kenya and Tanzania and proposed for Zimbabwe. New and ongoing subsector programs in agricultural services (researchv extension/natural resources management) in most Eastem, Sahelian, and Southem countries. At the donors' meeting in Rome in October 1996, the Bank participated in discussions relating to agricultural services (research and extension) to develop consensus on a common approach to helping African countries. (Table contames on the fllowing page) Appendix table B.3 (continued) Timetable for remaining Item Required action Actions completed and ongoing actions Responsible entity Build African capacity to man- All projects in the pipeline to include capacity building Most projects include capacity building components and are prepared FY98 TDs age agricultural development component wih more participatory approaches, including stakeholders, beneficiary surveys (Ethiopia, Guinea, Kenya, Mali, Mauritania, Senegal, Uganda). Continued attention would be emphasized through ongoing supervision efforts. Gender beneficiary assessment completed in Gambia, Mali, Mauritania, Senegal. Ongoing efforts will also be directed to developing monhoring and evaluation tools for NRM and establishing a region-wide network for support. Build commitment and partner- Target commitment among the key Bank stakeholders Ongoing efforts through country teams and cross-divisional ESW. A FY98 Africa Region ship within the Africa Region re- (CDs, country teams, macroeconomists, agricultural and joint govemment/lDA review of implementation programs and agriculture and garding key elements of the other operational staff) preparation of CAS was conducted in December 1995 in Mali with the environment regional strategy, prioriy areas country team and management team participation. This is an example group of focus, and division action of best practice. plans A workshop for all agriculture and environment staff (including field staff) was held in October 1996 in Washington to finalize the agricutural strategy and work program. Another workshop is planned for FY98. Product Quality Link 5-year Lending Program (FY96-FYOO) and ongoing Agricultural Group Team reviewed FY97 and FY98 Lending Programs FY98 CDs/agriculture operations to core areas of support to ensure that projects/programs support the Region's strategy and environment core areas of support. group Conduct beneficiary assessment in several countries to Beneficiary assessment completed in Mali, Mauritania, and Senegal FY98 TDs enhance client consultation and participation and assess and planned for Cameroon, Mozambique, Guinea, Nigeria, Uganda, results on the ground and Zambia in FY97. Focus on client consultation and development impact, Well underway through systematic reviews of agriculture and Ongoing CDslTDs and use participatory problem solving approaches to deal environment portfolios and mid-term reviews relating to specific with ongoing operations. projects in many countries. Region completed the bulk of its restructuring of the agriculture. portfolio in 1995/96. Provide incentives to staff for getting results on the Further work needed to establish a feedback system that includes all FY98 CDs/TDs ground; establish criteria for evaluation task team members, clients, country teams, and management Special Initlatives Implement the soil fertility action plan Through a participatory approach and consultations with other FY98 Environment partners, steps have been taken to: (1) establish an informal group, RDV secretariat, (2) form an Advisory Group of African and donor CDs/TDs participants, (3) raise trust funds for pilot programs and analytical FAO work, (4) address soil fertility measures through several agricultural services projects, and (5) develop a work program jointly with FAO to implement pilot projects in a few countries. Ongoing work on the preparation of soil fertility action plans and rock phosphate studies for Burkina Faso, Ghana, Kenya, Madagascar, Malawi is progressing, to be completed in FY97. Soil fertility was discussed during the World Hunger Conference in Rome in 1996. Implement agricultural services acton plan Efforts ongoing with emphasis in Benin, Burkina Faso, Ghana, FY98 TDs Guinea, Madagascar, Mozambique, Tanzania, Uganda Promote private sector development and rural finance Rural finance initiatives including pilot programs underway in Mali, FY98 CDs/TDs through pilot programs in Ghana, Guinea, Malawi, Zambia Senegal, Tanzania, and Uganda and initiatives to promote agribusiness development in Malawi and Zambia Documentation and Reduce time, cost, and documentation in processing Guinea and Tanzania agrcultural services projects were placed on FY98 CDs/TDs Processing operations (Target: 4 operations in FY98) fast track; the Nigeria Second Technology Prqect saved 20 staff weeks by combining appraisal and preappraisal activities. Review of FY98-99 Lending Program to identify operations that can be targeted for time, cost, and documentation reducton Donor Coordination/ Enhance donor consultation, improve dissemination of Steps taken to strengthen collaborative partnership with FAO, IFAD FY98 TDs Partnership information, and build consensus (including Cooperative Agreement with FAO and IFAD), and SG 2000 on food production efforts in Afn'ca and on new approaches: irigation, soil fertility, fertilizer marketing (Kenya, Madagascar, Malawi, Mali, Mauritania, Senegal, Tanzania, Zambia, Zimbabwe). This effort will continue to establish partnerships with the EU and bilaterals. * Region cosponsored workshop on African Forest Policy Forum in FY98 TDs August 1996 to focus on best practices in management of forest resources. Next forum in FY98, focusing on policy reforms and capacity building. * Region sponsored water workshops in Nairobi and Dakar, FY98 CDs ivolving bilateral and multilateral agencies and representatives from African Public Agencies, private sector, and NGOs to develop integrated approach to water resources management. The Region is designated as the co-chair of the water component of the UN's Special Initiative for Africa. Efforts will continue to develop programs at country level and support measures to foster regional cooperation. (Table continues on the following page) Appendix table 2.3 (continued) Timetable for remaining Item Required action Actions completed and ongoing actions Responsible entity Staff Development Deploy agricultural staff in the Region as a core group Plan for effective deployment of agricultural staff in the Region being FY98 Agriculture and and Training focusing on development impact at the country level implemented. Skill mix being adjusted toward new priorities environment ..__ _ _ _ _ _ _ _ _ _ _ group Implement training program for local agricultural staff Most local staff participated in rural week and strategy training during FY98 Agriculture and and develop terms of reference for functions and FY97. Will again attend rural week and complete strategy training. environment responsibilities group Complete ESSD training at Duke University for CDs that, The Region prepared a training component for the ESD training at FY98 Task managers/ have not participated in the program (CDI, CD5) Duke within the context of the overall training program. TDs Build partnership among sectoral staff within the Africa The agriculture and environment group will implement a framework for FY98 Agriculture and Region; agricultural staff to take initiative in working and increased collaboration with infrastructure, human resources, and environment planning jointly with staff dealing with infrastructure, private sector groups. group health, education, and private sector development Regional Summaries 123 terms. A major challenge is that borrowers approved in 1996, and five additional projects have their own preferences for uses of IBRD being prepared). In parallel stand-alone village lending, that may not be coincident with other infrastructure projects are targeted to poverty priorities. Virtually all East Asia and pacific villages. In addition the Indonesia rural devel- clients are willing to borrow for large dams, opment program supported by the Bank em- and the Bank response should be based solely phasizes a series of micro-credit projects on evaluation of economic, environmental, and targeting under-served rural groups, and sev- resettlement costs and benefits. Many coun- eral projects designed to arrest natural re- tries seem to have become less interested in source degradation on conserve threatened borrowing for agricultural research or water- biodiversity resources. shed management (Indonesia is an exception) Some of the actions undertaken to improve and more persuasive analysis will have to be the performance of rural sector interventions undertaken. A related challenge, in the sense supported by the Bank are shown in appendix that a sophisticated Bank response is required, table B.4). arises in respect to (a) financing of high tech- The areas of emphasis are funded in part by nology agribusiness and (b) reform of market- redeployment with the rural sector activities. ing parastatals. For the former, new types of Thus, in Indonesia, more integrated regional lending instruments are needed and new types projects have taken over commodity-focused of collaboration with the IFC. For parastatal re- projects (such as tree crop, fisheries, or live- formn, there sometimes is a danger, in nominally stock projects which were more common in the market economies, of replacement of a relatively late 80's and first half of this decade. Across transparent and efficient parastatal by an opaque the Region, micro credit projects have replaced private monopoly. Pragmatism will be re- more traditional directed credit programs, and quired in parastatal reform. A third challenge comprehensive water management projects are is the sheer heterogeneity of the region, rang- replacing traditional narrow-focus irrigation ing from some of the largest Bank borrowers projects. (China and Indonesia) to some of the smallest While the program described above is by borrowers (Fiji, Laos, Mongolia, Pacific Is- and large funded from existing and projected lands). Donor competition is strong but can be budget allocations, there are additional non- turned to an advantage, where another donor lending initiatives being contemplated, for is willing to take the lead in the agricultural which resources have not yet been secured. sector of entire small countries. Three countries They are discussed below. in the Region have been selected as focus coun- tries within the rural development action plan. Analysis and Best Practice Guidelines These are China, Vietnam, and the Philippines. on Upland Agricultural Technology Other significant agricultural programs al- ready undertaken by the Region are the Indo- An economically viable agricultural farming nesia rural and natural resources program, system for upland (rainfed and hilly) areas is which involves on average an annual admin- an issue on which the information available is istrative budget of US$2.9 million, and an ad- not yet adequate. Many areas in South East ditional trust fund budget of US$1.0 million. Asia fall under this category, and they are typi- The Indonesia program entails a series of agri- cally inhabited by poorer segments of the rural cultural area development projects (each focus- population. Furthermore, in many such areas ing on one or two of Indonesia's 24 outer island the existing farming practices are not fully provinces (which lag behind Java in most as- compatible with long-term sustainability of the pects of rural development) where agricultural ecosystem (for example, slash-and-burn agri- technology diffusion and village infrastructure culture). While agricultural research in re- development are promoted (two such projects search stations within the region and interna- 124 Rural Development: From Vision to Action Appendix table B.4 Actions taken to improve performance of rural development projects Action Objective Expected outcome Indonesia Introduced a participatory 'Needs Assess- Increase the effectiveness of rural Greater impact of Bank-financed rural ment" procedure for agricultural area develop- development projects by targeting development projects being introduced ment projects under preparation (1995). interventions to bottlenecks identified as during 1996-1998, to be completed in most pressing by the ultimate 2001-2003 beneficiaries. Design rural development projects with local Improve "ownership" of development Greater likelihood that Bank-financed government (province and district level) as activities by local authorities and the interventions, initiated in the years 1990- key implementing agency (in the past, central likelihood that design will fit local needs 1999, will be sustainable after project agencies were the key implementing organi- and capacities completions in 2001-2003 zations). Design village infrastructure projects in a flex- Improve effectiveness of Bank-financed Improved productivity of village economics ible manner whereby village community se- village infrastructure investments through better transport. Improved living lect the types of infrastructure most suitable standards through better water supply to their needs. The community controls and implements the project in the village (VIP I project, 1995; VIP II project, 1996). Vietnam, Philippines Clustering of related projects and task teams Ensure consistency in approach, learning Improve project implementation across projects and skill synergies performance (fiscal 1998-99) * Cost efficiencies (fiscal 1998-99) - Improved technical quality in multi- sector projects and/or combined approach of parallel single sector projects (fiscal 1998-99) Vietnam Delegation of Vietnam Irrigation Project to * Improve implementation performance * First year implementation and Bank resident mission at critical launching phase response already helped avoid * Improve Bank response time obstacles due to complex Bank * Reduce cost guidelines * Costs reduced by more than 30 percent in fiscal 97 versus fiscal 1996. Further reductions expected in fiscal 1998-99 General (EA1) Hiring of specialists in natural resource man- * Enhance divisional skills to address * Engage client and enhance portfolio for agement (senior ecologist and water resource critical natural resource management water, coastal resource, and forestry specialists) issues issues ( evident in all countries) * Create synergistic teams (already in place) Transfer of rural infrastructure responsibilities * Enhance community based approach, * Manor nural infrastructure initiatives in from infrastructure to agriculture division sustainability across rural infrastructure Philippines and Vietnam/Laos applying sectors new approaches (already underway) * Raise quality level of what comprise major investment in rural development projects Regional Summanies 125 tionally produced various proposals, many of which are either unique to the Region or imn- these are not fully tested under the typical socio- portant for Bank strategy in the Region. Many economic conditions prevalent in upland areas. A of these features give rise to issues which the compilation and analysis of actual diffusion expe- Bank must address either through strategic rience will benefit agricultural assistance pro- choices about approaches to different issues or grams across the Region. Currently, there are no through changes in internal Bank processes. staff with up-to-date expertise in such farming. It This note describes some of those features, lays