34392 Agriculture Investment Sourcebook The World Bank This Sourcebook is also available online at www.worldbank.org/agsourcebook, where the content will be updated on a biannual basis. The World Bank Agriculture Investment Sourcebook Agriculture and Rural Development © 2005 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 07 06 05 The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Executive Directors of the International Bank for Reconstruction and Development /The World Bank or the governments they represent. 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ISBN 13: 978-0-8213-6085-X ISBN 10: 0-8213-6085-X CONTENTS Foreword vii Preface ix Acknowledgements xii Acronyms and Abbreviations xiv Introduction xvii Module 1: Building Agricultural Policy and Institutional Capacity 1 Agriculture Investment Notes 12 Preparing a National Agricultural Development Strategy 12 Developing Capacity for Agricultural Sector Policy Formulation 17 Reform of Agriculture Subsidy and Protection Policy 22 Facilitating Efficient Adjustment to Liberalized Trade 27 Adjustment Lending for Agriculture Policy Reform 32 Improving Animal Health Services Through Public/Private Partnerships 37 Strengthening Farmer Organizational Capacity to Influence Agriculture Policy 42 Innovative Activity Profiles 47 Bulgaria: Adjustment Lending in a Transitional Economy 47 Ecuador: Commodity Chain Consultative Councils for Policy Formulation 49 Turkey: Hybrid Adjustment/Investment Lending 51 Guinea: Livestock Sector Partnership--Public Sector Herder Organization and the Private Sector 53 Module 2: Investments in Agricultural Science and Technology 55 Agriculture Investment Notes 68 Competitive Research Funds 68 Strengthening Public Research Institutes 73 Enhancing University Participation in National Agricultural Research Systems 78 Local Agricultural Research Committees 83 Biotechnology, Biosafety, and Agricultural Development 88 Innovative Activity Profiles 93 iii Brazil: Spill-ins from Foreign Research and Development Laboratories 93 Colombia: Decentralized, Demand-Driven, Competitive Technology Generation 95 Ecuador: Strategic International Alliances for Capacity Building and Research 97 India: Focus on Biotechnology 99 India: Revitalizing Institutional Capacity in Forestry Research 101 Senegal: Making Research Demand Driven 103 Module 3: Investments in Agricultural Extension and Information Systems 105 Agriculture Investment Notes 118 Contracting Extension Services 118 Decentralizing Agricultural Extension and Information Services 124 Client Groups as Key Intermediaries in Extension 129 Mass Media and Communications Technologies in Extension 135 Estonia: Transition to Private Extension Advisory Services 140 Innovative Activity Profiles 142 India: Participatory and Decentralized Agricultural Technology Transfer 142 CONTENTS CONTENTS CONTINUED Russian Federation: Using Information and Communications Technologies for Rural Information Services 144 Uganda: Extension Decentralization, Privatization, and Reform 146 Venezuela: Contracting Decentralized Extension Services 148 Module 4: Investments in Sustainable Agricultural Intensification 151 Agriculture Investment Notes 163 Market-Driven Diversification 163 Smallholder Dairy Production 169 Aquaculture Production Systems 174 Organic Agricultural Production Systems 179 Urban and Periurban Agriculture 184 Conservation Tillage 189 Integrated Pest Management 194 Integrated Nutrient Management for Sustaining Soil Productivity 199 China: Fruit Promotion in the Mid-Yangtze 204 Innovative Activity Profiles 206 India: Community Organization for Sodic Lands Reclamation 206 India: Income Generation through Aquaculture 208 Module 5: Investment in Sustainable Natural Resource Management for Agriculture 211 Agriculture Investment Notes 223 Community-Based Natural Resources Management 223 Watershed Management for Agricultural Development 228 Agroforestry Systems 233 Pastoralism on Arid and Semi-Arid Lands 238 Integrated Livestock-Wildlife Management 243 Innovative Activity Profiles 248 Brazil: Participatory Microcatchment Strategy for Increased Productivity and Natural iv Resource Conservation 248 China: Commercial Plantations to Help Conserve Forests 250 Egypt: Matruh Resource Management to Ensure Sustainable Livelihoods for Remote Bedouin People 252 Latin America and Caribbean: Payments for Environmental Services in Silvopastoral Systems 254 China: Watershed Management Approach to Optimizing Incomes and Ecology in Poor Highlands 256 Module 6: Investment in Agribusiness and Market Development 259 Agricultural Investment Notes 270 Supporting Market and Supply Chain Development 270 Horticultural Exports from Developing Countries 275 Private Seed Enterprise Development 280 Promoting Private Sector Fertilizer Distribution Systems 285 Getting Markets Right in the Post-Reform Era in Africa 290 AGRICULTURE INVESTMENT SOURCEBOOK CONTENTS CONTINUED Innovative Activity Profiles 295 Bangladesh: Autonomous Organization for Facilitating Market-led Export 295 China: Smallholder Cattle Development for Import Substitution 297 Colombia: Productive Agribusiness/Farmer Partnerships 299 Mali: Building Export Mango Systems 301 Module 7: Investments in Rural Finance for Agriculture 303 Agriculture Investment Notes 314 Microfinance Institutions Moving into Rural Finance for Agriculture 314 Financial Services through State Banks 319 Production Credit from Input Suppliers, Processors, and Buyers 324 Membership-Based Financial Organizations 329 Innovative Activity Profiles 334 Vietnam: Mobile Banking for Rural People 334 Zimbabwe: AGENT Program 336 India: Piloting of Smart Cards in Rural Areas 338 Madagascar: Microleasing for Agricultural Production 340 Ghana: Inventory Credit for Small-Scale Farmers 342 Module 8: Investments in Irrigation and Drainage 345 Agriculture Investment Notes 355 Investments to Empower Farmers to Manage Irrigation and Drainage Systems 355 Investments in Irrigation for Crop Diversification 360 Investments in Waterlogging and Salinity Control 365 Investments in Shallow Tubewells for Small-Scale Irrigation 370 Innovative Activity Profiles 374 China: Consumptive Use in Water Resource Management for Productivity, Equity, and the Ecology 374 Egypt: Improving Agricultural Production Through Better Drainage 376 India: Rationalized Public, Private, and Farmer Roles in Groundwater Management 378 v Mali: