A Perspective on the Foodgrain Situation in the Poorest Countries SWP251 WVorld Bank Staff Working Paper No. 251 waw,a, J. .^ April 1977 This paper is prepared for staff use. The views expressed are those of the N - author and not necessatily those of the World Bank. by: S. J. Burki T. J. G8ering PUB inning and Progra!i- Review Department ) jjl HG ral and Rural Development Department 3881.5 14> .W57 ' W67_ _ no.251 _-- This paper is for staff use. The views expressed are those of the author and not necessarily those of the Bank. WORLD BANK Bank Staff Working Paper No. 251 A PERSPECTIVE ON THE FOODGRAIN SITUATION IN THE POOREST COUNTRIES April 1977 Changing perceptions of the world food situation led to concern in the 1960s, optimism during the early years of the Green Revolution (1966-70) and then to pessimism growing out of the "food crisis" of the early 1970s. Recently more favorable weather conditions have improved short-term food prospects over large part of the world. Foodgrains account for about three-fourt1' of the calories in typical diets in the poor countries. This paper gives a perspective on the availability of foodgrains in poor countries which takes account of short term fluctuations and also examines secular trends in production, trade and consumption. In principle, the world has the ability to feed itself for at least two to three decades with presently known technologies, if these are employed effectively. However, most of the world's food surpluses originate in North America and Oceania, whereas deficits are growing in much of the rest of the world, particularly in the low income nations of South Asia and sub-Saharan Africa. Without significant policy changes these countries' nominal foodgrain deficits (i.e. the difference between projections of domestic production and domestic demand) are likely to triple between 1974 and 1985. Even if these market. deficits were filled, without a change in income distribution large numbers of low income people could not purchase their minimum nutritional needs. Proper nutrition is assumed to be an important development objective of all countries, and thus estimates are also made of the supply which would be needed to ensure adequate nutrition. Even to meet the market deficit, let alone the nutritional deficit, through commercial imports would place too great a strain on the balance of payments and the logistic capacity of the low income countries, and it will be necessary for them to depend primarily on increasing domestic production. The paper lays out in broad terms the strategies that seem most appropriate for increasing the availability of food in these countries, and estimates the additional domestic and foreign resource requirements necessary to meet output targets. Prepared by: S. J. Burki Policy' Planning and Program Review Department T. J. Goering Agricultural and Rural Development Department TABLE OF CONTENTS Page I. INTRODUCTION 1 II. T1E WORLD FOOD SITUATION 5 A. Past Production, Trade and Consumption 5 Recent Developments 9 B. The Outlook for the Next Decade 10 General Picture for the Developing 10 Countries Prospects for the Poor Countries 11 C. The Nutritional Dimension 13 D. Balance of Payments Considerations 15 III. DE'VELOPMENT STRATEGY FOR INCREASED FOOD PRODUCTION 20 A. A Target for Additional Production 20 B. Estimate of Additional Resource Requirements 21 C. Some Sttategic Considerations 25 -Production Incentives 26 Technological Development 30 Transfer of Technology and supporting Services 33 Snijall-farm Focus 35 IV., THE ROLE OF`STHE WORLD BANK 38 A. Bank Group Lending for Agriculture 38 B. Lending for Fobdgrains 41 ANNEXES List of Tables Page 2.1 General Production Per Capita 5 2.2 Growth Rates of Foodgrain Production 6 2.3 World Grain Trade, 1934-38 to 1976 7 2.4 Foodgrain Import,Burden for Developing Countries, 1968-72 and 1972-74 3 3.1 Comparative Price Data for Fertilizer and Rice 27 3.2 Foodgrain Yield Differentials by Farm Size in South Asia, 1969-71 36 4.1 Bank Group Lending for Agriculture 38 4.2 Geographical Distribution of Agricultural Lending 39 4.3 Per Capita Lending for Agriculture 40 4.4 Share of IDA in Agricultural Lending 41 4.5 Bank Lending for Foodgrains 42 I. INTRODUCTION 1.01 Changing perceptions of the world food situation led to concern in the early 1960s, optimism during the first years of the Green Revolution (1966-70) and then pess:Lmism growing out of the "food crisis" of 1972-74. Recently, more favorable weather, including timely monsoons in South Asia and normal rainfall in the Sahel, have improved short term food prospects over large parts of the world. Such factors are not always so favorable, yet they determine nutritioni for millions. A perspective is needed that takes account of short term developments and also examines longer term secular trends of production, trade and consumption. 1.02 The major concerns of this paper are longer term global food prospects, with a focus on the poor countries.l/ Several interpretations of these prospects exist. An extreme position holds that the world is losing its capacity to feed adequately a burgeoning population, particularly in the low income countries of South Asia and Africa. Increasingly serious depriva- tion is forecast. A less extreme view suggests that the era of grain surpluses in traditional exporting countries is being replaced by tight world market supplies which, although adequate in most years to meet global requirements, will result in rising real food prices and increasing undernutrition among the poor strata of society. 1.03 A widely-held view is that the shortages of 1972-74 were to a large degree transitory. They were the outcome of coincidental factors which do not presage a fundamental deterioration in the world's ability to feed itself. In this view, global agricultural resources are more than adequate 1/ Defined as those with average per capita incomes of less than $200 in 1975. A list of these countries appears as Annex 1. - 2 - to satisfy food requirements to at least the end of the century, although difficulties of inter-regional distribution will present problems for a growing number of countries. 1.04 The analysis of this paper is generally consistent with this third point of view. The world has the ability to feed itself for at least another two to three decades with presently known technologies, if these are employed effectively. However, most of the world's food surpluses originate in North America and Oceania, whereas deficits are growing in much of the rest of the world. The task of transferring these food surpluses to deficit areas would place a great burden on the resources of recipient nations. A growing number of poor nations are likely to experience increasing difficulty in meeting their deficits by importing foodgrains from abroad. 1.05 Given its regional character, it is appropriate to disaggregate the world food problem, with a focus on the regions that are now, or are likely to become, large food deficit areas. The first step (Chapter II) is to examine the food prospects among the developing countries as suggested by an extrapolation of trends from the recent past.-/ This analysis indicates that two groups of countries may experience rapidly growing food 1/ The basic figures in this study are projections of foodgrain production, demand and imports contained in Bank Staff Working Paper No.247, Developing Country Foodgrain Projections for 1985 (November 1976), Annex II summarizes these projections. In addition, regional data and information were provided in studies undertaken for the Bank's South Asia and Western Africa Regional staff (May 1976 and February 1976 respectively). This paper, like the above Working Paper, concentrates on foodgrains, a food group which accounts for about three-fourths of the calories in typical diets in the poor countries. Data on non-foodgrain staples generally are not adequate for projections. deficits.l/ IC trends continue, the aggregate foodgrain deficit of the countries of the Middle East and North Africa would double between 1974 and 1985. Wit'hout significant change in the policies pursued currently, the low income nations of South Asia and sub-Saharan Africa may face a three- fold increase in their nominal deficits during the same period. With notable exceptions such as Egypt, the foodgrain deficit projected for many of the Middle Eastern and North African countries could probably be met through commercial imports. It would not be possible, however, for the low income countries to rely on commercial imports to meet projected deficits. These 1/ These projections have been done for each of the six regions as defined by the World Bank. The supply projections are based on trends in foodgrain production in 1960-74, altered where considered necessary by commodity- specific aind other information. Growth rates behind the supply projections assume: (1) some improvement in the internal terms of trade facing agriculture from those of 1960-74; (2) technology adoption rates as in the recent past; and (3) some increases in agricultural lending programs by the multilateral agencies, but no sharp changes in the technical and capital assistance programs of the OECD countries. The resulting production growth rates are slightly higher, both among regions and commodities, than those of 1960-74. Growth in foodgrain demand reflects assumptions regarding population and income expansion. Population projections are based on the UN 1974 medium variants, adjusted as necessary, e.g., for West Africa, on the basis of more current infornation. Growth rates of GNP are derived from the Bank's Simlink model. The rates of GNP growth for 1980-85, which assume some acceleration from 1974-80 for most regions, approximate UN targets for Development Decade II. These projections of foodgrain supply and demand may be considered as plausible rates of expansion over the next decade, as suggested by .economic performance of the past and the policy scenarios considered most like:ly to prevail in these countries over the next several years. Past trends wield a heavy influence. The supply projections do not represent the growth potential which might be realized by larger investment in agricu'Lture and more favorable production and price policies by govern- ment. Numerous other studies are available. Differing definitions, assumptions and methodologies preclude strict comparisons but all indicate the same order of magnitude with respect to projected production shortfalls in the developing countries. - 4 - countries must therefore take steps to increase food output. 1.06 Apart from introducing a regional emphasis in the discussion of the world food situation, this paper makes another significant departure from the conventional treatment of the subject. Here "food deficits" are discussed both in the theoretical sense of the difference between projections of domestic productiorn and domestic demand and the normative sense of what should be provided to ensure adequate nutrition. Proper nutrition, which relates to issues of both production and income distribution, is assumed to be an important development objective of all countries. 