is estimated that an analytical effort to shed light out the Region's general strategy for lending on the issue would require US$500,000 over the and non-lending services, and then proposes next three-year period. Client interest in the topic specific actions to address the issues. is evident from interactions in the context of re- search and extension projects as well as upland Features and Issues of the Rural Sector development projects. The information gained in ECA Countries through a study and in-house expertise would allow an increase in the number of projects ad- * The Region is comprised of twenty-seven dressed to such areas over the medium term. countries, the majority of which are new members of the Bank and have limited Agro-Industrial Development experience with its operations. Inde- pendence has brought profound changes T'here is much interest among the faster grow- to the political and economic systems of ing countries in the region in agro-industrial these countries and the situation continues growth as an avenue for increased value to evolve rapidly and dramatically. added. While this is an area where private sec- * The political transition in many ECA coun- tor activity is dominant (and the IFC is increas- tries has resulted in a wide divergence of ingly active in), there are some public good viewpoints (from communist holdovers to aspects where governments can contribute in bold reformers) and this has made reach- the earlier phases of agro-industrial develop- ing consensus on a vision for agriculture ment, such as market information, and facili- difficult. While generally true across the tation of technical know-how acquisition, board, this has been particularly important specific types of insurance etc. International ex- in agriculture where anti-reform agrarian perience has indicated some useful formats of lobbies are strong and ministries of agri- government assistance as a catalyst for institu- culture tend to be the least reform- tional arrangements that are ultimately taken oriented. over by the industry (for example, producers' * There is extreme heterogeneity across associations). However, the Region lacks the countries, exemplified in a number of ways, expertise and the resources to provide sus- for example, (a) the extent to which policies tained advice and assistance on this topic (pres- have moved from command to market, ently, ad hoc inputs are sought from short-term (b) the types of farms that exist (from large- consultants). It is estimated that US$600,000 scale collectives to small-scale subsistence), would be required to facilitate an adequate and (c) whether the agricultural sector has level of service to Regional clients over the next historically been net taxed or net subsi- three-year period. dized (and, therefore, whether the sector is likely to expand considerably or whether it Europe and Central Asia Region may need to contract). Rural Strategy * In many countries there has been a com- plete collapse of the basic systems (finan- There are a number of features of the rural cial, marketing, trade, and payments) which sector in Europe and Central Asia countries have devastated the highly commercially- 126 Rural Development: From Vision to Action linked farming sector that existed prior to land, excessive use of chemicals and lack Independence. The challenge of abrupt re- of policies to ensure sustainable use of for- structuring and rebuilding of agriculture est resources. is very different from the gradual sector development occurring in other Regions. Internal Bank Issues Influencing Rural . Many of the former state or collective Development in ECA farms were inefficient producers of agri- cultural commodities, generating large * There is a lack of integration of rural devel- losses for the budget, and producing poor opment issues into the CAS due, in part, quality output that could be sold only at to insufficient consideration of macro- eco- heavily subsidized prices. nomic issues on the part of agricultural * While not specific to agriculture, the labor staff and a lack of understanding of force is generally not trained for operating the agricultural sector by the country in a market economy, does not understand economists. the basic principles or consequences of the . There is a fragmentation of agricultural transition and has not developed coping staff into small divisions without a critical skills or strategies. It is thus ill prepared mass for productive intellectual interac- and somewhat resistant to change. On the tion and intra-sectoral liaison. other hand, the agriculture labor force is . There is a difficulty Bank-wide in support- much better educated than in other Re- ing public intervention in agriculture as it gions and probably has considerable po- is essentially a private-sector activity. The tential to succeed under a new economic Bank as a whole is limited to financing TA paradigm. (including institutional development), ba- * Rural poverty has a different character sic public goods (primarily rural infra- from that in other Regions. It is not the key structure) and intermediation (lines of issue in ECA countries, although poverty credit). Member governments are often in general has increased during the transi- unwilling to borrow for TA and the rela- tion. In most ECA countries, those with tively greater distortions in price and trade access to private plots of land have been systems, and the general lack of privatiza- best able to cope with the general economic tion in ECA countries has made it all the crisis. Nonetheless, the increasing poverty more difficult to identify projects that can rates have raised sensitivities to policies productively add resources in the rural that create even short-term reductions in sector at this point in time. income. * The multidisciplinary nature of activities * Many of the Central European countries in the rural sector (encompassing infra- and the Baltics are actively engaged in ac- structure, basic social services, agriculture, cession discussions with the European Un- agribusiness, micro-enterprises, commu- ion and are developing agricultural nication networks) means that Bank staff policies both to better position themselves must be fielded from diverse sources. Yet during membership negotiations and in divisional boundaries in the Bank often anticipation of eventually applying the inhibit coordination necessary for this to Common Agricultural Policy. These con- occur. cerns often transcend concerns for effi- * There is a dearth of staff in particularly key ciency and rationality of public policy in areas, most notably, sector economists the agricultural sector. who can bridge the gap between techni- * There are severe environmental problems cians and macroeconornists, financial insti- fostered by former command policies, par- tutions specialists and practitioners in ticularly the inappropriate use of marginal agribusiness. Regional Summanries 127 * There is also a dichotomybetweenvery com- mum package, along with specific targets, petent technical/analytical staff who are not should be defined in the CAS. particularly well suited to working closely o Rural sector lending should be based with governments, and staff who relate well on a graduated response to thresholds to borrowers, can integrate their needs and for macroeconomic and sector policy bring them along with a program, but who reforms (for example, trade and price are not as strong at analysis. The Bank has reforms, ownership change, demonopo- traditionally assumed that one person can lization/deregulation and financial always embody all of these skills and can sector reforms) as shown in appendix task manage a project alone, but this has not figure B.1. proven to be true in all cases. o Adjustment loans supporting policy re- * There has been inadequate cooperation forms in all four areas can begin early and liaison with key partner organizations, on in the process to support progress particularly the EU which is playing an in macroeconomic policy and support increasingly influential role in the devel- liberalization. opment of ECA countries. a Projects with long lead times, for exam- ple, research programs where there is a Portfolio Strategy clear public goods component, may need tobeginbefore anticipated reforms Lending strategy are actually implemented. * A minimum amount of reform in the o Cadastre and technical assistance pro- macroeconomic and agricultural policy jects can also be introduced early in the framework is required before there can be reform process to accelerate land priva- any intervention in the sector. This mini- tization and other policy changes. Appendix figure B.1 Progress implementation strategy Operational initiatives Credit lines for the emerging sector Public goods (for example, irrigation, research and extension) Progress implementation strategy Cadastre and technical assistance Long lead-time projects Adjustment operations Minimum Price liberalizations Ownership change Demonopolization of Financial amount of and trade reform (land and rural assets) marketing services reforms Policy reform pathway 128 Rural Development: From Vision to Action n3 There should be a minimum amount of and the Bank strategy will differ accord- progress on reforms in the incentive ingly. A broad schematic indicating the framework (price and trade policy) and type of Bank programs that are likely is on ownership change (land privatiza- shown in appendix table B.5. tion) before projects are introduced to provide public goods such as irrigation ESW strategy. The substantive areas that will infrastructure or support services such likely warrant the most attention in the near to as research and extension. medium term include: n There should be a minimum amount of * Continued work on identification of progress in the incentive framework, macro and sector policy distortions that ownership change, demonopolization affect efficient and equitable development and financial sector reforms before the in the sector Bank introduces lines of credit to private * Public expenditure reviews, with a par- farmers. ticular emphasis on allocation and ici- o The minimum reform package for inter- dence of subsidies ventions in public goods and credit lines - Analysis of land and rural property issues will be defined on a country-by-country and the impact of privatization on effi- basis and will be detailed in the CAS. ciency, equity, employment, and rural Reforms in these areas are critical to en- income sure that i) the policy environment is not * Analysis of the legal and regulatory frame- giving signals that encourage produc- work for agribusiness and rural serv- tive activities in areas where the country ices does not have a comparative advantage; * Identification of an appropriate policy and ii) new investments are facilitating framework for management of natural re- private activity in the sector and not sources further entrenching publicly-owned * Identification of needs for building rural enterprises. infrastructure (rural roads, potable water oi ECA countries are likely to fall into three supplies, and communication networks) broad categories according to their pro- to provide the essential platform for rural gress in the different areas for reform development. Appendix table B.5 Bank strategies for countries in dfflerent stages of reform Stage of transition Transition of macro- Transftion to private Implications for Worfd to market economy economy ownership Transftion to free markets Bank operations Stage I Limited adjustment; Fundamental intra- Modest progress, mostly Focus on basic ESW and command policies still government policy state controlled adjustment lending tied to existing disagreements crucial reform issues, some institution building Stage 11 Partial adjustment Policies agreed, Policies defined but Emphasize privatization, significant progress in enactment delayed efficiency enhancement prmary agriculture but and institution building slow progress with agribusiness Stage Ill Adjustment mostly Agriculture mostly Variable progress, but Active program for rural complete privatized fairly well progressed development; focus on rural infrastructure, intermediation for private agents Regional Summaries 129 Action Plan with key decisionmakers (most notably in the ministry of finance) which may be more sup- Country issues portive than the ministry of agriculture. Finally, the Region will make use of decen- * Issue. The political and economic situations tralized programs involving pilot projects de- are evolving rapidly and dramatically. In signed by receptive communities covering the many instances, the Bank started with a gamut of interventions from regional-level pol- poor information base and is having diffi- icy reform to community-led environmental culty keeping up with the changes that protection. These will be used particularly in continue to occur. cases where it is difficult to obtain national * Action. The Region will continue to devote consensus but where reform-minded local gov- a relatively larger proportion of its re- ernments are eager to press ahead. sources to ESW, both formal and informal, to stay current. * Issue. In the majority of countries basic sys- tems supporting agriculture have col- * Issue. There is a wide divergence of opinion lapsed (including financial, marketing, between reformers and non-reformers on trade, payments). Because of the highly their vision for the rural sector, making it integrated farming systems that existed difficult to obtain consensus on an appro- prior to Independence, this void is having priate course of action. a devastating effect on agriculture. * Action. New instruments and techniques to * Action. The Bank will move on two fronts generate broad-based support for Bank in this regard. First, and most important, is recommendations need to be employed in- to get started rebuilding the systems. This cluding, perhaps, greater use of EDI, more will take a long time, and, for the most part, public information campaigns, more in- will be done with operations not directed country seminars and workshops, etc. at the rural sector. Nonetheless, it is critical These would be aimed at all branches of for long-run sustainability of the sector. In the government, of course, but also at all the interim, ad-hoc solutions may be nec- other stakeholders in the sector whose in- essary to provide critical services and put and support are crucial for any rural avoid decapitalizing agricultural assets strategy to succeed. For example, the while the systems are being developed. broad-based participation at the agricul- One key example in this regard is likely to tural workshop in the Kyrgyz Republic has be in the area of rural finance. The Region resulted in agreement on a rural lending has created temporary institutions such as program there. While not agriculturally Government credit windows (with sunset oriented, the Social Reform Support Pro- clauses), based on commercial banking ject in Macedonia has helped support principles, and sovereign risk guarantee downsizing of industrial enterprises un- instruments designed to mobilize farm fi- der the Sector Adjustment Loan. This Pro- nancing primarily from multinational cor- ject provides for a public information porations to bridge the gap. Other campaign and programs to support re- temporary schemes to prevent the sector training and redeployment of employees from collapse will also be pursued. who lose their jobs or wish to move. Such an approach could be applied in the rural * Issue. Much of the farming sector was inef- sector as well. ficient prior to Independence, generating The Region will also try to expand the breadth losses for the budget and poor quality or of sector dialogue on rural development issues expensive output. 