Institutional Reform to Focus Public Role on Essential Public Goods 380 Niger: Tailoring Irrigation Technology to Users' Needs 382 Module 9: Investments in Land Administration, Policy and Markets 385 Agriculture Investment Notes 397 Investments in Systematic Land Titling and Registration 397 Community-Managed Land Reform 402 Innovative Activity Profiles 407 Armenia: Benefits of Securing and Registering Land for Rural Development 407 Brazil: Participatory Negotiations and Market-Assisted Land Reform 409 The Lao People's Democratic Republic: Preserving Women's Rights in Land Titling 411 Module 10: Managing Agricultural Risk, Vulnerability, and Disaster 413 Agriculture Investment Notes 422 Commodity Price Risk Management 422 Agricultural Insurance 427 CONTENTS CONTENTS CONTINUED Responding to Disaster with Seed Distribution 432 Innovative Activity Profiles 437 Kenya: Community-Based Drought Management 437 Mongolia: Sustaining Livelihoods in Areas with High Natural Disaster Risk 440 Tanzania: Accessing Market-Based Price Risk Management Instruments 442 India: Innovative Rainfall-Indexed Insurance 444 Module 11: Scaling Up Agricultural Investments in the Bank's Changing Internal Environment 447 Agriculture Investment Notes 459 Targeting Agricultural Investments to Maximize Poverty Impacts 459 Nine Lessons for Improving Project Design for Better Investment Performance 465 Agriculture Sector Program Lending 470 Community-Driven Development for Increased Agricultural Income 475 Monitoring and Evaluation: Measuring and Assessing Agricultural Development Programs 480 Innovative Activity Profiles 485 Mozambique: Harmonized Donor Funding Around Principles 485 Brazil: Empowering Rural Communities for Poverty Reduction 487 Uganda: Cross-Sectional Programmatic Adjustment Lending Focusing on Poverty Reduction 489 Appendix: Key Websites 491 Index 495 vi AGRICULTURE INVESTMENT SOURCEBOOK FOREWORD vii The World Bank's new rural strategy, Reaching the Rural Poor, commits the Bank to five core areas of rural development: · fostering an enabling environment for broad-based and sustainable rural growth; · enhancing agricultural productivity and competitiveness; · encouraging non-farm economic growth; · improving social well-being, managing and mitigating risk, and reducing vulnerability; and · enhancing sustainability of natural resource management. Underlying all of the goals is support to agricultural growth that benefits the poor, for without a renewed effort to accelerate growth in the agricultural sector, few countries will be able to reach the Millennium Development Goals, especially the goal of halving poverty and hunger by 2015. While developing the new rural strategy, the need to better articulate good practice in agricultural policies and investments became clear.This is especially so, since the nature of donor supported investments in the sector, and the instruments for channeling those investments, has changed drastically over the last decade.This first edition of the Agriculture Investment Sourcebook, responds to that need, by compiling a wide range of emerging good practice and innovative approaches to investing in the agriculture sector. The first edition already provides a rich menu of options for profitably investing in the agricultural sector, but it is a work in progress.There are still important gaps that need to be filled, and good practice is constantly evolving as knowledge and experience accumulate. Our partners in other multilateral and bilateral institutions, national organizations, and civil society organizations possess much of the knowl- edge on how to get agriculture moving, and that has not been captured in this edition.We, therefore, plan to update of most of the modules in this Sourcebook annually. Our challenge now is to build on this edition of the Sourcebook by intensifying our efforts to evaluate, learn, and share knowledge in ways that promote the agricultural agenda and the welfare of rural people. Kevin Cleaver Sushma Ganguly Director Sector Manager Agricultural and Rural Development Agricultural and Rural Development viii AGRICULTURE INVESTMENT SOURCEBOOK PREFACE ix I nvesting to promote agricultural growth and poverty reduction is a central pillar of the World Bank's current rural strategy, Reaching the Rural Poor, which was released in 2003. One major thrust of the strategy outlines the priorities and the approaches that the public sector, private sector, and civil society can employ to enhance productivity and competitiveness of the agricultural sector in ways that reduce rural poverty and sustain the natural resource base.These actions involve a rich mixture of science, technology, people, communication, management, learning, research, capacity building, institutional development, and grassroots participation. This Sourcebook has been prepared to help in implementing the rural strategy, by sharing information on investment options and innovative approaches that will aid the design of future lending programs for agriculture.The Sourcebook provides generic good practices and many examples that demonstrate that investment in agriculture can provide rewarding and sustainable returns to development efforts.The contents have been assembled from all regions and thematic groups of the Bank, and from the experi- ences of many partners. sustainability, and can be broadly endorsed Box 1. The Sourcebook Modules by the community of practitioners from 1. Building Agricultural Policy and Institutional Capacity within and outside the Bank. 2. Investments in Agricultural Science andTechnology 3.Several Innovative Activity Profiles (IAPs) 3. Investments in Agricultural Extension and Information highlight design of successful or innovative Services investments. These provide a short de- 4. Investments in Sustainable Agricultural Intensification scription of an activity in the Bank's 5. Investments in Sustainable Natural Resource Management portfolio or that of a partner agency, 6. Investments in Agribusiness and Market Development focusing on potential effectiveness in 7. Investments in Rural Finance for Agriculture poverty reduction, empowerment, or 8. Investments in Irrigation and Drainage sustainability. Activities profiled have often not been sufficiently tested and evaluated 9. Investments in Land Administration, Policy, and Markets in a range of settings to be considered 10. Managing Agricultural