1.07 This paper provides some basic data and information onI the food situation in developing countries, its past trends and future prospects. It then lays out in broad terms the strategies that seem most appropriate for solving the food problem of the low income countries. Finally, the paper gives an estimate of the additional domestic and foreign resource requirements of the low income countries necessary to meet food output targets and the role played by the World Bank in this regard. - 5 - II. THE WORLD FOOD SITUATION A. Past Production, Trade and Consumption 2.01 World food production (foodgrains plus the foodgrain equivalent of pulses and tubers) during the past two decades (1954-73) grew more rapidly (2.8% -per annum) than population (2.0%), resulting in a modest improvement in per capita food availability. On average, the 3.8 billion people in the world in 1973 had about 20% more food available per person than did the 2.7 billion two decades earlier. 2.02 Food production in the developing countries grew more rapidly during this 20-year period than in the developed countries (3.0% per annum as against 2.7%). However, in per capita terms, the food production gap widened between these two groups of countries due to the rapid population growth in the developing countries (2.5% as against 1.0% in developed nations). Whereas in developed countries agricultural production per head increased more than one per cent per year, the increase achieved by developing countries was almost negligible. In 1961-65, cereal output per capita in the developed nations was three and a half times that in the developing world; by 1974 this had increased to four times. (Table 2.1 below.) Table 2.1: CEREAL PRODUCTION PER CAPITA Countries Kilograms per year 1961-65 1974 1. Low Income- 145 136 2. Middle Income 134 163 3. All L:DCs 143 147 4. Developed Countries 510 590 - 6 - 2.03 In 1969-74, production growth rates in developing countries slowed markedly from those for early years. (See Table 2.2.) Adverse weather, limited fertilizer supplies and unfavorable prices and seed deterioration of the new varieties were contributing factors. Developing country foodgrain output growth averaged 1.2% per annum during 1969-74, compared to 2.9% during 1960-65. Rapid growth in foodgrains output was experienced in the mid to late 1960s and was most pronounced in EMENA and South Asia where rates averaged 11.9% and 13.1% respectively. By the early 1970s the continued downtrend of production in East and West Africa and slower growth in every other region except East Asia and Pacific, resulted in output growing at less than half the rate of a decade before. For poor countries, the rate of growth declined to less than 1% in 1969-74, compared with over 10% during 1966-68. Table 2.2: GROWTH RATES OF FOODGRAIN PRODUCTION 1960-65 1966-68 1969-74 1960-74 Region (percent per annum) EMENA 3.4 11.9 1.0 2.1 East Africa 3.8 -1.3 -0.2 2.2 West Africa 3.5 -1.4 -1.7 0.2 Latin America 7.3 1.7 0.9 3.3 South Asia 0.3 13.1 1.2 2.9 East Asia and Pacific 2.4 0.5 2.6 3.1 Total Developing 2.9 7.1 1.2 2.7 Low Income 1.0 10.5 0.9 2.6 Middle Income 4.8 4.3 1.4 2.9 2.04 These developments are consistent with longer-term trends in the world food situation. Since 1934-38, Asia and Africa have moved from positions as small net exporters to importers of 40 million tons annually. - 7 - Grain export capability is increasingly centered in North America, having increased from some 5 million tons in the mid-thirties to over 90 million tons in the mid-seventies. (See Table 2.3.) Given the slower population growth and the remaining productive potential of North America, enough exports to fill the devEloping countries' deficits in the next decade could be forthcoming. However, greater uncertainty exists for the period beyond 1985 with respect to both supply and export availability. The 1970s have seen predictable efforts to control exports of foodgrains in the United States and Canada dur.ing times of domestic shortages. Table 2.3: WORLD GRAIN TRADE, 1934-38 to 1976-/ (million tons; + export; - import) Region 1934-38 1948-52 1960 1970 197621 N. America + 5 +23 +39 +56 +94 Latin America + 9 + 1 - + 4 - 3 W. Europe -24 -22 -25 -30 -17 E. Europe and USSR + 5 - - - -27 Africa + 1 - - 2 - 5 -10 Asia + 2 - 6 -17 -37 -47 Australia, N. Zealand - 3 + 3 + 6 +12 + 8 1/ These data include the trade in foodgrains between developed and centrally planned economies. 2/ Preliminary estimates. Source: The WorIdwatch Institute, based upon FAO data. 2.05 The emerRence of the Soviet Union as a large and frequent importer of foodgrains has,-aedded;further uncertainties to the global picture. That country may increasingly depend on commercial imports to meet rapidly growing domestic demand, -in-part reflecting needs of an expanding livestock industry. - 8 - Weather-related variability in Soviet production impinged sharply on world markets. Recent foodgrain supply agreements between the Soviet Union and the United States have the effect of further reducing supplies available to other countries. 2.06 Developments in the early 1970s placed disproportionate burdens on the poor countries. The burden on balance of payments of developing countries from high foodgrain import volumes and prices is apparent when food imports are compared with total exports. For the developing countries, annual average expenditures'on foodgrain imports rose from $1.8 billion in 1968-72 to $2.9 billion in 1972-74. However, the burden on the low income countries was greater than on the middle income group (all developing countries with per capita incomes of more than $200). (Table 2.4 below.) Table 2.4: FOODGRAIN IMPORT BURDEN FOR DEVELOPING COUNT'RIES, 1968-72 AND 1972-74 (Annual Averages) 1968-72 1972-74 Foodgrain Foodgrain Imports as Imports as Foodgrain Merchandise % of Foodgrain Merchandise 7, of Imports Exports Exports Imports Exports Exports ($ billion) ($ billion) (%) ($ billion) ($ billion) (%) Low Income 1.0 8.5 11.8 1.8 12.2 \14.8 Middle Income 0.8 40.9 2.0 1.1 73.8 1.5 All LDCs 1.8 49.4 3.6 2.9 86.0 3.4 2.07 This strain on the balance of payments of the poor countries was caused not only by larger food deficits and higher commercial prices, but also a sharp decline in the volume of foodgrains made available by developed countries on concessional terms. In the late 1950s shipments of food aid ranged from 30 to 45% of the total food imports of developing countries.-/ 1/ It has been argued that provision of large amounts of food aid during the fifties and early sixties retarded investment in agriculture by depressing domestic prices. The situation emerging now is different from the one that prevailed a decade or two ago; the deficits expected are very much larger relative to probable concessional shipments. - 9 - For the poor nations, the proportion of food imported under concessional terms was as high as 75%. Concessional shipments from all sources, of which the United States is by a wide margin the most important, reached a peak of 18 million tons in 1964/65 and fell to 7 million tons in 1973/74. 2.08 The 2 million tons of food aid made available to middle income countries in 1973/74 represented about 20% of their grain imports, while the remaining 5 million tons for poor nations were equivalent to 35% of their imports. In 1975-76, the level of concessional exports to developing countries is estimated at 9.5 million tons. Recent Developments 2.09 The world grains situation has improved since 1972-74. The 1975 world rice crop reached record levels (up more than 6% from 1974), with good har- vests reported throughout most of the developing countries, and the 1976 crop is expected to be only slightly smaller. Rice production in the major Asian countries in 1976 may be 4-5% greater than crops harvested in 1973 and 1974, an increase slightly less than population growth over that period. Global rice stocks by mid-1976 were about a third higher than year-earlier levels, while prices (Thai 5%ZO broken) continued to fall to levels only about half those realized in 1974. 2.10 The L976 world wheat crop is projected at a record level, some 15% greater than the 1975 harvest. Coarse grain production may increase by about 12%. The world wheat sil:uation irI the 1976/77 marketing year is likely to see the first significant increase in total wheat utilization since 1972-73. Larger supplies are reflected in sharply lower wheat prices: the 1976 price (US No. 1, SRW) was only 70% of the 1974 level. - 10 - 2.11 Favorable harvests for rice, wheat and coarse grains permitted some increase in global cereal stocks in 1976, after nearly steady declines since 1972. A further increase is projected for 1977, although the ratio of stocks to annual consumption will remain well below the levels of the late 1960s. Despite these encouraging developments, world per capita production of cereals in 1976 is likely to be lower than in the 1972-74 period. Most of the recent production gains appear to have been attributable to favorable weather. There is no evidence to suggest that a new, higher global production trend has been established. B. The Outlook for the Next Decade General Picture for the Developing Countries 2.12 Population and projected income changes in the presence of essentially unchanged policies suggest that the nominal foodgrain deficit of the Bank Group developing countries could more than double in the next decade, from an estimated 34 million tons in 1974 to about 75 million tons in 1985.1/ If the low food production growth rates of the early 1970s prevail, the deficit could exceed 140 million tons by 1985. 2.13 Nothing precise can be said regarding the commodity mix of the 1985 deficit. Grain deficits in 1974 were met largely through wheat imports (75% of the total), a reflection of its greater availability and price advantages relative to other foodgrains, and income-related consumer preferences among the richer countries (e.g., Korea) and urban populations elsewhere. This 1/ "Developing Country Foodgrain Projections for 1985," op. cit. - 11 - general pattern is likely to persist, although with some significant shifts. The demand for coarse grains is projected to grow rapidly among several higher income countri,es to support expanding livestock and poultry industries. In relative terms, projected total deficits for rice and coarse grains may grow more rapidly than for wheat. However, in 1985 the bulk of the deficit is likely to be in wheat. World trade in rice is expected to continue to constitute a small part of global foodgrain trade and a small part of rice production. It would therefore remain subject to sharp price fluctuations. Prospects for the Poor Countries 2.14 The group of poor countries has a total population of about 1.2 billion. Seven-tenths of this is in South Asia with India alone representing more than one-half of the total. Indonesia represents another one-tenth. With four-fifths of the affected population, and similar population pressure on land resources, South A;ia plus Indonesia dominate the food problem of the poor countries, In the diverse countries of East and West Africa, accounting for about 14% of the total population, per capita production generally has deteriorated more seriously than in South Asia.-/ Periodic food supply problems also are likely in several of these countries, with consequent deprivation for sizable proportions of their populations. 