130 Rural Development: From Vision to Action * Action. ESW will be used to determine governments to ensure that measures are where inefficiencies can be eliminated taken to reduce the impact on affected through improved incentives (policy re- populations. form), technology transfer, training, or other interventions. Much ESW has al- * Issue. Many Central European countries ready been done in this area and the Bank and the Baltics are formulating their agri- is quite experienced with these kinds of cultural policies to better position them- solutions. In those areas where there is selves with their accession negotiations inefficiency due to lack of comparative ad- with the EU and in anticipation of eventu- vantage in the production of the output in ally applying the Common Agricultural question, the Bank will need to assist in the Policy (CAP). process of shifting production to other ac- * Action. The Region will use its ESW to dem- tivities-be they in agriculture or else- onstrate the net social gains from not intro- where. The task of shifting resources out of ducing CAP-type policies prematurely; agriculture is a delicate one and a great and it will work with the EU to reduce the deal of care must be use to balance objec- likelihood that introduction of over-pro- tives of efficiency with political and social tectionist measures prior to accession ne- concerns about preventing rural-urban mi- gotiations will result in compensation gration. The Bank needs to develop tools to benefits from the EU after membership. help governments manage this process The Region will also actively encourage with the sensitivity required. The Region EU staff to join Bank missions to ensure will be actively supporting additional re- that the right balance is struck between search, brainstorming and development of efficiency and harmony with EU policy. innovative ideas in this area. Internal Bank Issues * Issue. The labor force does not fully under- stand market principles and is ill-prepared * Issue. There is a lack of integration of rural for coping with a market economy, how- development issues into the CAS. ever, it is relatively well educated and has * Action. Country teams will be formed considerable potential to achieve interna- (where they don't already exist) and will tional competitiveness. be responsible for ensuring that agricul- . Action. The Region will use techniques to tural and rural development issues are disseminate information and explain ob- duly integrated into the CAS. These teams jectives and principles as discussed in Ac- will also be responsible for developing the tion 2 above. minimum set of reforms that will be a pre- requisite for any lending to the sector, as * Issue. Rural poverty is not the issue it is in well as the minimum thresholds for price other countries, in fact rural residents have and trade reforms, privatization and finan- had some of the best success coping with cial sector reforms that will permit lending the transition because of their access to for public goods or lines of credit. land. * Action. The Region will continue to moni- * Issue. There is fragmentation of agricul- tor the poverty situation; however, equity tural staff into small divisions without a concerns will not be a primary justification critical mass for productive intellectual in- for intervening in the sector in most in- teraction. Moreover, the multi-discipli- stances. The Region will remain sensitive nary nature of activities in the rural sector to reforms that might exacerbate poverty, requires a broader set of interventions than even in the short term, and will work with those pertaining exclusively to agriculture Regional Summaries 131 (including rural infrastructure, rural social as strong at analysis. The Bank has tradi- services, communications networks and so tionally rewarded only one task manager forth). This has been difficult to achieve per operation and assumed that one per- because of divisional boundaries within son could carry out all of these functions. the Bank. * Action. Rather than insisting that one per- * Action. The Region has already decided to son play both of these roles, the Region will combine the Agriculture/Natural Re- actively try to team staff with complemen- sources Divisions for EC1 and EC2. To tary skills while giving both the credit for overcome divisional rigidities against a designing and implementing a successful multi-disciplinary type of approach, the operation. Region will rely on the country team model in the context of the CAS preparation to * Issue. There has been inadequate coopera- identify operations that might not fall tion and liaison with key partner organiza- neatly within divisional jurisdictions. tions, particularly with the EU. * Action. As noted above, these links will be * Issue. With agriculture being a primarily strengthened, in part by inviting other do- private activity, there is little the Bank can nors and the EU to participate in Bank directly finance in the sector. Basic pro- missions. This will be key in several areas, gress on price and trade reform, as well as most notably (a) where policies should be on privatization, is necessary before public consistent with future directions of the goods and lines of credit make sense. Be- EU's CAP; or (b) where governments may cause ECA is further behind than most be unwilling to borrow for needed techni- Regions in these areas, it is difficult to find cal assistance, but where other donors who projects that can make a productive contri- are active participants in ESW or projects bution at this point in time. may be willing to finance those elements. * Action. The Region will continue to actively pursue progress in reforms and privatiza- Latin America and the Caribbean Region tion through all of the instruments at its Rural Strategy disposal: adjustment lending, ESW and dialogue, other types of outreach such as Priority Areasfor Agriculture workshops, seminars, EDI training, and technical assistance for institutional re- Agriculture in LAC must be seen through the form to achieve the minimum thresholds dual lenses of rural poverty alleviation and necessary for traditional projects. sustainable natural resource management. The two most striking characteristics of LAC are * Issue. There is a dearth of particular skills that a high proportion of the rural poor have in the Region, most notably in the areas of fled to the urban peripheries, and the continu- sector economists, financial institutions ing severe levels of land and water resource specialists, and agribusiness practitioners. inequality found in the rural population. While . Action. The Region will concentrate its re- urban slums are extensive and poverty is par- cruitment in these areas. ticularly visible in urban areas, poverty is deeper and more prevalent in rural areas-and * Issue. The Region has a number of excellent is the source of urban poverty. In twelve of our analyst/technicians who are not strong at countries the majority of the poor are rural. In inter-personal relations and a number of the region as a whole, the poorest 10-20 percent staff who are extremely good at working of the population live in rural areas. Some 80 with their counterparts and ensuring full percent of the indigenous population of LAC ownership of a program but who are not are rural poor. The severe level of income 132 Rural Development: From Vision to Action inequality observed in rural areas is a historical we have achieved measurable successes in pio- phenomenon, still not adequately addressed, neering many innovative approaches to rural where governments provided discriminatory development, and the demand for our services access to land and capital, to the wealthy and from clients has increased. Recent approaches powerful. to projects put the region in the forefront of Another characteristic of rural poverty in the Bank practice. The lessons of LAC will be salu- region is the areas of extreme geographic con- tary for other regions as they approach the centration of the "poorest of the poor." The same level of development. rural areas of Southern Mexico, with the Chia- There exist many opportunities in our region pas "uprising," are well known. Similar areas for operations and policy reform that will pass exist in the isthmus of Central America, the if they are not developed. Further, the possi- Northeast of Brazil, and the Andean highlands. bility of policy changes to remove the biases In most cases these poor are of indigenous against farm employment and smallholder ancestry. farming, offers the potential for rapid creation Many rural poor earn their livelihoods as of employment in the rural areas. The creation laborers or subsistence smallholders in envi- of employment opportunities will occur not ronrentally fragile areas or on the frontiers only on farms but in rural towns that will de- between agriculture and the remaining forest. velop to service the increased farming activity. Consequently, rural poverty is closely con- There are few, if any, sectors that can generate nected to natural resource management issues. employment as quickly and inexpensively as Poor farmers are more concerned with every- this. This, combined with improved policy to- day survival than they are with stewardship of wards goods and factor markets, will enhance the land or forest. At the same time, commer- the effectiveness of our investment lending and cial farmers are beginning to better understand rural development efforts. The challenge for the concept of land conservation and sustain- the region is increase the effectiveness of our able farming, and are seeking assistance in de- policy dialogue as a means to improving port- veloping and implementing these techniques. folio performance, and to extend our successes Despite the focus on poverty and natural re- throughout the region and the Bank. source management in LAC, there is a need to recognize the importance of a fast output Priorities. The thrust of our efforts in LAC growth of the "modem" commercial sector. In have been in redefining the role of government: most LAC countries, this sector provides a high decentralization, strengthening local govern- share of the overall marketed output in agricul- ment and community groups, targeting inter- ture and is a major contributor to the supply of ventions, and greater reliance on market foreign exchange. Indirectly, it contributes to mechanisms. This effort is creating a new vision rural employment and hence plays a key role for the roles of different levels of government in poverty alleviation. Thus, policy makers are and the limits of central government. As a result very concerned about both equity and growth Bank interventions are being designed and im- considerations in the struggle to alleviate rural plemented differently. In these areas, the expe- poverty. In this effort, the ongoing economic rience of LAC, both the successes and the less policy reforms in LAC countries-perhaps the than fully successful efforts, provide valuable deepest in the developing world today-must lessons for other regions in the Bank. The fol- be followed up by institutional change and lowing are areas where the region has experi- public investment directed at the poor. enced successful outcomes and where we Despite the importance of the rural sector in continue to place emphasis: LAC, resources to the sector have recently ex- * Community development/participation, perienced a precipitous decline. While re- emphasizing decentralization and indige- sources have declined, rural poverty remains; nous people Regional Summaries 133 * The creation of partnerships with rural * Stronger sectoral participation in country communities and NGOs poverty studies, to help ensure rural issues * Targeted rural poverty programs and are well represented in CAS and other employment generation such as rural in- country strategy discussions frastructure, social infrastructure, micro- * More attention given to sound sector work irrigation, and access to markets to precede project development * Market-assisted land reform using innova- * Encouragement for some involvement in tive and newly developed approaches experimental, difficult, and more partici- * Policy advice regarding public investment patory operations in the sector, the rural poor, commercial * Improving the skills mix-such as more agriculture, and (especially) removing the practical sociologists, specialists in gender, policy biases against small farmers indigenous people, off-farm employment, * Water allocation/transferability using and land issues. newly developed approaches to water rights A second issue in LAC is that our operational • Rural financial resource mobilization portfolio increasingly consists of difficult, experi- * Sustainable land management/conser- mental, and costly-to-prepare projects. This is vation due to (a) limited prospects for large-volume, * The generation, adoption, and organiza- low-cost lending in areas like intermediary tion of agricultural technology. credit, forestry, water resources, and second- generation institutional reforms; (b) some over- Incremental activities. There are several areas lap with significant parallel incentives in rural where the region could greatly increase its ef- infrastructure and the social sectors; and fectiveness if it did more. Some have budget (c) procedural discouragement of pilot opera- implications and others do not. The expected tions. Actions to alleviate these constraints outcomes or outputs would include (further could include: work will be needed to identify and quantify * Working with RDV, LATAD, and LATEN monitorable success indicators): toward creation of frameworks which en- - Increased pace of land and tenure reform courage and facilitate lending in these * Increased pace of water management areas reform * Developing realistic internal strategies for * Increased pace of agricultural policy re- fomenting incremental institutional form through consensus building and out- change in our clients reach programs that raise the awareness of . Better integrating the rural elements of de- the need for change velopment (roads, health, education) on * Better diagnosis of rural financial markets the agenda for process change and additional pilot projects in rural fi- * Simplification of processing for small nance to test new approaches pilots. * Improved monitoring and evaluation of A third issue is that there is in some cases a the new rural social projects mismatch of priorities between the Bank and its * Improved targeting of existing social and nominal "clients" (that is, government minis- rural poverty alleviation projects, empha- tries). This has been contributed to by the sizing indigenous peoples. change of Bank priorities in favor of rural pov- The areas where actions are required center erty alleviation and sustainable natural on three issues. First, to better meet the varied resource management, which has not always demands of our clients, the priority and visi- been matched by corresponding change among bility of the rural sector needs to be increased our clients. Ways to bring Bank and client at the country level and within the Bank. Fa- priorities more in line with one another cilitating actions would include: include: 134 Rural Development: From