Risk,Vulnerability, and Disaster "good practice," but should be closely 11. Scaling Up Agricultural Investments in the Bank's Changing monitored for potential scaling up. Internal Environment Source: Authors. The Sourcebook thus provides introductions to topics, but not detailed guidelines on "how to" design and implement investments. The stand- STRUCTURE OFTHE SOURCEBOOK alone nature of each subunit of the The Sourcebook is intended as a ready refer- Sourcebook allows flexibility and adaptability ence for practitioners (World Bank staff and of the materials, but necessarily results in some their partners in borrowing countries) seeking replication of the issues covered. Selected summary information on the state of the art readings and Web links1 are provided for about good practice for agricultural invest- readers who seek more in-depth information ments, and innovative activities that merit close and examples of practical experience. All monitoring for potential scaling up. Sourcebook material is available on the World Bank Web site that links with additional key The Sourcebook is divided into eleven self- sources of information, such as other Web contained modules (see box 1). Each module sites, readings, and manuals. contains three different types of subunits, x which can also be stand-alone documents: PREPARATION OFTHE SOURCEBOOK 1.A Module Overview provides a summary of The Sourcebook draws on a wide range of the major issues and investment options for experience from donor agencies, govern- each investment area, and is intended as a ments, institutions, and other groups active in broad introduction to the topic. agricultural development. However, in this first edition of the Sourcebook, the initial contribu- 2.Several Agricultural Investment Notes (AINs) tions draw heavily from World Bank experi- summarize good practice (and sometimes ence, especially the "communities of practice" bad practice) in specific investment areas, represented by the Bank's various thematic to provide a brief, but technically sound, groups. Approximately two-thirds of the AINs overview for the nonspecialist. For each and most of the IAPs originate from within the AIN the investments have been evaluated in Bank. In the future, it is hoped that these will different settings for effectiveness and be complemented by more contributions 1. A list of Websites where many selected readings can be obtained is provided in Appendix 1. Since specific Web links are often cumbersome and become quickly outdated, only the generic institutional Web links are provided. AGRICULTURE INVESTMENT SOURCEBOOK drawn from the wealth of experience in other THE SOURCEBOOK AS A LIVING DOCUMENT international development agencies and in The Sourcebook is expected to expanded and countries, possibly as a major activity of the updated, as experience is gained with new newly formed Rural Alliance Platform (a investment initiatives. Most module overviews multidonor initiative) that is intended to share and investment notes should be valid for a experiences and coordinate donor actions. number of years. Individual modules can be Although the Sourcebook seeks to share experi- used as stand-alone documents, and it is ex- ence of both successes and failures--providing pected that several modules will be developed cautionary guidance on investment strategies to into their own Sourcebook--this is already avoid repeating past mistakes--there is a much occurring for the "Irrigation and Drainage" greater interest in sharing successes than fail- Module. The useful life of an IAP will be less, as ures, and this is reflected in the content. most are based on recent experience and have been subjected to limited evaluation. Readers are encouraged to check on current status by WHAT IS NOT COVERED contacting the person named in each profile. Thematic topic coverage is not always compre- hensive, as materials were assembled on a pragmatic basis, depending on available materi- als, and on specialists willing to contribute original notes. The modules generally address the priority issues within a thematic area or areas in which operational guidance is needed, but there are important gaps that should be filled in future editions. The Sourcebook also focuses on design of agricultural investment programs at the country level, and does not address important regional and global issues for the sector. Likewise, investment programs are the unifying element throughout the Sourcebook, although policy issues specific to those programs are also xi covered. The contents are also specifically focused on agricultural investments, recogniz- ing that rural development and rural poverty reduction requires a much broader approach, and that even successful agricultural perfor- mance requires investments in areas such as rural infrastructure. The Sourcebook, and the AINs in particular, therefore address public sector investment opportunities for agricultural development and how these might be approached. A companion publication in the World Bank's Directions in Development series, will be oriented to broad policy issues, and the sequencing and integra- tion of different types of investment within a coherent agricultural sector strategy. PREFACE ACKNOWLEDGMENTS The preparation of this Sourcebook involved a (ARD), Derek Byerlee (ARD), Marie-Hélène large number of people from within all units of Collion (MNA), Sanjiva Cooke (ARD), Cristophe the World Bank working on agriculture, and a Crepin (AFR), Cees de Haan (ARD consultant), variety of partner organizations. The design, Klaus Deininger (DEC), Ariel Dinar (ARD), and day-to-day coordination of the Nina Doetinchem (AFR), Graham Eele (DEC), Sourcebook, has been carried out by Gary Alex Enos Eskuri (ENV), Erick Fernandez (ARD), and Sam Kane (ARD consultants), and the Andrew Goodland (EAP), Matthias Grueninger overall task has been managed by Derek (MNA), Sam Kane (ARD consultant), Francois Byerlee and Eija Pehu (ARD), who collectively Le Gall (AFR), Annabel Mulder (ARD consult- assume responsibility for remaining errors and ant), John Nash (ARD), Ridley Nelson (OED), omissions. Agricultural and Rural Development Walter Ochs (ARD consultant), Nwanze Thematic Groups (TGs) coordinated the prepa- Okidegbe (ARD), Douglas Olson (EAP), Dou- ration of several of the modules, specifically: glas Pearce (CGAP), Eija Pehu (ARD), Herve Sustainable Agricultural