1/ Two populous countries, Egypt and Nigeria, have per capita incomes just above the $20-0 put-off point. Both have rapidly growing populations and potentially serious food problems. Due to oil revenues in Nigeria and a high level of ex-ternal assistance.in Egypt, they have more financial resources thani-most of the poorest countries. However, the needed policy and institutional improvements are similar. - 12 - 2.15 With the UN "Medium" projections for population, a modest increase in per capita income and consumption, and no correction of existing nutritional inadequacies, the projected demand for foodgrains in the poor countries in 1985 is estimated at 245 million tons, up from 174 million tons in 1974.1/ If the UN "Low" population projections were substituted, the estimate would be reduced by about 5 million tons. The "High" variants would add about 5 million tons. Assuming no increase in average per capita consumption with the "Medium" population growth, the 1985 demand would be about 230 million tons. The demand projection is relatively insensitive to these alternatives. This is due to an expectation of small increases in per capita incomes until 1980 and modest increases thereafter, and the fact that alternative population estimates for 1985 do not vary widely. 2.16 Based on trends during the 1960-74 period, and assuming that present agricultural policies are continued, production of about 212 million tons of foodgrains in the poor countries is estimated for 1985. From a production of 160 million tons in 1974, this represents a compound rate of growth of 2.6% per annum. For several reasons, this projection unavoidably involves greater uncertainty than the demand estimate. First, as already noted, growth rates of foodgrain production declined pervasively and sharply in recent years in the low income countries from those prevailing over the longer period (0.9% annually in 1969-74 from 2.6% in 1960-74). It is largely a matter of judgement whether the poor performance in the early 1970s is primarily due to adverse weather or provides evidence of deterioration in productivity trends. Recent good harvests are encouraging but the slowing contribution of new technologies is disquieting.-/ Second, departures from past policies and investment levels 1/ Derived from basic data in "Developing Country Foodgrain Projections for 1985," op. cit. 2/ According to recent estimates, the excellent latest harvest in India implies an annual growth rate in foodgrain output between 1970 and 1976 of only 1.5%. - 13 - cannot be predicted with confidence even though the effects of such possibilities might be large. To indicate the sensitivity to alternative growth rates in production, an increase in the annual growth rate of one-half percentage point over this pericid would add 12 million tons in 1985. 2.17 - While the Bank study noted in footnote 1/ of page 12 implies a deficit among poor countries of 33 million tons in 1985, a plausible range is from 20 to 45 million tons given, the uncertainties in projecting demand and supply. The combination of low growth in foodgrain production and high growth in market demand is highly unlikely because a slower output growth necessarily implies a smaller increase in per capita income than that built into the demand projection. Conversely,, rapid output growth would not be consistent with low demand unless, for example, the distribution of the incomes from the increment to production were highly concentrated. Such an increased inequality in incomes is undesirable. Further, in most of the countries, good growth in output and improved nutrition for the poor is not possible without full participation by small farmers. C. The Nutritional Dimension 2.18 This market deficit in 1985 would, if filled, imply modest increases in average per capita consumption. However, with essentially unchanged patterns of income distribution, as is implicit in the demand projections, large numbers of low-income people could not purchase their minimum nutritional needs. From the viewpoint of nbrmative planning, this is an unacceptable situation. Adequate nutrition is considered to be an important development objective because of its direct relevance to human welfare, as well as its relationship to human capital formation-and future income-earning capacity. 2.19 Estimates of nutritional deficits vary widely./ As pointed out in a 1/ Among the most wideLy quoted figures is that contained in the World Food Conference Assessments paper. Some 462 m people were assumed to have insufficient protein/energy supplies in 1970, excluding the Asian centrally-planned economies. About two-thirds of these were located in the Far East. The USDA (The World Food Situation and Prospects to 1985) has used this figure to estimate that about 25 m additional tons of grain would provide the extra 500 calories daily (equivalent to about 0.15 kg of foodgrains) per capita required to eliminate much of the world's calorie deficit. - 14 - recent Bank staff study, the severity of the problem is understated by the usual aggregative approach which neglects intra-country and inter-regional dif- ferences in incomes and food consumption.-/ Such. an approach implies incorrectly that calories consumed in excess of physiological requirements by some groups can be counted as available to meet caloric needs elsewhere. The above study, which estimates nutritional deficits by income levels, concludes that caloric deficits in the mid-1960s affected more than 1 billion people in the developing countries, with three-fourths of this total suffering from severe deficiencies in excess of 250 calories per day. Deficiencies of that magnitude would require for correction an additional 35-40 million tons of cereals annually. Assuming some increase in per capita food supplies, the study suggests that the total caloric deficit would remain at this approximate level through 1990 as the increasing numbers of undernourished people offset a decline in the average per capita deficit. 2.20 Estimates of the malnourished population in the poorer countries are similarly approximate. Assuming no change since the mid-1960s in the portion of total population affected, the caloric deficit among poor countries in the mid- 1970s may be of the order of 25 million tons of grain. This is equivalent to about 16% of their production in 1974 and nearly double their grain imports that year. 2.21 Correction of this deficit requires a consideration of distributional issues which are as difficult as those related to increased grain supplies. The deficit cannot be eliminated through the typical course of development which leaves basic patterns of income distribution unchanged. As the above study points 1/ Shlomo Reutlinger and Marcelo Selowsky, Malnutrition and Poverty Magnitude and Poverty Options (Washington, D.C.: World Bank Staff Occasional Papers No. 23 1976). - 15 - out, with unchanged incc,me distribution, implausibly high rates of growth in the demand for and supply of food would be needed to provide adequate calories to the lowest iincome classes. A realistic solution to the malnutrition problem in urban areas requires target group-oriented programs to provide additional calories to those with low incomes. In the short run, the problem could be significantly reduced by expanded, well-targeted external food aid programs wlhich augment food consumption of the poor without diminishing incentives to expand domestic food production. In rural areas the most effective approach will include both small-farm development programs to increase local food supplies and employment creation efforts to generate purchasing power for the unemployed and other low- income groups. Effective implementation of these various measures might well require more than this paper's planning horizon of one decade. 2.22 For purposes of this study, this nutritional deficit of 25 million tons may be added to the range for the projected market deficit (20 to 45 million tons). The sum, 45 to 70 million tons, is the difference between the production of the poor countries; in 1985 that is implicit in present policies and trends, and the quantity required to provide adequate food for their populations. D. Balance of Payments Considerations 2.23 Foodgrain imports required by the poor countries to make up a deficit of 45 to 70 million tons in 1985 are hardly credible for both logistical and balance of payments reasons. In comparison, their imports were 14 million tons in 1974, a year of- serious shortfalls in domestic production. If the major grain exporters in North America and Oceania were assured of stable market outlets, there would be little difficulty in meeting the projected 1985 food deficit in the poor nations. However, sucn-an addition to the grain trade would necessitate a considerable infrastructural investment in both exporting and importing countries. - 16 - It would also imply a substantial shift in consumption patterns in poor countries, since much of their production shortfall will be in rice whereas the bulk of the surpluses available for export in North America and Oceania consists of wheat and coarse grains. 2.24 More critically, imports of 45 to 70 million tons would place a large burden on the foreign exchange balances of poor nations. Concessionary foodgrain imports in volume significantly larger than those of recent years seem unlikely. Food aid of 6-10 million tons per year, of which perhaps two- thirds would be for the poorest countries, appears plausible. This means that an import-based solution of the food problem must take into account the implica- tions of obtaining a large quantity of imports on commercial terms. On such terms this range of imports would represent between one-third and one-half the projected export earnings of poor countries in 1985.- Taking the poor countries together, it would hardly be feasible to devote this share of export earnings to continuing foodgrain imports. Nor is it plausible that export growth could be accelerated sufficiently to make the balance of payments burden tolerable. 2.25 Both past performance and apparent opportunities do not suggest that poor nations will be able to expand their earnings from exports to match the growth in their demand for food. Their share in world export trade has declined steadily over the past decade from nearly 2% in 196.5. World Bank staff projections suggest that the share of poor nations (excluding 1/ In 1975 prices, export earnings of the poor countries might approximate $30 billion in 1985. Taking the CIF price of $200 per ton (1985 prices for wheat, coarse grain, and rice, weighted according to consumption shares and expressed in 1975 dollars), the foreign exchange costs would be $9-14 billion. - 17 - Indonesia) in world trale would decline to 1.2% in 1985. In terms of real growth rates, the export performance of low income nations is expected to be below that of developed and middle income developing countries. In the 1975-85 period, their real rate of growth in exports, including receipts from non-factor services, is estimated at 4.6% per annum as against 6.3% for the middle income countries and 6.6% for developed economies.-/ 2.26 For some countries, manufactured exports may be economically traded for foodgrains. However, for the poor countries together, the realistic potential by 1985 seems small relative to their foodgrain deficit. Starting from a small base, the manufactured exports of these countries collectively are projected to grow only slightly more rapidly than their total exports.-/ In addition to the domestic investment and restructuring required for manufactured exports, the poor countries will face external handicaps. Competition will be keen from a number of middle income countries with vigorous export sectors which will continue to expand their exports of manufactured goods. Also, there is considerable uncertainty about the future openness of markets for these goods in the developed countries. 