Vision to Action * Stronger sector work, with broader dis- * Large populations in MENA still live in semination audiences rural areas. * Development of nongoverrunental inter- * An efficient agriculture will be of high pri- locutors through stakeholder participa- ority to economies of MENA. tion, social assessments, and multi-party project steering committees Politicalfocus is on urban areas * Diversification of client contacts * Political advocacy of rural interests cur- * Working internally with and through rently low in most countries (N.B.: Jordan country departments to influence the core an exception) ministries. * Priority to ensuring balanced support to rural areas. Middle East and North Africa Region Rural Strategy Ourfocus should be on . The totality of the rural environment, not Overview of MENA Characteristics only agriculture - Increasing returns to scarcest factor, usu- * Severe land and water resource constraints ally water * Scope for intensification . Shifting balance increasingly to market * High population growth (+ 2.5 percent per forces annum), rural outmigration * Increased private sector roles in agricul- • Low food self-sufficiency tural and food production, including agri- • Urban bias in policies and public expendi- business, marketing, storage, transport, tures agro-industrial transformation, exports, * Government commitment to agricultural and their financing. policy reform unstable - Agriculture poorly represented politically Integrated rural development • Agriculture (irrigated and rainfed) could * Competitiveness of production and trans- be more efficient formation * Agricultural production involves high cli- * Efficient services matic risks a Manage transition in rural areas - Government interventions prevalent * Long-term preservation of natural re- in response to "market failure," but dec- sources (soil, water, biodiversity). lining * Market-oriented adjustment underway in Comparative Advantages some countries of the World Bank * Macro adjustment, for example, of terms of trade can have big impact Cross-Country Expenence, Honest Broker, Continuity * Export promotion constrained by foreign markets and local market organization Givenfiscal constraints * Regional political profile high * Help set priorities in public expenditures * Need for donor coordination is high. * Help establ-sh relative roles of public and private sector Rural Perspectivefor MENA * Promote efficient markets and market solutions. Rural areas remain important Population and share in GDP will decline Given vigorous cofinancing but absolute numbers still high and pro- * Bank leadership and analytical skills solic- duction potential considerable. ited by clients and cofinanciers. Regional Smmanries 135 * However, cofinanciers' agenda (especially duced the enthusiasm of the Govermnents EU) may differ from Bank's and cheaper to go for new projects. EU financing leverage can affect Bank lending volume. New Directions Implications for Lending in MENA The picture is not all bleak. Several new direc- tions are being explored, and show increased Trends in Lending during the Past Ten Years lending. * Natural resource lending is increasing (up 87 * Lending for agriculture, and natural resource percent): management stagnated during the last five 1986-90 $ 69 million years when compared with the previous 1991-95 $ 129 million. five years. The lending would have shown * Environmental lending (including GEF) has a decline if a new borrower (Iran) had not made a modest start (up $23 million from been added. zero): 1986-90 $1.65 billion 1986-90 $ 0 million 1991-95 $1.66 billion. 1991-95 $ 23 million. - The main areas of decline: . And last but not least, lending for water n adjustment lending, which accounted for resources, has shown a substantial increase 30 percent of the lending in 1986-90, was (63 percent) and now accounts for 43 per- reduced by 83 percent during the next cent of the lending: five years: 1986-90 $ 441 million 1986-90 $459 million 1991-95 $ 719 million. 1991-95 $ 80 million. a rural finance, which accounted for an- The Future other 30 percent of lending, declined by 36 percent: Looking to the future, we see the following 1986-90 $450 million opportunities: 1991-95 $286 million. . Integrated water resources management will o extension and research, although much become more important, and in the next smaller (5 percent), also showed 54 per- five years, we would like to maintain lend- cent reduction: ing in the $400 to 600 million range 1986-90 $85 million (some of it may be substituted by cheaper 1991-95 $39 million. cofinancing). These will emphasize institu- * The reasons for the decline in adjustment tional development (river basin authori- lending are well known. The 1980s was a ties) and more efficient water use in both period of large macro-economic and sec- rural and urban sectors. toral imbalances, and the debt crisis. This * Natural resource management lending would is for the most part over for most of our also be expanded in the range of $150 to 250 active borrowers (except for Algeria, million stressing improved management of Yemen, and, to a lesser extent, Jordan). The forests, pastures, and watersheds. reasons for the reduction in rural finance * Rural participatory development would also lending are also well known-the new the- be strengthened by emphasizing the pro- ology which dictates a lack of direction. vision of rural infrastructure and services * The decline in lending for extension and with active involvement of local people. research projects were due to rather mixed We expect to lend $250 to 350 million for performance of earlier projects, which re- such projects. Appendix table B.6 Middle East and North Africa: Matrix of Issues and action Issues and Background Progress Future action Water Agriculture has to adjust to using less and more expensive water more * Irdgation investments and, increasingly, focus on e Water Sector Investment Loan efficiently: improving efficiency and user role of existing systems * Integrated water resource management studies and projects * Water scarce * Water Sector Investment Loan in Jordan, Morocco, * specific irrigation, drainage and sanitation projects * Agriculture high and inefficient user Tunisia, and Yemen under preparation * Sector adjustment loans and ESW for policy dialogue on water * Water charges low; O&M inadequate * SAL & AGSECAL in Algeria for O&M pdcing, O&M * Intersectoral water transfers inevitable and entail political and * Policy dialogue for integrated water resource * Water Action Plan: establishing a MENA water fund policy decisions backed by sound information management * User participation weak. * AGSECAL in Jordan began sector adjustment * Yemen Water Strategy: participatory policy work underway Rural development and poverty alleviation * Poverty higher in rural areas * Regional projects targeting rural poverty alleviation * Increased lending for rural participatory development, including * A politically sensitive issue (for example, Tunisia NW project, Yemen Southern poverty alleviation * Extensive despite progress Govemorates, Egypt Matruh Resource Management) * Rural development and employment strategy and projects * Umited access to land, and insecurity of tenure * Poverty reduced substantially in some countries but * Increased private sector involvement * Poor access to basic infrastructure, and productive and social remains an issue in others, and more so in rural * Emphasize rural heaflth and education, particularly for women, as services, especially health, education, potable water areas in terms of access to services (health and well as other services (roads, electrification, potable water) * Poor rural women even more disadvantaged education in particular) * Mountainous areas development * Poor social development indicators. * Rainfed agriculture development Competitiveness of agriculure Rural finance * Inadequate agicultural and rural credit from official sources * Projects to increase productvity and efficiency * Redefine public goods; focus on institutions and incentives to pro- * System finances itself but at a high cost including inefficiency. * Research and extension projeds. mote the private setor (services, marketing, agribusiness, exports). * AGSECALs have made significant progress in * New approaches needed to revitalize rural finance projects. Food price stability for urban consumers has fer to: addressing these issues but there are remaining * New instruments need to be utilized along with investment projects * Distortions due to market controls and subsidies issues on the agenda depending on the country. (guarantees, non-balance of payment support sector adjustment * Dominance of state enterprises in agdculural marketing and trans- * lirdgation investments. loans targeting private sector development, for example, Industrial formation Renovation project in Tunisia). * Inadequate marketing organization and infrastructure for domestic * Adjustment lending on the decline; needs to be resuscitated. and export market development * Need to increase lending for private sector development, * inefficient pdce formation and transmission competitiveness in agriculture, marketing and agrolndustry in the * Rent seeking intermediaries light of increased global trade liberalization. * Insufficient product and market diversification. * Rainfed agdcuRure needs special focus, especially research and extension, and balance between production support and socia Food security transfers. * Region is net importer of basic foodstuffs (cereals, milk, sugar, * Close coordination needed with EU/European Investment Bank, cooking oil). Germany, Netherlands, and France. * Food self-sufficiency is low and concem about food security is in- * Macro agenda should incdude liberalization of Internal and external creasing in the face of dsing cereal pdces as a consequence of marketing, privatization of state marketing companies. trade liberalization. _ Support for cereal productfon . Targets mainly in low rainfall areas. * Heavy budgetary burden. * No incentive to increase productivity due to inadequate research and extension. * These supports entail social subsidies to producers who have few aftematives to cereal production. EU agenda . Proximity of EU has advantages, but EU trade barriers limit diver- siication towards higher value crops for export. Natural resource management and environment . Arable land resources have reached their limit under current irriga- * Forestry and watershed management projects * Soil, watershed, and rangeland projects. tion and rainfed water availability. * Increased national and donor resources for * Natural resource management and environment lending needs to * Productivity increases are the only way to increase production. environmental problems be maintained. * Require efficient and sustainable use. * Implementation capacity development * Participatory approaches need to be an integral part of projects. * Common land resources (steppes, ranges, fallow) are over- * Rainfed agricuiture should not be overlooked. exploited for livestock production (links land tenure). * Governments need to reassert control over groundwater. * Soil erosion a major environmental problem (importance of forestry). * Desert encroachment and desertdication a problem. * Overxkitation of groundwater a major problem in some countries. * Watershed management inadequate; participatory approaches needed as top-down approaches are not effective. Land tenure * Polifically sensitve. * Cadastre projects * Bank is timid in this area, including policy dialogue. * Small landholders predominate, for many farm size may be * Pilot components for land consolidation in some * Should the Bank get involved? if Bank decides not to get involved, economically inadequate, especially with fragmentation. proects we have to live with the consequences in that what we do in other * Insecurity of tenure and lack of land tities cause inefficient and areas may have limited effectiveness due to constraints posed by unsustainable exploitation, as well constraints in access to official land tenure. credit (collateral issue). * Historical and social factors lead to smaller farm sizes through dMsion for inheritance. * Common lands are exploited without any titles but through custom- ary rights. * Much of the agricuitural land has not been surveyed for cadastre and this process moves slowly due to the cadastre techniques used. * Land markets are virtually nonexistent and are encumbered by costly and time consuming bureaucratic processes. Appendix table B.7 Implicatons for the Bank How to meet challenges and improve performance? Bank process and resource implications Indicators * Diversified overall rural economic growth, not just agriculture * Coordination with COD and other SODs (for example, Caveat * Coordinate rural strategy/ESW with CAS/macro Morocco Rural Development Strategy) * Must take long-term perspective * Focus on rural employment and incomes * Flexibility in Process Management post-CAS (cut steps but * Very significant weather risk * Set realistic objectives reinstate technical review) * Selectivity, small-scale, 'staged' projects part of long-term * SODs vs. Urban: Rural Structure? Impact indicators program * Control of divisions through adherence to CAS and total * Baseline data critical * Lending on parallel track with macro (potable water) budget allocations (not micro-management of Individual a Sector performance indicators (RDV) * Empower and strengthen local institutions operations) * Coverage of basic services * Donor coordination vital * Skills shifts, not necessarily increased budgets * Rural poverty reduction O Operations management * Rural employment generation 0o o Water resource planning * Export growth-diversification o Participatory development * Agricultural GDP/water used o Marketinglagribusiness/flnance * Income-consumption stability * Need to strengthen intersectoral country team approach * Level of participation * Need to constitute thematic teams for, for example, water . Greater use of local TA capacity and local staff in Resident Bank quality control indicators Missions * Porfolio improvements (590) * Cofinanciers (and clients) pay more of direct processing and . Progress towards staffing profile changes management costs * Improvement in delivery times * Monitoring of processing costs Regional Summaries 139 * Projects for environment, for quick and regional trade (quantitative restrictions and responsive emergency assistance, and for in- trade barriers within the region) and regional creasing competitiveness of the rural econ- water allocation problems. omy would also be emphasized. These would account for $250 to 400 million. Agricultural Performance * Recognizing, the emergence of many con- cessionary sources of financing such as the Agriculture continues to be very important to European Union, we will also help our the economies of South Asia. Its contribution borrowers mobilize these resources for co- to GDP, employment, poverty alleviation and financing of the projects that we will sup- export earnings remain relatively high, though port. Cost sharing to cover preparation and relative shares of its contribution have been supervision costs will be promoted if loan declining. size is not sufficient to cover preparation Although agricultural performance has been and supervision costs. relatively good in the past with growth rates * Return to Integrated Rural Development varying from 1 percent to 3.1 percent across the with agriculture-rainfed