CILSS NATIONAL AND REGIONAL SECURITY GRAIN STOCKS IN THE SAHEL THE WORLD BANK STATEMENT ROME, APRIL 1982 Sahelian Food Security -- The World Bank Approach 1. The Sahelian Countries are clearly vulnerable to major disrup- tions in domestic food supplies and assisting them to increase food securi- ty is a priority concern for the World Bank. We are, like many agencies, already involved in these countries and the World Bank is committed to pro- viding additional assistance to increase food security in the Sahelian countries. Acknowledging our shared concerns in this respect, we have nevertheless, indicated to FAO our judgement that the report prepared for the CILSS, despite its importance, and many strengths, does not provide an adequate basis for project identification. We have been provided full op- portunity to discuss the problems we have with the report's strategy, and we have done this, so that there is little need to elaborate upon them at this time. 1/ Instead, my authorities have requested that I outline, in the short time available, an alternative program which the Bank is prepared to support with its own resources. Given our Articles of Agreement, which oblige us to deal with guarantees of national governments, we are now speaking in the context of our relations with individual countries. 2. The first priority in the Bank's program will remain food produc- tion expansion, in order to reduce food insecurity at its most basic level. We will continue to address the technological infrastructure and human re- source constraints on agricultural production. Moreover we recognize that pricing and marketing constraints are important bottlenecks to stimulating production and distribution of foodcrops in many Sahelian countries, and 1/ A summary of our comments on the report is attached for information. -2- want to contribute more actively to reducing those constraints at both the project and at the country level. An example of this problem and how it might be approached is provided by recent experience in Mali. 3. The reform of foodgrain marketing in Mali was launched in early 1981 when the Government and major food-aid donors agreed on a 5 year pro- gram of economic and financial adjustment. Having received a donor com- mitment of 50,000 mt of additional food aid each year, the Government an- nounced its intention to decontrol private grain marketing by abolishing the State monopoly, to raise official cereals prices closer to interna- tional levels, to eliminate most subsidies in public cereals marketing, and to transform the State marketing board into a cost-effective unit respon- sible for stabilizing prices, selling grain to public institutions, and managing grain reserves. For this Mali sought and obtained additional IDA support for technical assistance. 4. This program illustrates several important strengths and weak- nesses of marketing reform. On the positive side, it shows how close, al- though relatively informal collaboration among food-aid donors can be used to reinforce a local consensus that reforms must be made. It also shows how food-aid resources, combined with technical assistance and possibly in- vestments, can be used to support policy reform and market liberalization. On the other hand, this example shows that implementation is likely to be a protracted and fragile process, whose success is likely to be contingent on certain conditions. These conditions include a commitment by all major donors to give aid within the confines of the program, and agreement by both donors and the government on feasible, measurable objectives of the reform. In Mali, the initial commitments have materialized but the discus- -3- sion on specific goals -- how exactly the marketing system should operate at the end of the period - has barely begun. 5. More generally, the Bank's aim in support of rational government policies of this type would be matched by making resources available for new style integrated food security and marketing projects. Such efforts could include any of a variety of market development or food security com- ponents. Physical infrastructure could include improved handling facili- ties at the point of entry, increased storage capacity to ensure an even flow of food through the system, and improved internal transport arrange- ments, whether by road, rail or river. The administrative or system infra- structure would consist of improvirg crop reporting systems, development of logistics management capacity, especially for emergency purposes, and above all improved technical competence and institutional arrangements for opera- ting on the international market. This type of project, together with other similar programs for export crops that generate foreign exchange and provide national food self-reliance will provide a new balance in the Bank's operations. In more detail, the seven components of the Bank effort would consist of: (i) Rural transportation. The largest share of capital investments would be to reduce unit cost, increase reliability and strengthen capacity of small scale distribution services. Project lending would support investments in public goods like access roads, wa- terway improvements or collection centers as well as individual purchases of trucks or spare parts. -4- (ii) Local storage. Incremental investments for stockholding capacity would be made available to local decision making units such as village coops or households. Where appropriate low cost small scale facilities could be provided to other entities such as mar- keting authorities, but only after thorough cost-benefit analysis has shown them to be suitable alternatives. (iii) Improving information systems. Crop reporting systems on a dis- trict basis could be created or improved by financing of sample surveys of farmers and merchants, meteorological data, crop cut- tings and the technology required for satellite monitoring of plant development. Harvest estimates would be publicized as widely as possible in farming districts to ensure their use in private sector decisioifs about stockholding. Such market and price reports could complement production estimates. Financing for improved telecommunications links between different market- places would be provided in addition to remote sensing and data processing equipment. (iv) Agsuring competition. Programs to increase producers' market participation, eliminate cartels and reduce barriers of entry into the food trade would be financed in various ways. Seasonal credit would be provided to groups of farmers to enable them to store at harvest and resell under favorable conditions, rather than when their need for funds is most acute. Credit would also be provided to new merchants, small truckers and others involved in food marketing. Special financing for those who choose to ex- pand operations in areas where formerly a single merchant was -5- dominant could be important. Support to increase small merchant efficiency by encouraging high turnover rates on inventories and working capital and credit operations during lean times of the year could become government objectives. (v) Rural food security capacity. Contingency planning and arrange- ments for coping with specific emergency situations would be im- portant new areas for Bank finance. Standby logistics arrange- ments, pre-selection of staging areas and coordination with trade, transport and welfare agencies on relief operations would be encouraged on a systematic basis for disaster-prone areas. (vi) Protecting food vulnerable groups. Measures that ensure urban nutrition and incomes are obviously essential. Support for these measures could be provided through programs to identify the costs and increase the efficiency of institutions which provide food to vulnerable consumers. Alternative programs for stabilizing urban incomes and thereby food consumption, could be developed and com- pared. (vii) Efficient buying on world markets. Projects would include com- ponents to improve the management of international trading. The emphasis would be on training and expert counselling, in effic- ient use of grain, cargo and insurance markets, such as basis trading and price risk management. 6. In addition, support for the necessary concomitants of a trade oriented strategy to cope with production shortfalls would be based on: (i) politically realistic expectations about harmonizing inter-country poli- cies; (ii) better use of available food aid; (iii) forward contracting -6- of imports including some storage in exporting countries, (iv) tapping the np.wly established IMF Compensatory Financing Facility for liquidity at con- cessional rates to cover foreign exchange shortfalls due to an increase in the cost of cereal imports; (v) use of futures markets to hedge price risks, lower the cost of food purchases and take advantage of the favorable price relationship which exists between West African harvest cycle and the normal market cycle in North America, and (vi) investments to overcome ex- isting information, transport and institutional bottlenecks. We believe the approach outlined above would provide more security at a far smaller cost than other alternatives. Marcih 26, 1982