2.27 Some countries may find it in their advantage to expand commercial agricultural exports to exchange for foodgrains. Various agricultural commodities provide high value employment for both land and labor. However, the potential for this trade appears to be limited. World jute and hard fiber markets are depressed; rubber and cotton face strong competition from synthetics; and political opposition to palm oil imports is rising in a major market. 1/ Bank staff projections. 2/ Excluding Indonesia, whose export earnings depend critically on the price of oil, the export -receipts of the poor countries have been projected to grow at 5 to 7, per annum in several alternative scenarios. For their manufactured exports one projection is 7.6% annually from 1978 to 1985. - 18 - While trading other agricultural commodities for foodgrains will be important in a number of countries, the weight of these countries in the total demand of poor countries is small. 2.28 Global uncertainties regarding foodgrain availability can also be expected to affect production strategy in the food-deficit countries. In the 1960s the ready supplies of foodgrains at commercial terms, the relatively low world prices, and generous food aid, encouraged the poor countries to emphasize sectors other than agriculture. However, after the eXperience of the early 1970s, poor countries may be reluctant to rely on foodgrain imports and risk high prices in a possible period of global foodgrain shortages. This reluctance is reinforced by inadequate world stocks of foodgrains and the lack of an agreed plan for the creation and management of international buffer stocks. 2.29 The case for depending primarily on domestic production is strengthened by the income linkage to nutrition. Market availability of foodgrains will not ensure that the poorest groups will be able to increase their consumption. The majority reside in rural areas and are directly or indirectly dependent on agriculture for their livelihood. The direct means to improve their situation is to increase their productivity and income, thereby ensuring their access to the increased food output. Alternatives, such as massive redistribution of incomes and/or food to the rural poor, pose formidable administrative and institutional challenges. 2.30 As a "normal" level of foodgrain imports by the poor countries in 1985, about 15 million tons is suggested for indicative purposes. If 60% of this were imported at commercial terms at expected world prices, and the remainder received as food aid, the cost of imports would approximate $2 billion - 19 - in 1975 dollars.1/ -The implied share of export earnings is consistent with the ratio of foodgrain purchases to the export earnings of the poor nations in recent years, excepting crisis periods. As in the past, wide- spread advers,e weather conditions would lead to imports substantially above the trend. 2.31 With imports of 15 million tons, a shortfall of 30-55 million tons would remain from the quantities required to meet the above nutri- tional objective. The size of the remaining deficit is not substantially changed with plausible alternative scenarios. If commercial imports were doubled, implying a total foreign exchange cost of about $3.8 billion,2/ the deficit would still be some 20-45 million tons. 1/ At a weighted average CIF cost of $200 per ton, and with an assumed 80% grant element in food aid. 2/ That is, 18 million tons at $200 per ton CIF plus $40 per ton. for 6 million tons of concessional assistance, all expressed in 1975 dollars. - 20 - III. DEVELOPMENT STRATEGY FOR INCREASED FOOD PRODUCTION A. A Target for Additional Production 3.01 The above assessment suggests little, if any, increase in nutritional levels among poorer groups if improved access to food and increased supplies are not provided. Adverse developments in production and population growth could produce a nutritional deficit approximately double the present by 1985. Concentrated as it would be among the poorest groups within these societies, the prospect is selective deprivation and preventable death. Prospective planning that assumes a combination of fortuitous events would be inadvisable. Any decline in production from the trend line due to weather conditions would further aggravate the situation. Some combination of national and international stocks is essential, and in the present analysis is assumed to exist. 3.02 The target for increased foodgrain production in the low income countries should provide a reasonable estimate of the requirement to meet an objective of minimally-adequate nutrition for their populations. The above projections of supply and demand in those countries, assuming no basic changes in production policies, imply a nominal foodgrains deficit by 1985 of 33 million tons, with a plausible range of 20 to 45 million tons. Nutritional needs would add an additional 25 million tons, while normal imports of 15 million tons would result in a net deficit for these countries of 30-55 million tons by 1985. For purposes of this paper, an indicative target figure of 45 million tons is assumed. 3.03 The question remains of whether an additional 45 million tons of foodgrain production is feasible by 1985. Even if the required - 21 - doubling of the rate of investment were achieved, the target could not be reached without major changes in country policies. Recognizing the time that is required for major administrative and institutional improvements and developing the manpower resources, the target date may be difficult to meet. If the targeted increase proves to be infeasible by 1985, the earliest practicable later date could be set with an upward revision in the target quantity to account for the interim population growth. As the first step in exploring feasibility, the following sections of this paper address the general implications for finance and policy of such a target. B. Estimate of Additional Resource Requirements 3.04 In this section an effort is made to derive a rough estimate of the financial requirements for meeting the output target proposed for the poor nations. On the basis of information in the Bank Group's appraisal reports, estimates were made of the development expenditure (roughly synonymous with project costs as defined in those reports) per ton of incremental foodgrain output in a sample of 59 recent food- grain projects from 24 countries. Valuing this output in 1975 prices, ratios of project cost to value of annual incremental output (approximately the incremental capital-output ratio, or ICOR) at maturity were cal- culated. Annex III provides additional comment and details. 3.05 This analysis reveals widely varying ratios both across project types and regions. Among projects in, for example, West Africa, ICORs range from 1.2:1 to 4.7:1; in East Africa from 0.5:1 to 3.1:1 and in South Asia from 0.2:L to 3.3:1. The average for South Asia is lower than that for the regions of East. and West Africa. This diversity of results - 22 - permits no generalization except that new irrigation projects tend to have higher ratios than projects which involve, e.g., more limited construction of infrastructure, the rehabilitation of irrigation works, or only the provision of annual production inputs. Weighting these projects by output produces an average ICOR of 1.1 while weighting by cost yields a ratio of 2.1. The actual relationships between project cost and output may be significantly different from the ex ante estimates in Bank project appraisal reports. 3.06 Investment requirements estimated on the basis of these project ICORs should be interpreted as indicative figures only. Any aggregate future ratio will depend on the project mix. Declining reserves of arable land suggest an upward trend in this ratio. On the other hand, improved technology and policy reforms could make substantial contributions to output with a modest investment cost. It is to be expected that most projects with low ICORs would already have been undertaken. Hence, an ICOR of 1.8,near the higher end of this range, is used in this analysis. 3.07 To generate an additional 45 million tons of foodgrains annually by 1985, and assuming a price for foodgrains of $196 per ton in 1975 dollars,-/ an ICOR of 1.8 implies additional foodgrain project expenditure in the poor countries of approximately $16 billion in 1975 prices over the next five years. Additional supporting expenditure of at least 50% of this 2/ additional project expenditure may be required.- Complementary infra- structure such as rural roads and market facilities and production plants for farm inputs such as fertilizer is required to achieve these production 1/ This is the weighted average price of output used in developing the ICORs of past foodgrain projects. It corresponds to a composite average 1985 price, expressed in 1975 dollars. The prices for wheat, rice and coarse cereals were weighted according to a projected 1985 consumption mix. 2/ This figure is consistent with estimates in FAO's Indicative World Plan. - 23 - gains. Thus, the total, investment requirement is of the order of $25 billion over the next five years for a targeted increase of 45 million tons by 1985. 3.08 A possible range for the investment requirement is suggestecd by applying the alternative weighted ICORs in past Bank projects. The cost-weighted ICOR of 2.1 suggests about $28 billion, with other assumptions as before. The output-weighted ICOR of 1.1 would imply about $15 billion under the samE assumpti!ons. However, an ICOR of this size seems un- reasonably optimistic for a program of investment additional to an existing large! program. A plausible range of investment needed for the 45 million torn target is $20-30 billion. 3.09 This; range can be compared with current investment levels in the agriculture of low.-income countries. A continuation of present investment rates suggests agricultural investment, roughly estimated, of some $25 billion in these countries over the next half decade. Thus, an approximate doubling of investment, accompanied by the no less difficult policy and institutional reforms, is implied to generate an additional 45 million tons of foodgrain annually by 1985. 3.10 This investment would be required over the next five years to allow for norrmal project maturation. Provision of these incremental flows would require larger contributions from both domestic and external 1/ sources. Determination of the amount which might be expected from each source is highly speculative, although it is plausible to assume that the poorest nations would find it difficult to commit substantially larger domestic resources to agricultural development in the immediate future. 1/ High investment in agriculture is not without precedent. Investment growth of 8.5% per year was achieved in the Indian states of Punjab and Haryana and in the Pakistani province of Punjab during the second half of the 1960s. - 24 - 3.11 These needed resources may be related to recent experience with respect to external assistance. In 1974, official capital aid commitments to agriculture from DAC bilateral and multilateral agencies amounted to $3.0 billion. Of this, about $1.35 billion went to the poor countries. In 1975, the level of commitment from the same source for the agriculture sector of the low-income countries is provisionally estimated at between $2.0 and $2.2 billion. Another $200-300 million was committed by OPEC nations as concessionary assistance. Other official assistance and private flows now provide another $1.0-1.3 billion annually to agriculture in the poor countries. Maintenance of these flows in real terms over five years would cumulate to $16 to $19 billion in 1975 dollars. At a minimum, a doubling of external resources from recent levels would seem necessary. ODA flows would have to increase to at least $5.0 billion (in 1975 dollars) on average for 1976-81. 