and irrigated as region, it has been stagnating in recent years the main production sector and source of in all countries except India. But even in India, employment in rural areas in a catalytic its performance is below potential. With the leadership role. land constraints, the key to future agricultural growth is productivity increase. There is sub- South Asia Region Rural Strategy stantial scope for this as yield gaps are high when compared with other countries. Regional Characteristics Constraints South Asia has a large and rapidly growing population. Rural poverty is high. The region The major constraints are: has the world's largest concentration of rural * Inappropriate policies: distortions in product poor people. Most rural poor are landless. Ru- and factor markets particularly on water ral poor dominate rainfed areas, and have a and credit; too much govermnent inter- limited and fragile resource base. vention in marketing, distribution, and The physical environment in the region is credit, consequently reducing competi- quite diverse ranging from tropical areas in Sri tiveness in domestic and international Lanka and Kerala state in India to desert con- markets; inefficient planning and utiliza- ditions in Balochistan province in Pakistan and tion of public expenditures (large public Rajastan state in India. The natural resource outlays on safety net programs are poorly base (land and water) is critically constrained targeted and are ineffective); and weak by high population pressures. The limit for government commitment to rural reforms. expansion of new areas has been reached in Progress on policy reforms in recent years almost all countries. But there is still scope for has varied across countries. For example, more intensive land use. Resettlement is a ma- there has been some progress on land and jor issue. Forestry and other natural resources water resources in India and Pakistan are continuously being degraded. The pres- while much remains to be done in other sures on water resources are more acutely felt countries; similarly Bangladesh and Sri in Pakistan and parts of India which are heav- Lanka have been making better progress ily dependent on irrigation for agriculture. on rural poverty alleviation programs than There is good potential for growth in rural other countries in the Region. However, nonfarm sector and strengthening backward there is need for substantial improvement and forward linkages to agriculture. There are in the policy environment in all countries. 140 Rural Development: From Vision to Action * Weak institutions at both federal and * Strengthen inter-sectoral linkages to en- state/provincial levels: overcentralized de- sure multi-sectoral rural development cisionmaking, weak ministries (except in * Strengthen institutions and build local India) and poor interministerial coordi- capacity including community empow- nation, multiplicity of agencies, and poor erment and participation, and foster use of local institutes, universities, and greater role for local institutions and NGOs. NGOs * Physical constraints: inefficient use of land * Support resource management and envi- and water resources leading to rapid degra- ronmental protection in view of the close dationofthenaturalresourcebaseandunsus- relationship between environmental taiable development, in part due to slow degradation, poverty and population pace of technology generation and diffusion. growth * build regional and global partnerships Goals with experts in related fields and NGOs, other institutions and donors. The major goals of the Region are: (a) to sustain and increase agricultural growth rate to 4 per- What Should We Be Doing More of and Doing cent per annum,1 (b) to increase agriculture's Differently? Who Should Do It and By When? contribution to poverty alleviation, and (c) to ensure environmentally sustainable agricul- We should make a better effort to ensure that tural development. We envisage the major agriculture becomes a central part of our eco- source of growth to be in smallholder market- nomic and poverty alleviation dialogue, and oriented agriculture. raise commitment of govermnent and donors. To do this, we would make a better effort to Strategic Elements ensure that agriculture and rural development issues are adequately addressed in the Country We would work closely with our clients to: Assistance Strategies and the Country Eco- * Raise commitment of government and do- nomic Memoranda, and secure commitment of nors to agricultural development government and donors to address these is- : Redefine the role of public and private sues. This should be done by the Country De- sectors-provide a more active role for and partments including the resident missions; and expand the private sector, and strengthen implemented for all countries by the end of the the public sector's capability in its proper fiscal 1998-99 Business Plan period. roles We should take a broader look at agricul- * Remove policy distortions including pol- ture in the context of the rural economy and icy, institutional and technical measures to take a multi-sectoral approach to rural devel- improve the allocative efficiency of factor opment. To do this, we would prepare rural and product markets development strategies which take a multi- * Improve the efficiency and productivity of sectoral perspective. This would be done by agricultural public expenditures through establishing task teams with complementary measures such as rationalization of the skills. In addition to ensuring adequate cross- budget process for capital and recurrent fertilization of disciplines at departmental expenditures, and prudent phasing of new level, we would better integrate the work of projects field offices, technical departments and cen- * Ensure development and diffusion of new ter departments with these task teams. We technology to promote technical progress would provide incentives and reward staff at the farm level for effective contribution to the teams. Rural Regional Summaries 141 strategies for allcountrieswouldbe completed work design and implementation. This would by the end of the fiscal 1998-99 Business Plan be done by the country departments and resi- period. dent missions. The work is ongoing. We should better integrate macro and other We would make more use of pilots in cases sector aspects into agricultural sector work. For where there is need to test innovative ap- this, we would work with other sector and proaches and best practices, and where time is country operations divisions to break barriers required to build institutions and bring about across divisions and better integrate work of policy changes. This would be done by the sec- macroeconomists into our work program. The tor operations divisions, resident missions and chief economist, country departments, resident center departments; and is ongoing. missions and center departments would be re- We would bring more experts from outside sponsible for this. The action is ongoing. the Region, to ensure that best practices from We should become more proactive in resolv- around the world and latest technologies ing inter-sectoral and inter-country water dis- are transferred to countries in the Region. putes, and resettlement issues. We would raise This would be done by sector operations divi- country commitment to inter- and intra-sector sions, technical departments and RDV; and is water resources planning, management, and ongoing. institutions by launching participatory water To ensure that we better use the local knowl- resources management sector work, support- edge and closeness to the ground of the fields ing regulatory measures, and disseminating offices, we would strengthen co-ordination be- policy advice. This requires coordinate effort tween headquarters and field office staff, and by the regional management team, technical integrate them into task teams. We would bet- departments, country operations divisions, ter integrate work of technical departments sector operations divisions, and resident mis- and center departments (RDV, ESSD), and col- sions. Later on, we may have to call on help laborate with EDI, the IFC and MIGA in the from the President to address inter-country broad spectrum of activities induding partici- water disputes. Background studies and dia- patory water management and agribusiness logue have begun. development. We would establish better work- We would continue to restructure and ing relationships with WTO, FAO, IFAD, streamline the portfolio in line with implemen- UNDP, and other donor partners. This would tation progress and changing political and eco- be done by the sector operations divisions and nomic conditions, and strengthen the quality of country departments, and is ongoing. our supervision to implement our sector assis- We would ensure that our staff make maxi- tance strategy. This would be done by the sector mum use of the opportunities to enhance their operations divisions and resident missions with skills. At minimum all task managers would support from technical departments and RDV. have taken the task managers' training mod- All problem projects would be restructured or ules. Training plans have been developed for canceled as soon as possible. all staff and are being implemented on a con- To increase the effectiveness of our local dia- tinuing basis. logue, we would establish partnerships with local institutions and NGOs, and cultivate local What Should We Support in Future? interlocutors to disseminate findings and build consensus on policy issues. We would work We would continue to be selective and tailor closely with our External Affairs Vice Presi- our nonlending and lending services to ad- dency to develop an external relations strategy. dress critical constraints and implement our We would continue to enhance the roles of strategies. The blend of services would vary by beneficiaries in project, program and sector country. In Sri Lanka, for example, we do not 142 Rural Development: From Vision to Action envisage any significant increase in lending, policy and institutional reforms are built in as but would continue to do sector work on issues triggers into the CASs. related to irrigation, tree crops and non-plan- For portfolio performance, we would moni- tation agriculture. In the larger countries such tor movement in number of problem projects, as India, Pakistan and Bangladesh, we would levels of disbursements, quality at entry, con- provide a full range of services. In Bangla- sistency with the CAS and Sector Assistance desh and Pakistan we would focus on sector Strategy, use of participatory approaches and investments through which we would work degree of decentralization achieved in projects. with development partners to bring about In addition to ensuring that performance indi- policy and institutional changes in key areas cators are relevant and realistic for each project, such as trade, marketing and public expen- we would ensure that those projects in the diture management. In all our countries we portfolio without indicators are retrofitted by would continue to do sector work and lend- the end of fiscal 1998. We would monitor the ing to address critical environmental, dissemination of our ESW work, and the im- forestry, and water (including irrigation, pact of ESW on sectoral reforms. drainage and water supply) management is- To monitor impacts in client countries, we sues. In some cases such as Pakistan and Ne- would focus more on sectoral (policy and in- pal we would do sector work and lend to stitutional) reforms deemed important in the address land issues. We would continue to CASs and Sector Assistance Strategies, and support agricultural support services focus- their outcomes (for example, reduction in price ing on technology generation and diffusion, distortion, cost recovery in irrigation, resettle- and provision of rural finance. In all these ment and rehabilitation performance). To areas we would work with partners in bring- monitor longer-term trends, we would monitor ing about significant institutional changes as indicators such as agricultural growth rate, we implement projects. In all our efforts we level of distortions, shares of private owner- would make maximum use of pilots and pur- ship of major assets, share of public goods ex- sue participatory approaches. We would, penditure in agricultural sector expenditure, over the next plan period, in some countries total factor productivity, returns on public such as India explore possibilities for lending spending, and share of poverty alleviation ex- and implementing rural development strate- penditure in agricultural sector expenditure. gies on a regional basis. We would monitor the integration of macro and other sector aspects into agricultural sector How Should We Monitor Our Progress? work. We would update our Regional Manage- ment semi-annually on integration of headquar- We would use several methods to monitor our ters and field office staff into task teams; on joint performance. We would use the Region's tasks carried out with technical departments, Learning Group to monitor staff development center departments (RDV, ESD), EDI, the IFC and training and ensure appropriate skill mix. and MIGA; and on our working with WTO, The resident missions and sector operations di- FAO, IFAD, UNDP and other donor partners. visions would submit six month progress re- ports to the Staff Learning Group. Notes The department directors' front offices and chief economist's office would monitor the in- 1. Some states in India are already achieving tegration of agricultural and rural strategies this; the challenge is to maintain this rate. into the Country Assistance Strategies (CASs) 2. In India we would have to work at the and ensure that actions associated with key state and regional levels. Regional Summaries 143 Appendix table B.8 Action matrix Issues Actions POLCY FRAMEWORK FOR AGRICULTURE Agricultural price and market distortions * Distortions in agricultural product and factor markets reducing * Complement ESW by dissemination and policy dialogue with returns to wage labor. government agencies and stakeholders to formulate policy * Direct government interventions remain significant, although matrix, and identify sequencing of reforms and transition costs. declining. Indirect interventions through higher protection of Explicitly analyze stakeholders' interests in sector reports and domestic industry which gives comparative disincentives to tailor dissemination efforts accordingly agrculture. * Carry out ESW on agricultural price and trade policies. * Lack of competitiveness of agro-processing in major sectors Encourage speedy completion of trade policy reform, including (sugar, cotton-textiles, oilseeds, cereals, and dairy). Fiscally and liberalization of input and output markets with an orderly economically expensive pursuit of food security objectives transition to full private-sector orientation. Support removal of * Insufficient understanding and attention to stakeholders' any policies with pro-industry bias interests in ESW. * Support agricultural sector and agribusiness investments along * Weak government commitment to policy reforms; ineffective with critical sector reforms to increase competitiveness policy dialogue. * Complete portfolio review and redesign existing operations to * Lack of adequate number of strong interlocutors to push policy achieve policy objectives agenda. * Conduct analysis of regional trade issues by task team * Regional trade barriers (quantitative