Systems and Knowl- Plusquellec (Consultant), Idah Pswarayi- edge Institutions (SASKI) (Modules 2, 3, and 4); Riddihough (EAP), Annu Ratta (ARD consult- the NRM Thematic Group (Module 5); the ant), Pierre Rondot (ARD), Tijan Sallah (AFR), Private Sector and Agribusiness Thematic Kristina Sorby (ARD consultant), Amal Talbi Group (Module 6); Land Policies Thematic (ARD), Kees van der Meer (ARD), Panayotis Group (Module 9); Community-Driven Rural Varangis (ARD), Jaime Webbe (AFR), Melissa Development (part of Module 11); and the Williams (ARD), Johannes Woelcke (ARD), Gender Thematic Group (gender-related input Wael Zakout (EAP), and Ronald Zweig (EAP). across all modules). Individuals within these teams who merit special recognition include: Contributors to the module overviews and good Marie-Hélene Collion (MNA), Francois Le Gall practice notes from outside the Bank included; (AFR), Kees van der Meer (ARD), Wael Zakout Jacqueline Ashby (Centro Internacional de (EAP), John Bruce (ARD), Klaus Deininger Agricultura Tropical), Duncan Burnett (National (DEC), Idah Pswarayi-Riddihough (EAP), Jaime Resources Institute), Pavla Cornejo (Develop- Webbe (AFR), Melissa Williams (ARD) and ment Alternatives Inc.), Octavio Damiani Daniel Sellen (SAR). A number of individuals (IFAD), Timothy Donnay (USAID), Carl Eicher xii played a leading role in other modules, espe- (Michigan State University), Gerd Fleischer cially Jock Anderson (ARD) and John Nash (GTZ), Wayne Frank (USAID), Eleni Gabre- (ARD) (Module 1); Douglas Pearce (CGAP), Madhin (formerly International Food Policy Andrew Goodland (EAP), and Kees Van der Research Institute and now AFR, World Bank), Meer (ARD) (Module 7); Safwat Abdel-Dayem Francesco Goletti (Agrifood Consulting Interna- (ARD), and Ariel Dinar (ARD) (Module 8); Jock tional), John Kerr (Michigan State University), Anderson (ARD) and Panayotis Varangis (ARD) Hamdy Eisa (ARD consultant), Kimberly Lucas (Module 10); and Shawki Barghouti (ARD), and (USAID), Jerry Martin (Development Alterna- Sushma Ganguly (ARD) (Module 11). tives Inc.), Steve Morin (USAID), Erin Nicholson (USAID), Linda Nicolaides (Univer- Many individuals made written contributions to sity of Greenwich), John Orchard (National module overviews and good practice notes. Resources Institute), Anja Schilling (Swiss From within the World Bank, these included: Federal Institute for Snow and Avalanche Safwat Abdel-Dayem (ARD), Gary Alex (ARD Research), Thomas Thompson (International consultant), Mubarik Ali (ARD), Jock Anderson Fertilizer Development Center), Eduardo Trigo (ARD consultant), Amitabh Brar (CGAP Con- (private consultant, Argentina), Robert Tripp sultant), Shawki Barghouti (ARD), John Bruce (Overseas Development Institute), Dannielle AGRICULTURE INVESTMENT SOURCEBOOK Typinski (USAID), and Don van Atta (Develop- Toledano (AFR), and members of the SASKI, ment Alternatives Inc.). NRM, Land Policies, and Community-Driven Rural Development Thematic Groups. We also Many Bank staff contributed and/or reviewed wish to thank the external reviewers; Suresh profiles of innovative ongoing or completed Babu (IFPRI), Kathleen Cloud (University of projects or project components: Paolo Agostini Illinois), Ralph Cummings (USAID), Howard (LAC), Deepak Ahluwalia (SAS), Ousmane Elliott (ISNAR), Mary Hill Rojas (WIDTECH), Badiane (AFR), Manish Bapna (SAS), Mohamed Peter Hobbs (Cornell University), Susana Benali (EAP), Eustacius Betubiza (ECA), Adel Lastarria (University of Wisconsin), John Pender Bichara (MNA), Erin Bryla (ARD consultant), (IFPRI), William Rivera (University of Mary- Raimundo Caminha, Arie Chupak (EAP), Luis land), David Rohrbach (ICRISAT), Arja Vainio- Coirolo (LAC), Marie-Hélène Collion (MNA), Mattila (University of Western Ontario). Overall Christine Cornelius (AFR), Cees de Hahn (ARD), peer review was provided by Julio Berdegue Graeme Donovan (consultant), Henry Gordon (RIMISP, Chile), Benoit Blarel (ECA), Hamdy (ECA), Wahida Huq (SAS), Rapeepun Jaisaard Eisa (consultant), Gershon Feder (DEC), and (ECA), Toru Kinishi, Patrick Labaste (AFR), Peter Hazell (IFPRI), William Lane, Douglas Lister (MNA), Graciela Lituma (LAC consultant), Mark Lundell (ECA), Finally, Kevin Cleaver (ARD) and Sushma Salifou Mahaman (AFR), Matthew McMahon Ganguly (ARD) contributed invaluable guid- (LAC), Robin Mearns (EAP), Jessica Mott (ECA), ance and support throughout the preparation Mohinder Mudahar (SAS), Ohn Myint (SAS), John of the Sourcebook. Many other individuals Nash (ARD), Douglas Olson (EAP), R.S. Pathak provided suggestions or support, including (SAS), Eija Pehu (ARD), Jeeva Perumalpillai- Felicity Proctor (ARD), Csaba Csaki (ARD), Essex (AFR), Anna Roumani (LAC consoultant), Mark Lundell (ECA), Mohamed Ben Ali (EAP), G. Russell, Götz Schreiber (ECA), Daniel Sellen Severin Kodderitzsch (ECA), Manish Bapna (SAS), Ashok Seth (consultant), Paul Sidhu (SAS), (SAS), Ernst Lutz (AFR), Dina Umali-Deininger Harideep Singh (LAC), Geoffrey Spencer (EAP), (SAS), Robert Townsend (AFR), and members Jürgen Voegele (EAP), Pierre Werbrouck (LAC), of the Agricultural and Rural Sector Board. Wael Zakout (EAP), and Zongmin Li (ECA Reginald MacIntyre (ARD consultant), Helen consultant). Freeman, and Cynthia Bartel (ARD consultant) provided able editorial support. Sarian Akibo- Each module was peer reviewed, usually by Betts (ARD) assisted with logistics and assem- xiii two Bank staff and one outside person. We bly of the manuscript, and Corazon Solomon appreciate the review contributions of; Deepak (ARD), Felicitas Doroteo-Gomez (ARD) and Ahluwalia (SAS), Jock Anderson (ARD consult- Rebecca Oh (ARD) were extremely supportive ant), Ousmane Badiane (AFR), Frank in managing finances and contracts. Melissa Byamugisha (AFR), Marie-Hélène Collion Williams (ARD) and Kathryn Carr (ARD) man- (MNA), Louise Cord (PREM), Carlos Cuevas aged the publication production, and Rosemary (OPD), Ijsbrand de Jong (AFR), Maria O'Neill (ARD) oversaw the electronic version. Fernández (LAC), Henry Gordon (ECA), While the above list is comprehensive, it is very Matthias Grueninger (MNA), Steven Jaffee likely that we have overlooked important (ECA), Jacob Kampen (AFR Consultant), Nadim contributors. Our apologies for this oversight, Khouri (LAC), Hoonae Kim (EAP), Agnes Kiss but thanks all the same. (AFR), Renate Kloeppinger-Todd (formerly IFC and now ARD), Donald Larson (DEC), Mark