3.12 The provision of finances for investment in agriculture constitutes a necessary but not sufficient condition for achieving the suggested output target. Financial resources and physical infrastructure cannot be fully productive without trained manpower, strengthened institutions, and improved policies regarding pricing, marketing, credit and tenure. The relative importance of each of these factors varies from country to country. In the aggregate they are highly significant determinants of future produc- tion. In many circumstances, financial constraints are likely to be more tractable than these institutional factors. - 25 - C. Some Strategic Considerations 3.13 Tlhe means to increased production in most countries include some combination of new land development and increased production from already-cropped areas. Opportunities for development of new land on economic terms are declining in all regions and are practically non- existent in several countries, particularly in South and East Asia. In the majority of countries the most attractive opportunities for expanding foodgrain production within the next decade will be found through measures which increase production from existing irrigation schemes and already-cropped rainfed areas. Experience in South Asia suggests that a doubling of foodgrain yields from more effective use of existing irrigation systems could be achieved at about one-third the capital expenditure required to obtain the same increase from new irrigation development at current levels of water management. In India, possibly 15-20 million irrigated hectares are producing at less than 1/ one-half their realistic near-term potential. In countries where irrigation is less widespread, the already-cropped rainfed areas contain the largest reservoir of underutilized labor and land and constitute the largest potential for increased foodgrain production. 3.14 Over the longer period, population pressures in all regions will require development of remaining arable land reserves. Planning for these activities should be part of an expanded foodgrain production effort during the next decade. In general, however, lower priorities for investment seem warranted because of the slow-maturing nature of 1/ Compared with the ultimate potential or with current productivity in several other countries, the fraction is far less. - 26 - such development, the high cost of providng infrastructure and support- ing services, and the likelihood that economic returns are smaller than from measures to intensify production in already-cropped areas. 3.15 Experience suggests that in virtually all low income countries with food deficits or unrealized foodgrain export potential, a strategy to expand production and meet nutritional needs must embody several components of an interrelated nature. These include: - the existence of adequate production incentives to farmers; - the development of suitable agricultural technologies; - the transfer of those technologies to farmers and provision of other supporting services; and - a small farm development focus. Production Incentives 3.16 Provision of appropriate production incentives is a policy tool which has not been fully utilized. Among the most important is the relationship of input prices to value of output. Studies of Asian rice producing countries indicate that this relationship varies widely.'L In the early 1970s the ratio of the farmgate price of paddy rice to the nutrient price of fertilizer was eleven times higher in Japan than in Burma. (See Table 3.1.) This relationship is important to total rice production because of its apparent influence on fertilizer use and hence on yields. These studies indicate a high degree of correlation between the intensity of fertilizer use and the relative price of rice I/ The data in this paragraph originate in work at the StanEord Food Research Institute, reported in part in C.P. Timmer and W.P. Falcon, "The Political Economy of Rice Production and Trade in Asia," in L.G. Reynolds, ed., Agriculture in Development Theory, New Haven and London: Yale University Press, 1975. - 27 - Table 3.1: COMPARATI'VE PRICE DATA FOR FERTILIZER AND RICE* Paddy RLce Ratio of Paddy to Producers Price of Fertilizer Price to Paddy Yield (U.S. cent:s Nutrients to Producers Fertilizer in 1970 Countrr km) (U.S. cents per kg) Price (M.T. per ha) Japan 30.7 21.5;A 1.428 5.64 Rep, of Korea 18.4 (1) 19.1 0.963 4.55 Taiwan 11.7a/ 26.2 - / 0.447 4.16 Malaysia 8.8 (:t) 20b3 / 0.433 2.72 Ceylon 11.3 15.8 0.715 2.64 Indonesia 4.5 (E) 15.2 (I) 0.296 2.14 Thailand 45!a/ f/ 14.3 - 50.0 0.315 - 0.090 1.97 Philippines 7.0 (1)e/ 17.3-/ 0.405 1.72 Burma 3.1-S/ 25.1-/ 0.124 1.70 *Prices are from FAO Production Yearbook 1971 unless otherwise indicated. An (I) indicates the source is the relevant paper in IRRI, Viewpoints on Rice Policy in Asia, 1971, In all cases attempts have been made to approximate prices actually faced by producers. a/ Average 1969/70 and 1970/71. b/ Calculated from Padi Farming in West Malaysia, Department of Agriculture, March 1972. c/ Figure of 1965. Trade reports indicate the paddy to fertilizer ratio improved by 1970, so a figure of 0.20 was used in the analysis. d/ Figure for 1969/70 onLy. e/ The producer price of paddy was P0.45 per kg. and the nutrient cost of fertilizer was P1.111 per-kg. The "fluctuating free exchange rate" of 6.43/$ was used for the conversion. f/ Calculated from the p:rice of #2 paddy in Bangkok multiplied by 0.9 to get a producer price. / The. fertilizer price is a price for Ammonium Phosphate in 1967. The lower price assumes both the N and P 0 content contribute to increasing output; the higher 2 5 price assumes only the'N content is effective. All other fertilizer prices are for the N content of urea. Source: C. P. Timmer and W. P. Falcon, "The Political Economy of Rice Production and Trade in Asia," in L. G. Reynolds, ed., Agriculture in Development Theory, New Haveni and London: Yale University Press, 1975, p. 376. - 28 - to fertilizer. In 1970 the least favorable rice-fertilizer price ratio, the lowest intensity of fertlizer use and the lowest yiealds per hectare among nine Asian countries were in Burma. On the other hand, the highest price ratio, levels of fertilizer use and yields were in Japan. Recently, more favorable price policies have been implemented in several rice-producing countries. While it would be misleading to suggest that an attractive price ratio is the sole or perhaps even major requisite for high yields and increased output in Asia, it is a powerful determining factor. 3.17 Statistical analyses under a wide range of circumstances have shown that foodgrain and other agricultural output responds significantly to higher relative prices. Such estimates are based on observing "short-run" fluctuations in price and output in which investment and technology are relatively fixed. The extent of the response varies greatly, depending upon inherent production potential and availability of additional variable inputs. While some response to higher individual crop prices comes from shifts in cropping patterns, increased yields are of equal or greater importance where land is scarce. 3.18 Of equal importance may be the "long-run" effects of greater incentives to producers. Those incentives would help to strengthen agricultural research efforts, to accelerate the adoption of new technologies among farmers and to stimu- late private and public investment in agriculture. While measurement of these longer-run effects is in its infancy, there is convincing evidence that relative prices strongly influence the amount and types of agricultural research undertaken, the speed of adoption of improved techniques and varieties by farmers, and levels of agricultural investment, including that for land improvement, for farm equipment and facilities, and public - 29 - and private irrigation. 3.19 Price incentive policies are attractive tools because they can be altered through government action and generate a production impact relatively quickly. Raising the relative prices of foodgrains provides productive uses for previously underemployed resources, of which rural labor may be the most significant. A large portion of the resources needed to expand production through improved pricing will be provided by the private sector, although complementary government expenditures for research, extension, irrigation and farm-to-market roads may be required. Budgetary funds previously used to subsidize farmers or consumers could be used instead for directly productive investments. 3.20 In favorable circumstances a 10% rise in foodgrain relative to non-agricultural prices may, over time, result in a similar increase in output.-/ Even a 5% increase would be enough to shift some major foodgrain producing countries from importers to self-sufficiency.2 It would be equivalent to about 25% of the addition to 1985 production suggested earlier. 1/ Correlation analyses of price elasticities of areas planted in rice, wheat and other grains have generally yielded area elasticities of 0.2 to 0.6, with occasional higher and lower values. Such studies measure movement along essentially static production functions, how- ever, with a time trend factor capturing most of the effects of invest- ment and technological change. Thus the effect of higher prices on investment, technology and other "institutional" or "dynamic" factors may well raise the total price elasticity to unity or greater. Growing commercialization of production and institutional-technological develop- ment may also increase price elasticity. Commercial crops such as cotton, jute and coffee commonly have static elasticities greater than unity. For summaries of statistical studies, see J. R. Behrman Supply_Response in Underdeve1oyed_Ariculture, Amsterdam, North-Holland Publishing Company, 1968 or Raj Krishna, "Agricultural Price Policy and Economic Development," in Herman Southworth and Bruce Johnston, ed., Agricultural Development and Economic Growth, Ithaca: Cornell University Press, 1967. 2/ Comparison of yields of HYV and traditional varieties suggests that the use of HYV has added only about 5% or less to total rice output in a majority of countries, and as noted earlier, perhaps 7-8% to total grain production. - 30 - 3.21 The challenge for policy-makers is to find ways to assure adequate farmgate prices, relative to both domestic non-farm and world market prices, without substantially lowering real incomes and nutrition levels of poor urban consumers or hindering economic growth. In many circumstances, the answer appears to lie in the direction of an over- haul of the entire pricing structure to eliminate distortions in terms of trade against agriculture and in favor of manufacturing.