restrictions and tariff comprising sector divisions, COD, technical departments and barriers within the region). resident missions; and initiation of dialogue with governments including through interlocutors. Rural economy and poverty alleviation * Poor rural infrastructure, particularly markets, roads, utilities, * Conduct ESW on rural development issues including nonfarm and communications. linkages and opportunities for growth outside agriculture, and * High rural poverty, large number of landless poor and strengthen ESW dissemination and dialogue with stakeholders disadvantaged rural women, uneven access to farm land and to raise country commitment to the design and implementation agricultural credit. Limited and fragile resource base in rainfed of decentralized, participatory watershed and rural develop- areas which are dominated by poor. ment programs. In India priority to completion of participatory * Weak ministries and lack of interministerial coordination ESW on rainfed agriculture. * Need for decentralization of public expenditure decision- * Increase Bank support for funding rural infrastructure including making and reprioritization to fund key aspects of rural rural roads, rural health, rural electrification, and education. development strategy. Weak capability of local government * Incorporate sectoral strategy into Country Assistance Strategy institutions for program planning and implementation monitoring and policy dialogue, develop rural development strategy and * Lack of coordination and integration with NGOs working on regional action plans. poverty issues. * Assist federal, state and local govemments in creation of new funding mechanisms in line with decentralization. * Encourage closer collaboration among ministries by establishing inter-ministerial task forces. * Increase use of NGOs and stakeholders in design and implementation of poverty programs. RESOURCE MANAGEMENT Water resource management * Scarcity of water; intersectoral and intercountry disputes over * Bank should take proactive role in resolving intersectoral water water allocation which lead to inefficient water allocation. allocation and water disputes between states, provinces, and * Irrigation is facing a crisis. Service delivery dominated by countries. Raise country commitment to inter- and intra-sector public sector, weak ministries and poor coordination. O&M water resources planning, management, and institutions by expenditure vastly inadequate, lack of beneficiary contribution launching participatory water resources management ESW, in O&M. Cost recovery in water and rural power is minimal supporting regulatory measures, and disseminating policy and fiscally unsustainable. advice. * Agriculture is an inefficient, inequitable, and unsustainable * Pursue irrigation, drainage, flood control, and rural water supply user of water. Lack of integration of water delivery and on- projects, test new approaches through pilots, and support farm water management. Worsening problem of waterlogging efforts to decentralize irrigation systems based on water user and salinity. Ground and surface water becoming increasingly associations and public utilities which would efficiently operate polluted making rural domestic water supply unsafe. and maintain facilities, and by formalizing water rights and (Table continues on he followng page.) 144 Rural Development: From Vision to Action Appendix table B.8 (continued) Issues Actions RESOURCE MANAGEMENT (continued) Land and forest resource management water markets. Promote more effective O&M planning and * Land degradation serious problem in some areas. Lack of arrangements including full recovery of O&M costs from users. sustainable management of productive forests including a * Pursue project design which effectively addresses inter-sectoral rundown of forestry resources issues by ensuring access to appropriate skill mix. * Weak government commitment (financial and institutional) for * Strengthen quality of preparation, supervision, institutional natural resources management including forestry. Ineffective reforms and policy reforms (including subsidy policy). project implementation. Lack of counterpart funding, lack of * Undertake ESW on environment and land issues. Incorporate country commitment to sectoral reforms, weak project key actions (such as funding and institutional changes) as administration capacity in country. Inadequate human triggers in CAS. Enhance country awareness and support resources, and civil service practices efforts to increase productivity through technological and * Limited capacity within the Bank to scale-up sectoral policy changes. operations * Pursue efforts, including pilot projects, at participatory manage- * Need for more upfront actions to address resettlement ment of land and forest resources by invoMng beneficiaries in issues. planning and implementation of activities. Foster greater in- volvement of NGOs. Help strengthen institutions with oversight Land markets over green environment and remove economic incentives to * Systems of land records and land registration are faulty and degrade land. outdated. * Training program in Bank guidelines and procedures to govem- * Land markets highly distorted. ment officials. * Land tenure systems have created disincentives in some * Secure access to needed skill mix by Bank staff. countries. * Beef up capacity in resident missions to address resettlement issues. * Develop projects to improve and computerize systems of land records. * Carry out ESW on land market issues (including land tenure). * Support land market and tenure projects. TECHNOLOGY AND CREDIT Research and extension e Research activities not addressing many key production * Raise country commitment through ESW on strategies for problems. Research priorities not focused on environmental future growth in agriculture, agricultural technology generation friendly production techniques (for example, farming systems and its dissemination, integration of technology into sectoral research). Failure to import and adapt technology to local policy dialogue. conditions. * Support agricultural research management, agricultural * Extension is often too centralized and not responsive to local support services, and agricultural sector investments. conditions. Duplication of research efforts and lack of * Increase Bank staff effectiveness through training of technical coordination between research institutions. staff, improve access to Bank extension/research specialists, * Weak incentives for profitable private sector research. and develop partnerships with regional banks. * Excessive numbers of front-line extension workers. Rural credit * Lack of access to credit by poor and women * Support rural finance reform program with associated * Rural credit markets highly distorted. institutional and policy reforms that will support phasing out * Poor repayment discipline. public sector institutions from rural credit and remove * Rural credit policies pursue conflicting commercial and social subsidies. Develop participatory ESW and stakeholder objectives. analysis to address sequencing of reforms and estimate * Weak rural financial intermediaries; poor administraton and transition costs outreach; high unit cost per dollar lent in rural areas. * Give guidance in improving legal framework (for use of collateral and recovery of loans). Regional Summaries 145 Appendix table 2.8 (continued) Issues Actions TECHNOLOGY AND CREDIT (contnued) * Raise country commitment to establishing links between rural financial sector reforms and overall rural development policy reform agenda, sustainable rural financial system for bankable clients, and efficient and targeted system for the non-bankable poor. * Work with NGOs on rural credit for the poor. * Better integrate work of Technical Departments and Central Departments with that of Region. ORGANIZATIONAL * Incentives for promotion and standard working systems have * Establish task teams with complementary skills ensuring led to "lone ranger" task managers with inadequate cross- adequate cross-fertilization of disciplines (agronomist / fertilization, and lack of adequate cross-sectoral work. engineer /economist /rural sociologist) including staff from * Inadequate coordination between agriculture SODs and CODs other divisions, technical departments, and central and other divisions. Skills mix is inadequate to deliver higher departments. Strengthen coordination and cross-support economic content of lending and nonlending services, mechanisms with CODs and SODs on sectoral reforms * Inadequate skill mix in technical areas including forestry, water and fiscal decentralization and ESW, and with the IFC and MIGA resources planning, land issues, extension and rural finance. on lending and non-lending services. Relieve technical staff of * Need for more coordination with EDI, the IFC, and MIGA. part of current processing and editorial burden. Amend * Need to strengthen links with FAO, FAO/CP, UNDP, WTO, promotion and evaluation standards to reward effective IFAD, and multilateral and bilateral lending agencies. contribution to task teams, not just task management and report authorship. * Better coordination between headquarters and field offices, and beneficiary consultation. * (Re)create in technical department or central departments a unit which can support regions with technical staff who cannot be fully used in one department or region. * Establish ad hoc cross-divisional task teams for strategy/sector work, such as food/nutrition policy, rural infrastructure, and role of local governments. * Within the Bank, continuously build up skills to conduct ESW, policy dialogue, monitor policy reforms and their outcomes. * Collaborate with EDI in developing training program for clients, staff and fostering participatory management in water and natural resources. * Strengthen links with FAO, FAO/CP, UNDP, WTO, IFAD, and multilateral and bilateral lending agencies. APPENDIX C The International Finance Corporation's Vision for Agribusiness T he IFC has been active in projects involv- * Recognizing the specific risks attached ing agribusiness development since its to agribusiness ventures, and the fact that early days. The Corporation's involve- these risks are best handled within a ment in this sector reflects the pervasive im- supply-chain perspective, the depart- portance of the agribusiness sector to the ment was oriented to develop projects economies of its borrowing member countries. ranging from farm production to final Food/agribusiness portfolio currently repre- consumption. This approach is also fully sents about 9 percent of the IFC's portfolio. The in line with the industry's approach to its IFC's experience indicates that the financing of business. agribusiness generates significant benefits in The merging of the IFC operations into the terms of development, but that it also implies specialized Agribusiness Department was also unusual risks that are not generally found in designed to ensure continuity and consistency other manufacturing activities. in relations with clients, and a careful evalu- ation of the appropriate role of the Corporation The IFC's Approach to Rural Development in each country. This new structure has had a determining impact on the operational strat- The 1992 reorganization was the opportunity egy to be adopted by the new department; for the Corporation to reflect on its mediocre the inheritance of a portfolio which had a past agribusiness experience and bring re- higher share of under or non-performing newed focus to its investments in the sector. projects led to the adoption of a two-pronged The Corporation's activities in the agribusiness approach: sector were consolidated in the new Agribusi- * Aggressive cleaning-up of inherited port- ness Department. This decision was based on folio through workouts and restructuring, the lessons learned in past operations and em- to minimize impact on bottom line phasized the following points: * Selective build-up of new quality assets. Recognizing the global nature of agribusi- This approach has been successfully im- ness and the need to develop further an plemented since 1992: all profitability para- agribusiness expertise in the Corporation, meters of the department are now in line with staff resources were concentrated in a spe- the rest of the IFC, while the volume of fi- cialist department with the capability to nancing in fiscal 1995 exceeded $600 million identify and evaluate agribusiness projects (including syndications), a six-fold increase on a worldwide basis; over fiscal 1992. 146 The International Finance Corporation's Vision for Agribusiness 147 The IFC's Role in Rural Development economic justification for lowering investment standards with regard to agribusiness, even in The late 1980s have seen a significant improve- low-income countries where agricultural re- ment of the environment for private invest- lated activities dominate the economy. The IFC ment in developing countries: structural therefore intends to apply the same standards adjustment programs, sectoral liberalization, to its agribusiness operations, while formulat- enterprise privatization and international trade ing a strategy that takes account of the diver- liberalization have created a new situation sity of country situations and specific risks with tremendous opportunities for the private attached to the sector. sector to expand and regain its role in eco- The long-term objective for the IFC is to sup- nomic development. It has also raised a formi- port the development of efficient agribusiness dable challenge for entrepreneurs to replace systems in developing countries. This objective the public sector and overcome years of under- can best be attained by judging the suitability or ill-advised investment in agribusiness. Dis- of an IFC investment according to the follow- appointment with structural adjustment has ing criteria. also been voiced as output and growth re- sponse have sometimes been slow to material- Enabling environment. The IFC's and the ize and overcome the perceived costs World Bank's experiences have clearly estab- of adjustments, or have been temporarily lished that support will be more effective and derailed by exogenous climatic or economic profitable in countries that have adopted sound factors. macroeconomic and sectoral policies, and have In general, the IFC does not have a compara- followed generally recognized principles and tive advantage in contributing to plan govern- set up the necessary prudential and regula- ment institutional reforms and public sector tory environment to support private sector technical assistance components that are best development. handled by the World Bank. The IFC can, how- ever, stimulate the supply response to reform Competitiveness. Financing of tradable com- by supporting selected agribusiness invest- modity projects must be conditional on agricul- ments that have a catalytic and demonstration tural production and processing being value. The IFC is also in a favorable position to internationally competitive, or offering clear in- support enterprise restructuring and modern- dications of becomning so over the project life. ization through transition periods when these enterprises become fully exposed to the conse- Supply chain approach. Vertical coordination quences of a country's economic adjustment. features (quality control, risk-sharing arrange- ments, and others) are essential to the overall Principles of Operation competitiveness and project robustness