Lundell (ECA), Ohn Myint (SAS), Aleksandar Nacev (ECA), David Nielson (AFR), Gunars Platais (LAC), Katrine Saito (PRM), William Steele (AFR), Juergen Voegele (EAP), Josef PREFACE ACRONYMS AND ABBREVIATIONS ADC Agribusiness Development Center IADB Inter-American Development Bank ADS Agricultural Development Strategy IAP Innovative Activity Profile AIN Agricultural Investment Note ICA Investment Climate Assessment AKIS Agricultural Knowledge and Infor- ICT Information and Communication mation System Technology APL Adaptable Program Lending IFAD International Fund for Agricultural ASAL Agricultural Sector Adjustment Loan Development ASP Agricultural Sector Program IFC International Finance Corporation ATM Automatic Teller Machine IFPRI International Food Policy Research BDS Business Development Services Institute BP Bank Procedure IGA Income Generating Activity Bt Bacillus thuringiensis ILWM Integrated Livestock-Wildlife Man- CAS Country Assistance Strategy agement CBNRM Community-Based Natural Resource IMF International Monetary Fund Management IMT Irrigation Management Transfer CBO Community-Based Organization INM Integrated Nutrient Management CDD Community-Driven Development IPM Integrated Pest Management CF Conservation Farming IPPM Integrated Production and Pest CGAP The Consultative Group to Assist Management the Poor IPR Intellectual Property Rights CGIAR Consultative Group on International LEISA Low External Input and Sustainable Agricultural Research Agriculture CIAL Comité de investigación agricola M&E Monitoring and Evaluation local/local agricultural research MBFO Membership-Based Financial Orga- committee nization CRGP Competitive Research Grant Program MDG Millennium Development Goal CRMG Commodity Risk Management MENA Middle East and North Africa Group MFI Microfinance Institution CT Conservation Tillage MIS Management Information System xiv DFID Department for International Devel- NARI National Agricultural Research opment Institute DIS Direct Income Support NARO National Agricultural Research ECA Eastern Europe and Central Asia Organization Region NGO Nongovernmental Organization ESW Economic and Sector Work NOAA National Oceanic and Atmospheric EU European Union Agency FAO Food and Agriculture Organization NRM Natural Resource Management FFS Farmer Field School O&M Operations and Maintenance GCD Groundwater Conservation District OD Operational Directive GDP Gross Domestic Product OECD Organization for Economic Coop- GEF Global Environment Facility eration and Development GMO Genetically Modified Organism OED Operations and Evaluation Depart- GTZ Deutsche Gesselschaft fur ment Technische Zusammenarbeit OED Operations Evaluation Department HACCP Hazard Analysis Critical Control Point OP Operational Policy HIV/AIDS Human Immunodeficiency Virus/ PAD Project Appraisal Document Acquired Immunodeficiency Syndrome AGRICULTURE INVESTMENT SOURCEBOOK ACRONYMS AND ABBREVIATIONS CONTINUED PDA Personal Digital Assistant T&V Training-and-Visit PIM Participatory Irrigation Management TAP Technical Assistance Provider PO Producer Organization TG Thematic Group PRSP Poverty Reduction Strategy Paper TRIPS Trade Related Intellectual Property PSAL Programmatic Structural Adjustment Rights Lending TT Task Team PSIA Poverty and Social Impact Analysis UNESCO United Nations Educational, Scien- PVR Plant Variety Rights tific and Cultural Organization QAG Quality Assurance Group UPUA Urban and Periurban Agriculture R&D Research and Development URAA Uruguay Round Agreement on R&E Research and Extension Agriculture RPO Rural Producer Organization USAID United States Agency for Interna- S&T Science & Technology tional Development SAC Structural Adjustment Credit WHO World Health Organization SAL Structural Adjustment Loan WMA Wildlife Management Area SECAC Sectoral Adjustment Credit WTO World Trade Organization SECAL Sectoral Adjustment Loan WUA Water User Association SME Small/Medium Sized Enterprise WUG Water User Group SPA Sector Performance Analysis xv PREFACE INTRODUCTION xvii P romoting pro-poor agricultural growth is not easy. It is subject to risks from many areas, from uncertain prices to the weather. Many investments, while providing high payoffs, can take years, even decades to fully materialize.And because the population directly affected by rural develop- ment is widely dispersed, and often has little political voice, the results are often not visible to influential decision-makers.With the myriad demands on limited development funds, it is not surprising that in recent years agriculture has not received as much attention as it should have. However, few countries will reduce poverty significantly, nor will the world community achieve the Millennium Development Goals (MDG), if agriculture and rural development are ignored (see box A). The first MDG to "eradicate extreme poverty and hunger" cannot be reached without addressing the livelihood issues of the 70 percent of the world's poor who live in rural areas, and without ensuring access to food of the poorest and most vulnerable. Rural people are also the custodian of much of the world's land and water resources, and biodiversity, and will be central to achieving MDG 6 on environmental · Improve social well being, manage and Box A. Millennium Development Goals: 1990­2015 mitigate risk, and reduce vulnerability. 1. Eradicate extreme poverty and hunger · Halve the number of people with less than $1 a day · Enhance sustainability of natural resources · Halve the share of people who suffer from hunger management. 2. Achieve universal primary education · Ensure completion of primary schooling Pro-poor agricultural growth is therefore 3. Promote gender equality and empower women highlighted as one of the five strategic areas of · Eliminate gender disparity at all levels of education the strategy, but it also heavily influences the other four areas, including nonfarm economic 4. Reduce child mortality · Reduce by two-thirds the under five mortality rate growth, which in most countries is closely · Improve maternal health linked to agricultural growth. · Reduce by 75 percent the maternal mortality rate 5. Combat HIV/AIDS, malaria, and other diseases To act on these five major strategic areas, the · Reverse the spread of HIV/AIDS Bank, other international agencies, and national 6. Ensure environmental sustainability public and private sectors will have to increase · Reverse loss of environmental resources investment in agricultural and rural develop- 7. Halve the share of people without access to potable ment. However, this must be done in a way water that improves outcomes and impacts. Good 8. Significantly improve the lives of at least 100 million slum practices associated with such investment dwellers outcomes must be mainstreamed into the Bank's portfolio. 