- A change in foodgrain or agricultural prices, as well as changes in exchange rates, reductions in effective protection for manufacturing, and higher urban wages all may be required. Within the farm sector, higher foodgrain prices and reduced excise taxes on agricultural products may be linked to reduced farm subsidies and increased land taxes. Technological Development 3.22 The Green Revolution, comprising the adoption of the high- yielding cereal varieties (HYVs) and complementary inputs, is a dramatic example of recent technological change in agriculture. By the mid-1970s, the area planted with new rice varieties in developing countries exceeded 21 million hectares while that under new wheat varieties was only slightly less. The area planted with other improved cereals, of which maize is the most important, is much smaller in the aggregate but of considerable significance in some regions, notably East Africa. In the low income countries, incremental annual output from improved varieties is of the order of 16 million tons or 10% of their total 1974 output. Without this technological breakthrough, the foodgrain deficit in the poor nations 1/ Studies have shown that effective protection rates of up to 100% for manufacturing are common in poor, food-deficit countries, while rates of zero to minus 20% are common for agriculture. See, for instance, Bela Balassa, Structure of Protection, Baltimore: Johns Hopkins Press, 1971, p. 46 (Table 3.2). - 31 - in 1974 might have been twice that actually realized. 3.23 Both physical and economic environments have determined to a considerable degree the adoption of HYV technology. In the poor countries the new wheats and, to a smaller extent, improved rice varieties, expanded in the relatively homogenous regions of North India and Pakistan. These regions, characterized by areas of fertile soils, extensive irrigation development and high solar energy, represent only a small fraction of the cereal-growing areas in the low income, food-deficit countries. The HYV wheats are not suitable for the colder areas of Afghanistan and Pakistan nor have they done well in the drier areas of Madhya Pradesh, Maharashtra or parts of North Africa. Similarly, the improved rice varieties have not been suitable for the colder Asian rice zones or the flood plains of Vietnam, Bangladesh and Burma. 3.24 By 1975 the-HYV technology had proven suitable for 35-40 million of the 140 million hectares under foodg.rain^s in the low income countries. There is need and opportunity for-similar technologies over larger areas, both rainfed and-irrigated. The-potential-:for increased production is substantial ev'n undesr less than 6ptimum-conditions. Recent trials in Assam on farmers' 'fi;ilds in rainfed areas >indicate that appropriate land preparation, the use ot improved vari:eties and high levels of fertilizer appli=carion produced rice yields about three times as high as the present-state;average. 3.25 F'utu're-.research effbrts must focus in particular on removing the remaininig t:e-chological obstacle's to the spread of modern technology over a wide spectrumn of farm sizes and cropping systems. High priority - 32 - should be accorded efforts to develop innovations which can confidently be expected to work under the difficult economic and ecological con- ditions faced by the large number of small-scale farmers who have not benefitted significantly from the technologies developed in recent years. International and national research programs are devoting 1/ greater efforts to the solution of these problems. 3.26 No less important than the above biological innovations are improved mechanical technologies suitable to farm situations with severe capital constraints and where the smallness of cropping units limits the use of conventional mechanical improvements. Improved animal draft, simple water-lifting devices, better tools and imple- ments and efficient, small-scale power sources are examples. In several countries research and development are well along for low- cost irrigation devices suitable for small farms. In Eastern India, the feasibility of bamboo wellpoints, manually powered pendulum pumps and small electric pump sets is to be tested in forthcoming Bank- supported foodgrain projects. A key feature of the Bank's irrigation program in South Asia is the wide introduction of small tubewell tech- nology. The small-capacity pumps (i -½ cusec) have been very successful in India and large numbers of farmers have invested in them. Similar technology is also being encouraged in Pakistan and Bangladesh. 1/ The Bank Group has been an active supporter of agricultural research at project, national and international levels. More than 100 Bank-assisted projects in 50 countries include research compionents. The first Bank loan for a national agricultural research program was made in 1971. Since then the Bank has helped research efforts in six -countries. In addition, the Bank provides the Chairman and Secretariat for the Consultative Group on International Agricultural Research and serves as residual supplier of funds to the internati-onal research centers after other donors have made their commitments. Bank contributions averaged about 9% of costs of the international centers in 1972-76 and cumulated to more than $16 million during the period. - 33 - Transfer of Technology and Supporting Services 3.27 Evidence from several poor, food-deficit countries suggests that international and national research programs are generating productive foodgrain technologies more rapidly than they can be effectively disseminated to and adopted by farmers, particularly those on small holdings. Within a large number of major foodgrain-producing areas in developing countries, an important constraint on expanded foodgrain production is the inability to transfer known technologies to small farms and to provide the complementary inputs and services necessary for full utilization. An urgent need throughout most low income countries is to develop an extension service which provides for the dissemination of proven technology from research stations to the large number of small farmers who either remain unfamiliar with improved methods or utilize them to less than full advantage. 3.28 In the initial years of farmers' exposure to extension services much can be done to increase production by encouraging the adoption of relatively simple cultural practices, many of which require few purchased inputs and involve little risk for typically risk-averse small farmers. These practices include appropriate land preparation, time of planting, optimal plant spacing, weeding, use of organic fertilizers, and simple crop rotations. Studies in the Indian States of Assam and Orissa suggest that such practices by themselves, using current varieties, could increase yields by 2570. Success with relatively simple approaches would establish farmers' cconfidence in the extension service and strengthen the farm financial base for subsequent adoption of technologies which require larger cash outlays and sharper breaks with traditional practice. - 34 - 3.29 The economic returns to effective extension programs clearly are attractive. Experience with Bank-supported projects indicates the essential features of such systems. These are: close links between research and extension activities; careful selection of high pay-off practices for priority crops; and concentration of efforts in favorably- situated areas, particularly with respect to water control. Clear lines of command and precise work programming are required for field-level extension staff. Field staff should hold frequent meetings with key "contact farmers" to impart specific, proven recommendations. Regular on-the-job training sessions are essential to bring together subject matter specialists and field personnel. Attractive remuneration policies and appropriate staff development and promotion procedures must be followed to maintain staff morale and the incentive to perform well in frequently difficult physical settings and work conditions. The generally excellent results from the application of these principles in more than 15 Bank-assisted projects strongly suggest an organizational breakthrough in this important activity. 3.30 Adequate supporting services in the form of supplies of physical inputs, credit, and marketing programs are complementary to an effective extension service. Agricultural extension which demonstrates to farmers the economic benefit of improved technology quickly generates demand for a greater variety of increasingly sophisticated prcduction in- puts and services. Deficiencies in the type and quality of agricultural support services are major constraints on accelerated production over large areas, but particularly among the smaller, frequently less- knowledgeable and poorly-capitalized farmers who, without assistance of this type, are unable to break out of low-productivity agriculture. - 35 - 3.31 Critical gaps in many poor countries and in the poorer areas within these countries include the lack of adequate physical infra- structure and organization to ensure that farmers have easy access to modern production inputs. Seeds, fertilizers,-pesticides and simple 1/ farm tools and implements are particularly important. Recent Bank experience with multi-component rural development projects aimed at increasing agricultural output has demonstrated the need for careful integration of extension, input supply and farm credit activities to obtain the synergistic effect of these components. Small-farm Focus 3.32 Broad distribution of income gains, both inside and outside the agricultural sector, is essential in a foodgrain production strategy aimed at nutritional improvement. An emphasis on small farm development is warranted both by this distributional consideration and by the oppor- tunities for sizeable production increases. 3.33 As shown in Table 3.2 below, a significant productivity gap has emerged between small and middle- sized farmers in South Asia, in 1/ A highly productive use of Bank funds in this general area is the support of seed production activities, either through seed industry development projects which are nation-wide in scope or seed components in agricultural projects which focus on smaller geographical areas. Through FY 1976 $86 m of Bank iunds had been committed to national seed projects in six countries (India, I]ndonesia, Korea, Bangladesh, Ecuador, Pakistan). Average estimated economic. rate of return on these projects exceeded 50%. The recent Bank-financed Indian National Seeds Project, the major objective of which is to expand foodgrain production by increasing supplies of high- quality Seed, is typical of this approach. The project provides support for research and cirganizational improvements to increase the Indian seed industry's capability to respond quickly to problems of seed deterioration among improved varieties and frequent attack by pests and diseases. Through cooperative efforts of the government, agricultural universities and the private sector, the project is expected to increase foodgrain production by more than 900,000 tons annually at full development and benefit three million mostly small farmers. The project is estimated to generate an economic rate of return in excess of 50%. Similar projects elsewhere, designed to deal with the problems of low seed quality and inadequate supplies, are essential to restoring momentum to the Green Revolution. There is reason to believe they would generate equally attractive returns. - 36 - large part as a result of the differential adoption of new technologies in recent years. Village surveys in this region suggest that foodgrain yields per ha on medium-sized farms (5-20 ha) may be 40-50% greater than 1/ those on smaller farms. Small farmers account for nearly half of the cropped area under foodgrains in South Asia. There is evidence that good technology and appropriate supporting services could increase their productivity by as much as 25%. If such an increase were achieved in South Asia, some 50 million small farms could add approximately 10%/ to the region's foodgrain output, thus reducing considerably projected deficits in the subcontinent. Table 3.2: FOODGRAIN YIELD DIFFERENTIALS BY FARM SIZE IN SOUTH ASIA, 1969-71 Farm Size No. of Farms Foodgrain Area Yield Output (ha) (m) (m ha) (kg/ha) (m/t) Less than 1 26.6 8.6 813 7.0 1-5 27.8 49.2 829 40.8 5-20 5.2 27.6 1,178 32.5 More than 10 2.6 35.6 862 30.7 Total 62.2 121.0 917 110.0 Source: Policy Planning and Program Review Department, May 1975. Based on village surveys in India, Pakistan and Bangladesh. 