of a project. The IFC therefore evaluates projects The IFC's agribusiness strategy was presented with an overall supply chain perspective. It then to the Board and approved in 1994 (IFC/ focuses in each country on those projects that SecM94-53). Another review of the IFC's agri- are likely to have the highest benefits to the business operations by the Board is planned in industry. December 1996, that will provide an opportu- nity to articulate more fully this strategy within Development impact. In general the IFC does the overall Bank Group's vision for rural not have a clear comparative advantage in the development. financing of farm production itself, with the The IFC is able to play a valuable role in the exception of some plantation-type enterprises. development process only when it promotes The IFC will more effectively fulfill its develop- well structured, profitable projects. There is no ment mandate when it supports those projects 148 Rural Development: From Vision to Action upstream or downstream of agricultural pro- (project cost of US$500,000 to US$5 million) is duction that have a clear but indirect impact on financed by Africa Enterprise Fund. small and medium-sized farms; for example The Agribusiness Department in the IFC is seeds, packing houses for fruits and vegetables, also exploring several possibilities to increase processing enterprises with significant techni- its exposure to small and medium-sized com- cal linkages to farmers. panies, as well as to individual farmers: * A multicountry loan facility targeting small Consolidating the IFC's Agribusiness and medium-sized enterprises is being dis- Operations cussed with a major agribusiness bank. * In Central America a regional loan facility Barring a strong reversal of the current favor- is being discussed with an agribusiness able investment climate in client countries, the investment bank. IFC foresees a continued but controlled growth * In Brazil the Agribusinesss Department of its agribusiness financing for the years to has been very active in supporting the de- come. Recent experience has demonstrated velopment of the integrated poultry and that financing the development of agriculture pig sector; it is now investigating the struc- is not doomed to be unprofitable and therefore turing of a credit line that would finance unsustainable for the Corporation. Since the necessary investments to be made by indi- Agribusiness Department has managed to in- vidual farmers who have contractual crease its activity while achieving a high level agreements with the industrial processors. of productivity, future expansion will clearly be in line with its staff resources, particularly Interacting with IBRD industry experts. IBRD and the IFC activities in the agribusiness Extending the IFC's Reach sector are complementary to each other. Requirements for successful agricultural devel- As the level of financing increases, the depart- opment are listed by IBRD as follows: (a) ade- ment has also undertaken to extend its reach quate economic incentives; (b) appropriate along two lines: (1) country coverage, espe- institutions; (c) appropriate infrastructures cially those countries where the department is (roads, ports and telecommunications); and, not yet present and where agribusiness is a (d) appropriate technologies. IBRD has long significant economic activity; and, (2) small been involved in the process of strengthen- and medium-sized enterprises. ing the enabling environment for agribusi- The importance of being able to support the ness through a range of instruments including development of small and medium-sized enter- agricultural sectoral adjustment loans, in- prises is well recognized, particularly in agri- vestment loans, technical assistance, or hy- business and more specifically in Sub-Saharan brids of these that can be targeted to specific Africa. It is also important to identify a delivery situations. mechanism that will be cost-efficient and there- On the other hand, the "private good" nature fore sustainable and replicable. of the main agribusiness activities (production, One such model has been arranged specifi- processing, agricultural marketing and distri- cally for Africa at the IFC level and is therefore bution) enables them to be efficiently supplied not sector specdfic: Africa Project Development by the private sector. When sectoral policies Facility, Africa Enterprise Fund, and Enterprise are appropriate, the IFC will therefore be in a Support Services for Africa are general facilities position to adequately support the develop- to support small and medium-sized enterprises ment of private agribusiness, including the pri- at all stages of their development. Every year, vatization of state-owned concerns through its a large number of small agribusiness projects provision of advisory services and financing. The International Finance Corporation's Vision for Agribusiness 149 The debate about the appropriate role of the the framework of ongoing macroeconomic and public and private sectors in agricultural de- sectoral reforms, and identifying potential in- velopment has certainly progressed in recent vestments. Conversely, the IFC staff have rou- years, but a precise boundary between the two tinely participated in workshops, sectoral will never definitely be drawn. The optimal studies and as peer reviewers for IBRD sector allocation of public and private resources work and projects. will continue to vary according to the country, The nature and scope of the IFC's operations the depth of its private sector, its income level requires substantial knowledge about agribusi- and quality of its public sector institutions. ness subsectors (technology, market, and The domain of agricultural marketing is a case others), particularly the key drivers of competi- in point: building the market architecture in- tiveness on the global markets. This knowledge volves both public and private components that is essential to the IFC's advisory role in the will justify involvement by the Bank and the proper structuring of agribusiness projects, in EFC. complement to its financing. This led the IFC Interaction is therefore a natural and desir- to initiate recently the publication of a series able outcome of each institution's objective to entitled "IFC Global Agribusiness Series" that leverage each other's work by sharing sectoral analyzes strategic trends in agribusiness sub- knowledge and operational experience, while sectors, with particular reference to emerging each institution confines its operations to areas countries. It is the Agribusiness Department's where it has a recognized comparative advan- intention to continue developing its industrial tage. This may take different forms: discus- expertise in areas which it does not currently sions with Bank staff are particularly valuable cover. It will thus provide an effective resource in orienting the IFC's promotion effort in each base to the World Bank Group for the main country, positioning each investment within agribusiness subsectors. APPENDIX D The Role of the Economic Development Institute's Training Strategy in Agriculture and Natural Resources EDI is presently expanding its activities. study tours, publications, and now through In this expansion plan, EDI aspires to broader outreach to wider audiences using play a catalytic role in mainstreaming new technologies. learning as a core Bank activity. While EDI will As EDI expands its activities, it intends to not be the sole source of learning activities in build a closer partnership with the rest of the the Bank, it does aspire to become the Bank's Bank. Among other things, EDI will work to- learning center of excellence-applying the gether with Operations to mainstream learning highest standards in the design and execution into country dialogue, CAS definition, ESW, of training activities, continuously updating its and the project cycle in order to assist Opera- training materials and outreach, and piloting tions in improving the quality and impact of innovative approaches that can subsequently Bank activities. be adopted widely in Bank operations. EDI's Strategy for a Closer Partnership EDI's Vision with the Rest of the Bank EDI shares with the Bank a vision of the world EDI's strategic contribution towards increasing in which knowledge can improve the pace the impact of Bank-wide support for borrower and quality of development-a vision of learn- learning will have four components: ing that allows countries to avoid costly policy 1. A program framework within EDI (rather mistakes, that allows countries to make the than ad hoc, disparate activities) in which most of available resources, and that enables EDI divisions annually identify program- people to participate in development fully. matic priorities (that is, cutting edge EDI's mission is to help the Bank achieve this development issues and themes) jointly vision for the world by making available lessons with Regions and the central vice presi- of experience to policymakers, providing the dencies skills needed to use and to manage resources 2. Annual agreement with the Regions on effectively, and reaching the civil society to build priority regions or countries for EDI the basis for sustained reforms. EDI pursues this learning efforts mission by working with its partner institutions 3. Identification of "touchpoints" in the CAS in delivering seminars, the training of trainers, preparation process, ESW, and the project 150 The Role of the Economic Development Institute's Training Strategy in Agriculture and Natural Resources 151 cycle where training and public educa- and senior policy makers to journalists and tion activities will have the highest pay- NGOs, EDI is continually developing more ef- off fective approaches to learning and outreach. 4. Systematic collaboration with the Learn- ing and Leadership Center on joint learn- EDI's Training Strategy for Agriculture ing efforts. and Natural Resources: Guiding Principles Six touchpoints that have been identified where training and public education activities As the division of EDI that is responsible for can significantly affect project quality include training in agriculture and natural resources, the following (see appendix figure D.1). EDI Environment and Natural Resources Divi- 1. At the initial identification phase, assem- sion (EDIEN) shares both the vision of EDI for bling diverse stakeholders together to mainstreaming learning as a core Bank activity build consensus on both the issues and the and the vision of the World Bank Group for assessment of options agriculture and natural resources, as articu- 2. During preparation presenting client staff lated in the main body of this document. with systematic cross-country experience to EDIEN will be demand-driven within a sup- help guide project design in productive ply framework. On the demand side, the geo- directions graphic distribution of its training activities 3. At appraisal helping to define training com- will roughiy mirror the emphasis which the ponents Regions give to agriculture and natural re- 4. During implementation helping to organ- source activities. Ahd within each region, ize and provide training, such as participa- EDIEN will establish priority issues, priority tory management skills, to project and countries, and priority operations in consult- program managers ation with RDV, the Regions, client countries, 5. At project completion and in conjunction and EDI's partner institutions. with OED extracting lessons from individ- On the supply side, among the range of pol- ual projects for the benefit of others icy issues, EDIEN has developed expertise in 6. In adjustment operations or projects that agricultural policy adjustment, water resource support the adoption of major reforms policy, participatory natural resource manage- public outreach in order to develop under- ment, and forestry. While EDIEN will continue standing of the rationale for the policies to maintain such expertise in policy issues that being adopted. cut across countries in a given region (or the Obviously, EDI will not have the resources entire developing world), EDIEN will not at- to become systematically involved in all phases tempt to duplicate the research activities of of the lending cycle, and the Regions will, in Center. Rather EDIEN will continue to focus any event, take the lead in most of these areas. on distilling and disseminating these research Rather, EDI will contribute in accordance with findings, cross-country experience, and best its comparative advantages in relation to the practices to a wider audience. rest of the Bank. First is EDI's reputation for EDIEN will also continue to focus its training neutrality and willingness to listen, and its on analytical and other approaches to address- ability to facilitate, for example, consensus- ing the range of policy issues. These include building at the project identification stage (see cross-disciplinary approaches (or processes) such appendix box D.1). as public information, awareness-raising, con- Second is EDI's specialization in training. In sensus-building, and participatory project the context of its programmatic approach to preparation as well as disciplinary approaches (or training, in which EDI plans and delivers a substance) such as economic policy analysis, series of training activities on a particular topic sector analysis, project analysis, environmental to different audiences from parliamentarians economics, ecology, and sociology. 