9. Develop a global partnership for development · Raise official development assistance · Expand market access, especially in agriculture · Encourage debt sustainability THEWORLD BANK'S SUPPORTTOTHE SECTOR Source: www.developmentgoals.org The World Bank is the largest single provider of loans for agricultural development, accounting for over one-half of all lending for agriculture sustainability. Other MDGs such as gender of the international financial institutions. How- equality (many farmers are women), child ever, financing for agricultural development by nutrition (depends on access to nutritious the World Bank and other donors has dropped food), and market access (especially interna- sharply since 1990 (see figure A and figure B). xviii tional trade in agriculture which remains highly This drop reflects both past successes (in- protected) depend directly or indirectly on pro- creased production and lower food prices) and poor agricultural growth. failures (poor ratings for outcomes, develop- ment impacts, and sustainability for agricultural The World Bank current rural strategy, Reach- projects). The rural strategy commits the Bank ing the Rural Poor, is designed to respond to to reverse this trend if countries are to meet the these challenges within a rapidly changing MDG goals of rural poverty reduction and environment for agricultural and rural develop- environmental sustainability. In particular, the ment. The strategy seeks to: strategy calls for a coordinated effort to identify good practice and innovative activities that · Foster an enabling environment for broad- should be scaled up to have wider impacts-- based and sustainable rural growth. the focus of this Sourcebook. · Enhance agricultural productivity and The Strategy also sets high standards for lending competitiveness. quality in terms of outcomes and impacts. The gap between quality of agricultural lending and · Encourage rural nonfarm economic growth. the average Bank-wide lending has narrowed AGRICULTURE INVESTMENT SOURCEBOOK FIGURE A. IBRD/IDA COMMITMENTSTOTHE AGRICULTURE, FISHING AND FORESTRY SECTOR, FY1990-2003 Committment 3,000 (3-year moving average) 2,500 (Millions US dollars) 2,000 1,500 1,000 500 0 FY91 FY93 FY95 FY97 FY99 FY01 FY03 Year Source:World Bank Internal Documents FIGURE B. AGRICULTURE, FISHING AND FORESTRY SECTOR: SUB-SECTORAL COMMITMENTS FY 1995-2003 Irrigation and drainage General agriculture, fishing and forestry xix Forestry Crops Animal production Agro-industry 01-03 98-00 Agriculture market 95-97 and trade Agriculture extension and research 0 10 20 30 40 50 60 70 $ million Source:World Bank Internal Documents INTRODUCTION have a wider impact on sector performance and Box B. The changing context for agricultural development investment--an objective of this Sourcebook. The environment and context for investment in agriculture has changed dramatically over the past 20 years. Instead of investing with a view to increasing production and world food supplies, CROSSCUTTINGTHEMES agricultural sector investments must now seek to increase Future investments in agriculture will need to competitiveness and profitability along the commodity chain deliver on some established principles for from farmer to consumer, enhance sustainability for the successful development programs--sound policy environmental and natural resource base, and empower rural frameworks for investment, long-term institu- people to manage change.The rural strategy identifies a tional development, a focus on core public number of critical changes that will influence this process, namely: goods (such as research and roads), empower- ment of farmers, and a private-sector orientation. · A crisis in commodity prices for traditional agricultural Future investment programs, however, have to exports (cotton, coffee). respond to a rapidly changing environment for · Rapidly growing demand for higher-value agricultural agricultural investments (see box B) products due to urbanization and income growth. · Increased export demand for fruits, vegetables, and a variety of niche products (organic produce), especially The modules in this Sourcebook reflect a new within evolving multinational food market chains. emphasis in the rural strategy in several dimen- · Aging of the farm population and the impact of HIV/AIDS sions (see table A). These in turn highlight a on farming, especially in Africa. number of crosscutting themes in the Sourcebook. · Growing scarcity and degradation of land and water resources. POLICY REFORM . Many experiences have shown Source:World Bank, 2003. that investment made in a poor policy environ- ment produces poor results. In most countries, significantly in recent years. This is despite the markets are now much more open and trade far special challenges associated with agricultural freer than in the past. Many, if not most, lending--dependency on weather, vagaries of parastatal corporations involved in agricultural commodity prices, the dispersed and often markets have been closed or scaled down. Still, remote nature of agricultural production, the there remains an unfinished agenda for policy high level of poverty in the sector, and an reform that cuts across the various thematic uneven global playing field for developing areas for investment treated in individual mod- countries in agricultural trade. ules. The challenge is now shifting from first xx generation of policy reforms built around The improvement in lending quality reflects a market liberalization, and redefinition of the role transition from public-sector oriented lending to of the state, to second generation policies and "new style" projects and programmatic ap- regulations to enhance competitiveness and proaches based on private-sector implementa- growth. These reforms, in turn, require new tion, market principles, decentralization, and roles and skills for the public sector. beneficiary participation. This transition has not been easy or straightforward, and in all