3.34 An emphasis on foodgrain production must be set in the broader sectoral and inter-sectoral context. The development of other food crops merits more attention than it has received in the past. Non-food crops will play a major role in some countries and some role in nearly every country. 1/ Ii other regions where the impact of the Green Revolution has been less pervasive, the yield differential appears to be much smaller. In numerous cases, small-farm yields exceed those on large farms. - 37 - Agricultural planning with an objective of increased food availability provides a better perspective than a narrow emphasis on foodgrain develop- ment. As noted, complementary development and expansion in non- agricultural sectors is essential, particularly in transport, energy and power and education. The prospects for overall development would be substantially improved if growth in the production of foodstuffs could be accelerated sharply. A development strategy emphasizing income gains for the poorest groups would be facilitated. - 38 - IV. THE ROLE OF THE WORLD BANK A. Bank Group Lending for Agriculture 4.01 The Bank Group's lending for agriculture increased from an average of $29 million per year in FY48-63 to $1,481 million in FY74-76. By June 30, 1976, the Bank Group's lending for agriculture cumulated to over $8.1 billion. It is now the largest single supplier of official assistance to the poor countries. In each year of the current five-year lending program (FY77-81), an additional $13 billion is expected to be provided for agriculture. Agricul- ture's share in the Bank Group's total lending increased from just over 6% in FY48-63 to over one-fourth in FY74-76, and is expected to exceed one-third of its total lending in the 1977-81 period. Table 4.1: BANK GROUP LENDING FOR AGRICULTURE (Annual averages, current $ million) Lending % of Total for Period for Agriculture Total Agriculture FY48-63 29 476 6.1 FY64-68 124 1127 11.0 FY69-73 518 2570 20.2 FY74-76 1481 5614 26.4 FY77-81 2817 8162 34.5 Source: Policy Planning and Program Review Department 4.02 Within this overall increase in the Bank Group's lending for agri- culture, South Asia's share has been constant at just over one-fifth of the total. The other regional shares have changed significantly, with the combined shares of Eastern and Western Africa increasing from 7% in FY64-68 to 17% in FY69-73 and to 19% in the last three years (FY74-76). The share of the Europe, Middle East and North Africa Region (EMENA) also - 39 - increased sharply from [2% in FY64-68 to 22% in FY74-76. Correspondingly, the portions of the remaining regions have declined -- that of East Asia modestly (23% in FY64-68 to 19% in FY74-76), and that of the Latin American and Caribbean Region (LAC) more sharply (38% to 20%). Table 4.2: GEOGRAPHICAL DISTRIBUTION OF AGRICULTURAL LENDING (Annual Averages) _FY48-63 FY64-68 FY69-73 FY74-76 Region ( ti) % ($m) X ($m)_ % ($M) % Eastern Africa 4 14 5 4 55 11 113 8 Western Africa - - 4 3 31 6 165 11 South Asia 12 41 25 20 116 22 299 20 East Asia 2 2 29 2B 80 15 284 19 EMENA 4; 14 15 12 127 25 332 22 LAC 7 24, 47 38 109 21 290 20 Total 2' 100, 124 l00 518 100 1,483 100 Source: Policy Planning and Program Review Department 4.03 Use of per';capita lending .for'agriculture as an indicator of the Bank Group's-regional emphasis present's a strikingly different picture. Comparing FY69-73 and FY74-76 per capitallerd'i'ng to the-Latin American countries has remained about the same multipL'4 C2.-6 `and 2'.7:.-respectively) of per capita lending to South As4a, the absol1ute gap-has-,i,dened from $0.24 to $0.63 in annual averages per capitna. tie p,er capit-a.avtrages for all regions, except South Asia, are now rdu2hly ej,ual ,at. about one dollar as an annual average in FY74-7b. In per ,tap,ita terms, Aouths-Asi-d re e:ives about one-third this average. (See Table 4.3.). - 40 - Tabl 4.3: PER CAPITA LENDING FOR AGRICULTURE (Annual Averages) Region FY64-68 FY69-73 FY74-76 ($) ($) (M) Eastern Africa 0.04 0.43 0.83 Western Africa 0.03 0.23 1.22 South Asia 0.03 0.15 0.38 East Asia 0.11 0.30 1.06 EMENA 0.05 0.44 1.17 LAC 0.17 0.39 1.01 Source: Policy Planning and Program Review Department 4.04 The geographical distribution of the Bank Group's lending for agriculture does not correspond fully to the resource requirements of the food deficit low income countries. One reason is that the Bank emphasis on foodgrain production is of recent origin. The other reason, and currently the operative constraint, is inadequate concessionary resources available to the Bank Group for lending to poor countries. The poor countries in South Asia and Africa require IDA-type concessionary assistance, while most middle income countries of East Asia, EMENA and Latin America can afford IBRD loans. Since its inception in 1961 and up to FY73, the share of IDA in total Bank Group lending for agriculture was slightly less than one-half. However, in the last three financial years, the share of IDA dropped to an average of 31%. (See Table 4.4.) The sharp increase in the Bank Group's lending, while IDA resources have been constrained, has left those cotmtries that can afford to borrow only on concessionary terms at a relative disadvantage. - 41 - Table 4J+: SHARE OFf IDA IN AGRICULTURAL LENDING ($ million, annual averages) Agricultural Lending Share of IDA Period From IDA From IBRD Total in Total (%) FY61-68 38 41 79 48.1 FY69-73 261 257 518 50.4 FY74-76 455 1028 1483 30.7 Source: Policy Planning and Program Review Department, August 1976(See Annex IV for details). B. Lending for Foodgrains 4.05 Through the m:Ld-sixties the bulk of the Bank Group's agricultural lending was for non-foodl crops and livestock. -This reflected the high priority that was given to expansion of agricultural exports from developing nations. Accordingly, the share of foodgrains in total,lending for agriculture during FY64-68 was less than 22%..- The sharp increase in lending for agriculture during FY69-73 was not accompanied by any significant shift in intra-sectoral priorities. (See Table 4.5.) During that time the share of foodgrain lending increased marginally, to just one-fourth of the total for agriculture. The emphasis remained on non-food grain crops, even in food deficit countries. 1/ Data on- the food component of agricultural projects have not always been readily avaaiLabile. H6wever, u§inkg more-r-ecent project appraisal reports, it is possible to estimate the amount and-proportion of the Bank resources that have gorne into fbod production.- A series of project audits suggest that appraisal reports have by and large accurately projected increases re- sulting from project investment. - 42 - Table 4.5: BANK LENDING FOR FOODGRAINS (Annual averages, current $ million) Lending for Lending for Share of Period Agriculture Foodgrains Foodgrains (%) FY64-68 124 27 22 FY69-73 518 141 27 FY74-75 1407 715 51 Note: Data on the foodgrain component of the projects financed in FY76 are not yet available. Source: Policy Planning and Program Review Department 4.06 Only in recent years has the Bank. Group's concern with foodgrain production in the deficit countries become evident in a substantially greater volume of lending for this activity and as a larger share of the total lending for agriculture. Much of this shift reflected the Bank's growing emphasis upon small farm development. During FY74-75, about one-half of the resources in agricultural projects was devoted to foodgrain, a share twice the average of the previous ten years. In terms of resource flows, the lending for foodgrains increased to an annual average of $715 million during FY74-75, compared with an average of only $84 million during the preceding decade. 4.07 The foodgrain-related lending by the Bank Group in FY64-73 is estimated to produce at project maturity an annual increase of 5 million tons in the output of foodgrain in the four regions of Africa and Asia. Relative to aggregate output recently in these regions, this contribution is small (about 3%). However, viewed in-terms of the share in total incremental output, the impact is more substantial. During the FY64-73 period the food output of the Bank borrowers in Africa and Asia increased by 39 million tons. Abstracting from time lags, the Bank Group's contribution to incremental output is of the order of 13%. - 43 - 4.08 The large increase in the Bank Group's lending for foodgrain in recent years :is expected to have a much greater impact on future output. If the capital-output ratios used for ascertaining the impact on output of invest- ment in FY69-73 also apply to the lending in FY74-75, the eventual increase in yearly foodgrain output that can be attributed to Bank supported projects would be of the order of 8.5 million tons in Asia and Africa. The largest beneficiary would be India. The share in the increase in India's foodgrain output that can be attributed to Bank-assisted projects is estimated to be about 30% of the increase in output projected during 1976-80. 4.09 The World Bank's total contribution to future food production among all developing countries will remain marginal. The extent to which food problems in t'hese countries are held within manageable bounds depends in large part upon the efforts which they themselves make. However, the financial resources and technical assistance provided by the Bank and other exter- nal donors have potentially important roles to provide the margin between food adequacy and shortage and to support the low income countries in the process of sectoral planning, policy formulation and project preparation required for more rapid growth.- The increasingly urgent need to increase agricultural output, particu-larly f'ood staples, together with the aim of greater equity in the distribution of' incomes among the poor, requires both aid donors and recipient-s toYexami-ne the adequacy of their proposed efforts and to identify those activities wh'ic-h make the most of limited manpower and finance in this regard. ANNEX I Page 1 LOW INCOME COUNTRIES -/ 1973 1973 Eastern Africa Population Western Africa Population (million) (million) Ethiopia 27 Upper Volta 6 Zaire 23 Mali 5 Sudan 17 Guinea 5 Tanzania 14 Niger 4 Kenya 13 Chad 4 Uganda 11 Benin 3 Madagascar 8 Sierra Leone 3 Malawi 5 Togo 2 Rwanda 4 Central African Burundi 4 Republic 2 Somalia 3 Mauritania I Lesotho 1 Gambia 1 Comoro Islands 2/ EMENA Latin America and Caribbean Afghanistan 17 Haiti 5 Yemen AR 6 Yemen PDR 2 East Asia and Pacific South Asia Indonesia 124 India 582 Vietnam 43 -Bangladesh 74 Khmer Republic 8 Pakistan 66 Laos 3 Burma 30 Sri Lanka 13 Nepal 12 Bhutan 1 Sikkim 21 Maldives 2/ 1/ Average p-er ctapita income of less than $200 in 1975. 2/ Less than one million. ANNEX II PROJECTIONS OF FGODGRAIN SUPPLY ANDT DEMAND FOR DEVELOPING REGIONS, 1980 & 1985 SUPPLY DEMAND Growth Rates 1974 1980 1985 Grwth Rates 1974 1980 1985 1960-74 1974-85 194 18 951974-80 1980-85 17 90 18 (percent per annu. ) (million metric tons) (percent per annu.) (million metric tons) Wheat Emena 2.7 2.4 23.9 27,6 31.1 3.7 3.5 34.9 43 5 51.7 East Africa 4 2 4.2 1.2 1.6 2 0 3.1 3.7 2.0 2 5 3.0 West Africa -0.9 3.0 . . 