152 Rural Development: From Vision to Action Appendix figure DA Lending and leaming in the year 2000 ( ) ( Di~~~~sseminatin Bank priorities Dissemdialogun, Country priorities 0 ountry strategy -~~~~~ ( P~~~re arato ( dntifcation \ / Consensus building Systematic cross-country Appraisal Extract experience lessons Evaluation Defining training components > ~~~~Training The Role of the Economic Development Institute's Training Strategy in Agriculture and Natural Resources 153 Appendix box D.1 Program on participatory irrigation management in October 1994 when EDI organized a national semi- management transfer. This convinced the Pakistani nar in Pakistan on participatory irrigation manage- participants of the validity of transferring the opera- ment, reaction ranged from skeptical to hostile. A tion and maintenance of irrigation systems from the Bank review of the irrigation sector earlier that year public sector to water users associations. These par- had raised apprehensions about possible commer- ticipants subsequently presented action plans to the cialization and privatization. By the end of the five- central as well as provincial govemments, which con- day seminar, however, there emerged a consensus tributed to the announcement by the Pakistani Presi- that the participation of water users in the manage- dent of a key policy reform in August 1995: ment of irrigation systems should be explored. provincial irrigation departments would be trans- One year later in October 1995 a subsequent semi- formed into authorities, and financially accountable nar saw a transformed atmosphere. Senior officials water boards, composed largely of farmer repre- from each province discussed not the "why" of par- sentatives, would be established for each major canal ticipation but the "how"of the optimal speed for in- system. troducing it, and the nature and scope of pilot While EDI cannot claim credit for a presidential projects. Representatives of farmers and NGOs also decision, there has clearly been a meeting of the spoke out in favor of user-based management, and minds in Pakistan. Whether the participatory irriga- the seminar participants drafted detailed action plans tion management program is playing a leading or a for implementing participatory irrigation manage- supporting role is less important than the indisput- ment. Why the changed attitude in one year? able fact that progress is being made in reforming the One factor was an EDI-sponsored study tour and irrigation sector. EDI will continue to facilitate a mu- intemal travel seminar in Mexico for Pakistani offi- tual leaming process in Pakistan to help refine and cials, NGOs, and farmers in February 1995, which implement the nation-wide participatory irrigation showcased Mexico's ongoing program of irrigation management program. With respect to process, three cross-cutting objective of adapting these for use in borrow- initiatives in all our agricultural and natural ing countries, so that Bank and borrower staff resource activities are expanding the audience will receive similar types of training. EDIEN is to include opinion leaders, the private sector, also open to joint Bank/borrower training and civil society, facilitating a learning dia- activities, and is attempting to shorten its re- logue and exchange of experiences among sponse time to requests from operations. seminar participants, and using innovative communications technology. With respect to EDIEN: Major Programs in Agriculture substance, the major cross-cutting theme is pol- and Natural Resources icy and institutional reform for sustainable de- velopment-that is, building ecological, Agricultural Policy Analysis economic, fiscal, and institutional sustainabil- and Institutional Reform ity into the design of new policies and institu- tions from the very beginning. This is a continuing and multiyear program. While EDIEN already has multiyear pro- The overall goal is to contribute to the formu- grams in agricultural policy analysis, rural pro- lation and implementation of improved and ject analysis, agricultural management, water better informed agricultural policies that will resources management, forestry management, strengthen the contribution of the agricultural and biodiversity, it will continue to revise and and rural sector to national development in update these with new analytical frameworks member countries, with a particular focus on and illustrative case studies. EDIEN is already Sub-Saharan Africa, China, and the Russian working closely with RDV and LLC in devel- Federation. By means of senior policy semi- oping the core training modules in agriculture nars, sector management seminars, and train- and natural resources for Bank staff, with the ing of trainers workshops, the program aims 154 Rural Development: From Vision to Action to improve analytical and training capacity-in design and management; agribusiness man- government, universities, and other training agement; strategic planning and policy formu- institutions-for agricultural policy analysis lation by agricultural sector managers; and implementation. Increasingly, the empha- agricultural services for small-scale commer- sis of the program is shifting from the "first cial farmers; and community management of generation" issues of adjustment such as natural resources and community finances. macroeconomic and sectoral pricing policy The program is being implemented through reform to the "second generation" issues of training activities including training of train- policy and institutional reform at the subsec- ers, development of training materials, and tor level, in the context of the changing role support for rural training networks. Seminars of the state from a direct provider of agricul- for senior project management staff help them tural services to a facilitator of increased pri- upgrade their general management skills and vate and non-profit sector provision of learn how to apply these skills through man- agricultural services. agement consultant-client relationships and follow-up activities. Rural Project Analysis Sustainable Agricultural Development This program introduces project analysis, for Central Asia and participatory planning and management methods, with a focus on the transition The objective of the program is to change the economies in Eastern Europe, Central Asia attitudes towards conservation and to incorpo- and East Asia. Seminars train trainers in the rate issues of the environment into comprehen- general principles and techniques of project sive agricultural reform policies under analysis, planning, and management as these conditions of financial constraints and eco- apply to agricultural and agro-industrial in- nomic transition, and through synergies with vestment projects. In addition sessions pro- the development sector. Central to the pro- vide hands-on experience in identifying gram is the analysis of the long-term and in- agricultural projects suitable for financing, in centive framework for securing environmental preparing a feasibility study, and in applying and natural resource assets and pricing of en- microcomputer and software. The project vironmental damage. The content of the pro- analysis criteria are those employed by mul- gram consists of modules on managing tilateral and bilateral public financing insti- sustainable agro-environmental development, tutions and private sector investors. Through macroeconomic and agricultural sector policy, collaboration with local training institutions, mechanisms of environmental protection and EDI also assists in the development and dis- managing natural resources, and experiences semination of suitable training materials in of other transition economies. investment project analysis. Water Resources Management Agricultural Services and Management Water is essential to all human activities. How- In conjunction with the African Development ever, in the years to come, water shortages and Bank and the International Fund for Agricul- pollution are likely to cause extreme hardship tural Development, EDI is helping national, in the poorer countries, national and interna- regional, and subregional institutions in Sub- tional conflicts, and practically irreversible Saharan Africa, North Africa, and the Middle damage to the environment. In many parts of East to expand their capacity to provide train- the world, this is already occurring. There is a ing in agricultural services and management. widespread consensus that, to address the The emphases of the program are agri-project complex and multi-disciplinary issues associ- The Role of the Economic Development Institute's Training Strategy in Agriculture and Natural Resources 155 ated with the water sector, water management ment of more than 1.2 million hectares of irri- should be approached in a holistic manner, and gated land has been transferred to water users capacity building in the sector should be associations. The overall purpose of EDI's pro- geared to facilitating the development of sus- gram on participatory irrigation management tainable policies and plans that ensure effi- is to stimulate high level policy dialogue on ciency and comprehensive management in the participatory irrigation management within sector. The primary objective of the water re- client countries, leading to commitment and sources management program is to increase programmatic action. The program offers five the capacity of policymakers, decisionmakers, phases of training activities, depending on the and managers to design and implement sus- needs of a particular country: national semi- tainable policies and programs geared to the nars to introduce policymakers to the efficient management and conservation of implications of participatory irrigation man- water resources in their countries. Program ac- agement; study tours to model countries; fol- tivities emphasize, among other things, the low-up national seminars to formulate a need for a comprehensive policy framework national action plan for participatory irrigation for analyzing policies and options, as well as management; special-purpose seminars to help the issues of water as an economic good, decen- support the implementation of a national par- tralized management and delivery structures, ticipatory irrigation management program; greater reliance on pricing, and stakeholder and support for evaluating participatory irri- participation. Activities take the form of na- gation management programs and disserninat- tional and regional seminar series tailored, ing lessons learned to other countries. EDIEN jointly with beneficiaries, to specific needs and also serves as the secretariat for the Interna- country conditions; creation and operation of tional Network on Participatory Irrigation international water resources networks; and Management, an autonomous, not-for-profit launching of regional programs to strengthen organization which facilitates participatory ir- water sector training institutions. Activities are rigation management through the exchange of planned for Sub-Saharan Africa, Middle East people, ideas, and training materials. and North Africa, and Latin America. Forestry Management Participatory Irrigation Management Now in its fifth year, EDI's forestry program The irrigation sector, which accounts for focuses on policy and institutional reforms for roughly three-quarters of total water use in the the management of forests on a sustainable ba- world, is in a state of management crisis. Na- sis. Participants learn how their countries can tional irrigation agencies incur severe losses of sustain indigenous forests and reduce the rate up to ten times the actual costs of operating of deforestation, preserve genetic resources, and maintaining the dams, control structures, and maintain a flow of timber and nontimber and canal networks under their jurisdiction. forest products. The program helps public Since the mid-1980s, countries including Mex- sector forestry institutions to carry out new ico, Turkey, Indonesia, the Philippines, Colom- mandates (such as managing externalities, con- bia, India, Sri Lanka, and Nepal have adopted servation, and biodiversity) through collabora- policies to encourage greater participation in tion with new partners (such as local management by waters users. One of the most communities, NGOs, and the private sector), dramatic management transfer programs has while addressing other pertinent issues, such occurred in Mexico, where the government as institution building and reform, technologi- adopted a policy of gradually transferring all cal improvements, social problems in forestry, its large scale irrigation districts to 78 water the environmental services rendered by forests, users associations. As of mid-1993 the manage- and the links between forestry and other sec- 156 Rural Development: From Vision to Action tors of the economy. In discussing the options support functions, many of which are not well available for addressing these issues, attention understood. Significant knowledge about the is also given to the possibilities of preparing a value of species and ecosystems lies in the oral plan of action. These seminars are of interest traditions of indigenous peoples whose lives to directors of departments of forestry, plan- are being transformed by economic develop- ning, finance, and the environment, along with ment. The objective of this program is to in- representatives of private sector and nongov- crease awareness and knowledge among ernmental organizations. At the present time, senior policy-makers, advisers, and leading the program focuses on India and other South opinion-makers of the need, the benefits, the Asian countries. Future plans include Africa opportunities, and the constraints for conserv- and the Russian Federation. ing biodiversity. Among other things, the program addresses the implications of macro- Biodiversity economic and sectoral policies on biodiversity, on ecosystems, and on traditional knowledge Global biodiversity is estimated at 10-30 mil- endangerment in terms of their nature, the im- lion species, of which at best 10 percent has mediate and root causes of threat, and the been documented, and an unknown number of symptoms of endangerment. The program pro- diverse ecosystems with life-supporting func- motes a learning dialogue among participants, tions in the major biomes of the world (tropical among other things, by means of case studies forests, deserts, grasslands, temperate and bo- and interchange of experiences, which enable real forests, tundra and taiga, coral reefs, and participants to identify and internalize marginal seas and oceans). Biodiversity pro- concepts, approaches, and lessons most mean- vides economic goods and services, and acts as ingful to their immediate problems and envi- a sink for wastes, through a variety of life- ronmental situations. Bibliography Binswanger, Hans P. and Pierre Landell-Mills. World Bank. 1994. "Agricultural Extension: Les- 1995. Implementing the World Bank Strategyfor sons from Completed Projects." Operations Reducing Poverty and Hunger. Environmentally Evaluation Department Report 13000. Wash- Sustainable Development Studies and Mono- ington, D.C. graphs Series 4. Washington, D.C.: World Bank. . 1995a. "A Strategic Vision for Rural, Agri- International Food Policy Research Institute. 1994. cultural, and Natural Resource Activities of the 2020 Vision. Brief 3. Washington, D.C. World Bank." Agriculture and Natural Re- McCalla, Alex F. 1994. "Agriculture and Food sources (now Rural Development) Department, Needs to 2025: Why We Should be Concerned." Washington, D.C. Sir John Crawford Memorial Lecture. Consult- . 1995b. World Development Report. Wash- ative Group on International Agricultural Re- ington, D.C. search, Washington, D.C. . 1996a. "Achievements and Problems in Serageldin, Ismail. 1996. "Setting the New Agenda the Development of National Agricultural Re- for Agricultural Research." Paper delivered at search Systems." Operations Evaluation De- the conference on Global Agricultural Science partment Report 15828. Washington, D.C. Policy for the Twenty-first Century, Melbourne, . 1996b. "From Vision to Action in the Rural Australia, August 26-28. Office of the Vice Sector." Agriculture and Natural Resources President, Environmentally and Socially Sus- (now Rural Development) Department, Wash- tainable Development, World Bank, Washing- ington, D.C. ton, D.C. . 1996c. "Sustainable Banking with the Serageldin, Ismail, and David Steeds. 1997. Rural Poor-A Worldwide Inventory of Microfinance Well-Being: From Vision to Action. Proceedings of Institutions." Agriculture and Natural Re- the Fourth Annual World Bank Conference on Envi- sources (now Rural Development) Department, ronmentally Sustainable Development. ESD Pro- Washington, D.C. ceedings Series 15. Washington, D.C.: World Yaron, Jacob, McDonald P. Benjamin, Jr., and Bank. Gerda L. Piprek. 1997. Rural Finance: Issues, De- von Braun, J., R. Hopkins, D. Puetz, and R. sign, and Best Practices. Environmentally and So- Pandya-Lorch. 1993. Aid to Agriculture: Revers- cially Sustainable Development Studies and ing the Decline. Washington, D.C.: International Monographs Series 14. Washington. D.C: Food Policy Research Institute. World Bank. 157 Distributors of COLOMBIA GERMANY ISRAEL NEPAL PORTUGAL SWEDEN Intoenlace LIda. UNO-Vertag Yozmot Lherature Ltd Everest Media international Services (P) Ltd. Livrara Ponugal Wennergren-Williams AB W orld Bank Carrera 6 No 51 21 Poppelsdoder Allee 55 PO. 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