INSTITUTIONAL CAPACITY. Institutional capacity subsectors the quest for good practice contin- development remains the key agenda item for ues. Further improvements in lending ratings donor investments. Moving from a government- require a concerted effort to share good prac- controlled and directed development strategy to tice for technical aspects of agricultural invest- a paradigm of market-based growth requires a ments, the processes by which investments are myriad of institutional changes in how programs designed, and the structure and sequencing of operate and are financed, how institutions are investment programs both within the sector and organized and interact, and what policies and across sectors. The challenge is to identify, capacities they need. Getting the institutional adapt, and disseminate these good practices to framework right is seldom a one-step process, AGRICULTURE INVESTMENT SOURCEBOOK and the real test is the Table A. Changing emphasis in agricultural growth strategies in the rural strategy ability of institutions to evolve and adapt to a Less emphasis More emphasis rapidly changing envi- ronment for agriculture. In some sectors, espe- Resource and input-led growth Knowledge-led growth and cially research, exten- sustainable production systems sion, financial services, and market develop- Agricultural production Agricultural chains and markets ment, long-term institu- Food staples Higher value crops, animals, fish tional development is often required through a Traditional exports Nontraditional exports series of careful se- quenced investments. Broad-based approaches Poverty focused within differentiated farm types and PUBLIC VERSUS PRIVATE ecological conditions SECTOR ROLES . Agriculture is by and large a private sector activity. One of Source:World Bank, 2003. the major reasons for the reduction in agricul- tural lending has been the redefinition of the that has not been adequately filled by the role of the state, and the emphasis on the private sector, due to high transactions costs private sector and market development. In and risks. This means that there is a need for a nearly all thematic areas of agricultural devel- more active public sector role in coordination opment addressed in this Sourcebook, there activities, joint financing, and building needed has been a marked shift toward private-sector capacity to allow the private sector to fill its implementation of programs and market-based role, in addition to financing core public goods allocation of resources. This has naturally led to (especially infrastructure). Many responsibilities more emphasis on policies to create the condi- are also being devolved to local or state tions for private sector investment, and a governments for decentralized program imple- reduction of public sector investment programs. mentation, and this provides additional chal- xxi Public funding for agricultural programs is lenges and opportunities. Strategies such as unlikely to increase dramatically, but must be contracting-out to the private sector, providing focused on core public goods--science and targeted matching grants to support activities technology innovations, information and dissemina- within the public interest, and expanding tion, infrastructure services, and environmental collaborative action in the context of market conservation. supply chain development and trade associa- tions, and various types of consultations and PUBLIC-PRIVATE PARTNERSHIPS. It is now recognized coordination forums with the private sector are that a rigid distinction between public and all important. There is still much to do in this private sector roles is not possible, and there area to establish good practice. are many gray areas where public-private partnerships, often in conjunction with civil EMPOWERING FARMERS . A demand-side orientation society and producer and community organiza- for investment programs represents a funda- tions, are needed. In the least-developed mental shift in thinking away from seeing the countries, especially in Africa, the withdrawal farmer as a passive entity in his/her own of the public sector from markets (through the farming situation, to recognition that the farmer elimination of parastatals) has left a vacuum is the ultimate decisionmaker guiding change INTRODUCTION in the sector. Empowerment of farmers is the diversification of regional and national agricul- result of decentralized program management, tural production and marketing systems, and participatory approaches to planning and much greater demands on the support systems implementation, building capacity of producer for agriculture--research, advisory services, and community organizations, responsiveness irrigation and drainage, market grades and and accountability of public agencies to users, standards, and information services--to provide and wide access to information about all these the enabling environment for farmers to benefit developments. Involving local communities and the private sector to grow and diversify. early in project design and throughout imple- mentation increases the ability of projects to INTERNATIONAL AGREEMENTS AND REGULATORY SYSTEMS. effectively respond to demand, positively International agreements and regulatory sys- impacts the way projects are implemented, and tems have become more important with in- contributes to the sustainability of the outputs and creasing trade and global economic integration, the outcomes of the project. requiring increased emphasis on developing capacity for governments to represent their Making participatory mechanisms fully effective national interests in negotiations, and for will take time, as old habits are hard to change. mechanisms for producers and private Strengthening and working through partner- agribusinesses to influence negotiating posi- ships with producer organizations provides a tions. Advocacy by developing countries, tool for empowering farmers that runs through- development bodies, and much of civil society out this Sourcebook--influencing policy formu- for improved access to markets for agricultural lation, carrying out research and extension, products in industrial countries, and elimination implementing land reform programs, expand- of export subsidies, is a key issue. Most inter- ing financial services and marketing functions, national agreements also require developing improving