4 1 5.0 0.9 1.1 1.4 Latin America 1 3 3.0 12.3 14.7 17.0 3.2 3.4 17.4 21.0 24.9 South Asia 7 3 4.0 30.3 38.3 46.6 3.4 6.0 39.3 48.1 64.2 East Asia -3.3 2 0 0.1 0.2 0.2 6.6 6.8 4.6 6.7 9 4 Total Developing 4.2 3.3 67.9 82.4 96 8 3.7 4.7 99.1 122.9 154.5 Coarse Grain.C Emema 1.1 1.1 17.1 18.2 19.2 2.9 2.9 19.3 23.0 26.5 East Africs 2.1 2.1 12.2 13,9 15.4 3.0 3.5 12.9 15.3 18.2 West Africa -0.2 2.0 15.0 16.9 18.7 3.1 3.4 15.5 18.6 22.0 Latin America 4.3 4.7 46.1 60,8 76.5 4.2 4.8 42.3 54.1 68.4 Sooth Asia 0.6 0.8 19.7 20.6 21.5 2.0 0.3 20.0 22.6 22.9 East Asia 3.7 3 7 10.0 12.5 14.9 4.7 4.7 10.5 13.8 17.3 Total Developing 2.4 3.0 120.1 142.8 166.1 3.4 3.6 120.4 147.4 175.3 Rice E.e.a 3.7 3.7 3.2 4.0 4.8 3.7 3.5 3.8 4.7 5.6 East Africa 2 8 2.8 1.7 1.9 2.2 3.0 3.1 2.0 2.4 2.8 West Africa 3.6 3.6 1.7 2.1 2.5 3.1 3.4 2.2 2.7 3.2 Latin Arerica 2 7 2.7 7.5 8.8 10.1 2.7 2.6 7 5 8.8 10 0 South Asia 1 9 2.2 63.0 71.8 80 1 2 7 2.8 62.6 73 3 84 3 East Asia 3 1 3.1 32.7 39.3 45.8 3.2 3.2 33.7 40.7 47.6 Total Developing 2.4 2.6 109.8 127,9 145.4 2 9 3.0 111.8 132 5 153.4 Total Grains Emena 2 1 2.0 44.1 49.7 55 0 3.5 3.3 58.1 71.2 83.8 East Africa 2.2 2.4 15.1 17.4 19 6 3.0 3.5 16 9 20.2 23.9 West Africa 0.2 2.2 16.7 19.0 21.2 3.1 3.5 18.6 22.4 26.6 Latin A ierIca 3.3 4.2 66.0 84.3 103 5 3.8 4.2 67.2 83.9 103.2 Sooth Asia 2.9 2.5 113.0 130.8 148.2 2.8 3.6 121.9 144.0 171.4 East Asia 3.1 3.2 42.9 51.9 60 9 3.8 3 9 48.8 61.2 74.4 Total Developisg 2.7 2.9 297.8 353.1 408.3 3.3 3.7 331.4 402.8 483.3 1/ Includes millet for West Africa and East Africa. Negligible Source: World Bank Staff Working Paper No. 247, Developing Co.ntry Foodgrain Prolactions for 1985, Table 9 (Nove=ber 1976). Data have been rounded. ANNEX III Page 1 ESTIMATING FINANCIAL REQUIREMENTS TO MEET FOODGRAIN OUTPUT TARGETS 1. The approach employed here to estimate financial requirements for meeting otutput targets was to estimate financial costs of incremental foodgrain output for recent Bank Group projects. A sample of 59 projects with foodgrain components and approved during the period 1970-76 was selected from 24 countries. Information for these calculations was taken from the Bank Group's appraisal reports. The ex ante data from these reports are cLearly onLy approximate. As with the rest of the analysis we seek to generate order of magnitude estimates of the variables involved.- The results for each project are presented in Tables 1-3 of this annex. 2. For each project, development expenditure (roughly synonymous with project cost, as defined in each report) that could be allocated to incremental foodgrain output was estimated. Costs were allocated in proportion to value of foodgrains as a fraction of total value of incremental output attributable to the project. Only incremental outputs at full development were considered. Cost estimates excluded price contingencies and were converted to 1975 dollars. Financial requirements for incremental foodgrain production were estimated to be the ratio of that proportional cost to incremental foodgrain production. 3. The incremental capital-output ratio (ICOR) or ratio of project development expenditure to output was then computed by valuing each ton of foodgrain at US$196 in 1975 dollars. This is a composite average price for wheat, rice, and coarse grains estimated for 1985. It is weighted according to projected 1985 consumption patterns for developing countries. 1/ Basic data are ex ante estimates of project costs and may not accurately reflect ex post input-output relationships. A recent survey of 16 Bank Group agricultural credit operations does, however, bestow some reliability to these estimates. ANNEX III RATIOS OF PROJECT DEVELOPMENT EXPENDITURE TO FOODGRAIN Table 1 OUTPUT IN PROJECTS SUPPORTED BY THE BANK GROUP IN WEST AFRICA Page 2 Proportional Ratio of Percent of Incremental Project Cost Project De- Total Project Costs Production of per ton of velopment Cost Related to Foodgrains at Years to Incremental Expenditure Year ConstantI/ Foodgrain Full Deyelop- Full.De- Foodgrain 3 t to Approved Country Project 1975 US$- Output ment- velopment Production- Output- (FY) (million) (thousand tons) 1972 Senegal Polders 11.0 44 17 10 278 1.4 1974 Chae Sategui Deressia 13.6 100 19 9 712 3.6 1974 Mali Rural Development 22.0 100 35 8 625 3.2 1974 Upper Volta Bougouriba 9.7 41 7 9 584 3.0 1975 Ivory Coast Cotton 43.4 24 37 6 284 1.4 1975 Liberia Lofa 12.6 37 11 10 428 2.2 1975 Nigeria Rice 30.7 100 29 10 1070 5.5 1975 Nigeria Gusau 17.8 51 43 5 210 1.1 1975 Nigeria Funtua 26.0 42 83 6 132 0.7 1975 Nigeria Gombe 20.1 43 50 6 173 0.9 1975 Senegal Sine Saloum 24.6 86 89 6-10 237 1.2 1975 Sierre Leone Integrated Ag.II 12.8 69 20 10 451 2.3 1976 Chad Lake Chad Polders 9.6 46 31 5 1472 7.5 1976 Liberia Lofa 12.6 30 7 10 518 2.6 1976 Senegal Terres Neuves II 3.2 67 6 18 340 1.7 1976 Togo Maritime 11.4 64 17 5 429 2.2 1/ Excludes price contingencies. 2/ Includes pulses; all foodcropsdestined for export are excluded. 3/ Project cost in proportion of foodgrain output to total project output. Cost in 1975 dollars.. 4/ Assumes composite price of $196/ton. Source: Basic data from project appraisal reports and IBRD, West Africa Projects Department (Feb., 1976). Dollar amounts adjusted to 1975 dollars with Index of International Inflation: Manufactured Exports from Developed Countries, Economic Analysis & Projections Department (April 1976). ANNEX II! Table 2 RATIOS OF PROJECT DFVELOPMENT EXPENDITURE TO FODGRAIN Page 3 OUTPUT IN IPROJECTS SUPPCRTED BY THE BANK GROUP IN EAST AFRICA Proportional Ratio of Percent of Incremental Project Cost Project De- Total Project Costs Production of per ton of velopment Cost Related to Foodgrains at Years to Incremental Ecpenditure Year Constant Foodgrain Full Develop- Full De- Foodgrain to An-rsved Country Project 145 13S$s/ Oatput ment velopment Productionl/ OutPut FrY (million) (thousand tons) 1973 Kenya Second Smallholders 15.3 30 30.7 4 150 0.8 Ag. Credit 1973 Lesotho Thaba Bosiu Rural Dev. 11.5 100 18.8 6 612 3.1 1973 Nalawi Shire Valley Ag. Dev. - 16.4 20 34.1 5 97 0.5 Phase II 197h Ethiopia Mininmun Ag. 42.3 100 115.5 10 366 1.9 1974 Ethiopia Second Wolamo Ag. Dev. 17.5 82 61.8 10 233 1.2 1975 Mauritius Rural Dev. 14.1 5 2.7 9 259 1.3 1974 Sudan Southern Region Ag. 10.7 10 9.4 4 117 0.6 Rehabilitation Dev. 1974 Tanzania Geita Cotton 26.3 46 1U5.7 15 271 1.4 1975 Ethiopia Lower Adiabo Dev., 11.7 36 29.0 5 145 0.7 1975 Kenya Group Farm Rehabilitation 15.7 34 24.0 6 242 1.2 1975 IIalagasy l Village Livestock and 10.4 11 4.1 5 279 1.4 Republic Rural Dev. 1975 Malawi Lilongwe Land Dev. 11.6 40 167.8 10 27 0.1 1975 Tanzania Kigoma Rural Dev. 13.9 37 13.6 8 375 1.9 1976 Burundi Second Coffee Improvement 5.2 10 1.0 7 520 2.7 1976 Kenya Integrated Ag. Dov. 26.8 54 83.0 8 175 0.9 1976 r4alawi Karonga Rural Dev., 8.9 62 12.3 9 447 2.3 Phase II 1976 Somalia Drought Rehabilitation 7.9 90 17.5 4 506 2.1 1976 Sonalia UT.W. Regional Ag., Dev. 9.5 75 4.0 13 1775 9.1 1976 Tanzania National Maize 31.8 100 195.0 7 161 0.8 2/ lbcludes price contingencies. 2/ Foodgrains include cereals, pulsos, tubers, and groundnuts adjusted to comparable caloric content. 2/ ProJect cost in proportion of foodgrain output to total project output. Cost in 1975 dollars. 5/ Assumes composite price of 4$196/ton. Source: Basic data from project appitLisal reports. Dollar amounts adjusted to 1975 dollars with lndex of Intetnetional Inflation: Manufactured Exports from Developed Countries, Economic Analysis & Proje!ctions Department (April 1976). ANNEX III Table 3 Page 4 RATIOS OF PROJECT DEVELOPMENT EXPENDITURE TO FOODGRAIN OUTPUT IN PROJECTS SUPPORTED BY THE BANK GROUP IN SOUTH ASIA Proportioral Ratio of Percent of Incremental Project Cost Project De- Total Project Costs Production of per ton of velopment Cost Related to Foodgrains at Years to Incremental Expenditure Year Constant Foodgrain Full Develop- Full De- Foodgrain to ADproved Countrv ProJect 175 US$ Output ment 2/ velopment Production 2 Output 4/ (FY) (million) (thousand tons) 1970 India Gujarat Ag. Credit 137.4 83 191 3 597 3,0 1970 Sri Lanka Mahaweli-Ganga Dev. 96.4 25 93 5 259 1.3 1971 India Tamil Nadu Ag.Credit 120.0 75 280 3 320 1.6 1972 India Credit Maharashtra 86.2 40 247 4 iho 0.7 1972 India Mysore Ag. 135.2 65 192 6 458 2.3 1972 India Pochampad Irrigation 174.7 85 275 8 540 2.8 1973 Bangladesh Cereal Seeds 13.2 100 406 4 33 0.2 1973 Bangladesh Chandpur II Irrigation 36.5 30 51 30 216 1.1 1973 Bangladesh N.W. Region Tubewells 67.9 100 203 7 335 1.7 1973 India Madhya Pradesh Credit 84.4 40 167 6 202 1.0 1973 India Uttar Pradesh Ag.Credit 101.5 50 423 6 120 o.6 1973 Nepal Birganj Irrigation 15.4 80 80 10 15h 0.8 1974 Burma Irrigation I 20.2 95 197 20 98 0.5 1974 India Bihar Ag. Credit 84.0 83 430 10 162 0.8 1974 India Chambal Command Area 100.5 85 210 8 407 2.1 (Rajasthan) 1974 Nepal Ag. Settlement 13.0 15 17 :0 113 0.6 1975 Bangladesh Barisal Irrigation 35.1 90 135 5 c34 1.2 1975 India Chambal Command Area 33.9 90 184 25 166 0.8 (Madhya Pradesh) 1975 India Drought Prone Area 71.9 23 58 8 285 1.5 1975 India Rajasthan Canal 140.5 60 392 16 215 1.1 1975 India West Bengal Ag. Credit 46.0 95 408 15 107 0.5 1976 India National Seed 41.9 100 858 9 o9 0.3 1976 Bangladesh Rural Development 17.4± 90 77 10 20 h 1.0 1976 Bangladesh Karnafuli Irrigation 22.7 90 32 5 638 .3 1/ Excludes price contingencies. 2/ Foodgrains include cereals, pulses, tubers, and groundnuts adjusted to comparable caloric content. / Project cost in proportion of foodgrain output to total project output. Cost in 1975 dollars. !/ Assumes composite price of $196/ton. Source: Basic data from respective project appraisal reports. Dollar amounts adjusted to 1975 dollars with Index of International Inflation: Manufactured Exports from Developed Countries, Economic Analysis & Projections Department (April 1976). ANNEX IV IDA CREDITS BY SECTOR (Amount and number of Operations) IDA FY74 FY75 FY76 FY74-76 $M No. $M No. 'M No. $M No! Agriculture Credit 32.0 1 106.5 4 23:4 2 161.9 71 Area Development 49.3 6 178.5 10 130.3 11 358.1 27, Perennial Crops (smallholoers) 30.5 2 47.2 4 11.5 2 89.2 8 Fisheries 6.5 1 1.6 - 6.0 1 14.1 2 Irrigation 87.6 8 142.5 7 109.3 4 339.4 191 Livestock 79.5 7 85.0 6 69.7 6 234.2 19 Other Agriculture 24.0 1 74.8 4 68.2 5 167.0 10i Total 309.4 26 636.1 35 418.4 31 1,363.9 92 Infrastructure Colmmunications 41.4 2 103.0 4 5.2 1 149.6 7 Power 13.5 2 28-.0 2 259.0 5 300.5, 9 Tourism 16.0 1 - - 10.0 2 26.0 3 Transportation 223.8 15z 172.9 11 256.2 13 652.9 39' Urban Development 45.0 3 22.5 3 - - 67.5 61 Water Supply & Sewerage 24.5 3 17.1 2 88.1 3 129.7, 8 Total 364:2 26 343.5 22 618.5 24 1,326.2 72 Other Development Finance Co. 36.2 5 34.5 2 64.0 5 134.7 12 Education 18.7 3 97.1 13 76.4 7 192.2 23 General Development - - - - - - - - Industry 109.7 7 125.0 3 105.0 1 339.7 11 Maintaining Imports 200.0 2 325.0 3 354.0 4 879.0 9 Population 17.0 2 15.0 1 - - 32.0 3 Other Projects 40.0 2 - - 19.0 4 59.0 6' Total 421.6 2i 596.6 22 618.4 21 1,636.6 641 Grand Total 1,095.2 74-/ 1,576.2 79 1,655.3 76 4,326.7 229-i 1/ This includes- the drought- relief operation in the West Arrica Region. PUB HG3881.5 .W57 W67 no.251 Burki, S. J. A perspective on the foodgrain situation in the poorest countries - qS57 V67 nIo ' 1 ~~* ~ t0 , io odgrain , persPectlve the po0rest Cou,ntriest