management or irrigation systems new skills and capacities in both public and and natural resources, establishing new pro- private sectors for effective implementation. duction systems, and coping with risk and vulnerability. Few, if any, producer organiza- RECOGNITION OF DIFFERENT FARM TYPES . Adjustment-- tions do all of these, but different organizations whether to export to liberalized global markets address different priorities, such that these or to the competitive domestic market within a organizations need to be an integral part of the country--is forcing many changes on small design of most agricultural investment pro- farmers, including the transition out of agricul- xxii grams. Finally, investment programs will have ture for marginal farms. Most agricultural to broaden participation to include all stake- sectors have a combination of different farm holders, not just farmers (and particularly types, with different needs for public services women farmers), as consumers and and investments and different abilities to agribusinesses have important interests that respond to markets. In all adjustments there are need to be heard in policy and program design. winners and losers--at least over the short term. The transition to liberalized markets DIVERSIFICATION TO HIGHER VALUE COMMODITIES - . offers unprecedented opportunities for small Markets have also changed with liberalization farmers to improve their economic circum- of trade policies in global markets, and the stances and so lift themselves out of poverty. It growing demands for higher-value, higher- may, however, also lead to their greater quality products. This is reflected in the grow- marginalization if the economic environment ing "supermarketization" of food outlets in does not enable family farms to become more Latin America and other regions, and the global market oriented and if inefficient markets, sourcing of food products by multinational especially land markets, constrain adjustment. If food companies. These changes in consumer farmers produce high-value agricultural prod- demand provide a basis for much greater ucts, they will need access to the complex AGRICULTURE INVESTMENT SOURCEBOOK technology and market information needed to Box C. Checklist of readiness for scaling-up compete in these markets. For other farmers, adjust- ment programs may be required to ensure their What is known about impact? transition to the nonfarm sector, including into agricultural processing industries. · Level of social, environmental, or economic impact. · Cost of delivery of benefits. · Nature of beneficiaries. · Time scale. ADAPTINGTOTHE LOCAL CONTEXT What is known about success factors? The many geographic regions, countries, and agro-ecologies in which the Bank is involved · Organizational process and institutional factors. present quite different development problems · Cultural, environmental, and social factors. and opportunities, as seen in the regional rural · Policy and sectoral environment. · Characteristics of beneficiaries. strategies of the Bank. Sub-Saharan Africa and South Asia, with their high concentrations of rural What is the "state of practice"? poor, require particular attention to achieving · Innovation ­ minimal objective evidence. broad-based growth through small farmers. · Good practice ­ clear evidence from some settings. Middle-income countries of East Asia and the · Policy principle ­ proven in multiple settings. Pacific, Latin America, and the Middle East/North What are the scaling options? Africa require more attention to programs for · Internal replication; program expansion. marginal areas where poverty is increasingly · Catalyzing and supporting others; joint ventures. concentrated. Eastern Europe continues to focus · Capacity building; partnerships; replication by others. on strengthening of markets and private sector · Diffuse concepts and models; policy advocacy. capacities and attention to environmental conservation. Source: World Bank 2003a. The Middle-East-North Africa area is especially concerned with improved management of natural resources (particularly the scarce water resources). Within these very broad differences, design of invest- Learning and information management and ments in the agricultural sector must be context sharing processes are essential, and the recog- specific, introducing reforms suited to the country nition of this provides the basis for this conditions and sensitive to the path-dependent evolu- Sourcebook and its attempt to: tion of rural institutions. Trade-offs are often necessary and design of investments must be based on extensive · Improve monitoring and learning within xxiii analysis of past experiences and options for future projects and programs and between pro- program and market development. grams, projects, sectors, and regions. · Identify and share widely the knowledge of SCALING UP INVESTMENT PROGRAMS what works and what does not in agricul- The rural strategy commits the Bank to a tural development projects and programs. process of rapidly scaling up good practice in order to achieve greater impact and coverage. · Support the buildup of knowledge to help (box C) These efforts to increase investment in practitioners address specific needs, situations, agriculture must rely heavily on monitoring, and local variability. feedback, analysis, and evaluation, facilitated through internal and external networking Investments with complex and multiple goals (meetings, workshops and conferences, joint make this process more difficult, and this is a impact assessment, peer-to-peer exchanges, fact relevant to the increased focus on poverty cross-visits). There is also much to be learned reduction and environmental sustainability. from failure as well as success. Combining impact assessment and ongoing learning processes may help to make monitor- INTRODUCTION ing and evaluation activities more efficient and relevant to program needs. The preparation of this Sourcebook has identified ongoing evalua- tion and impact monitoring as a serious weak- ness, that must be corrected to guide successful scaling up of projects. REFERENCES CITED Millennium Development Goals Website: www.developmentgoals.org World Bank. 2003. Reaching the Rural Poor: A Renewed Strategy for Rural Development. Washington, D.C.: World Bank. ____ 2003a. "Scaling-Up Issues and Options: Supporting the World Bank Rural Develop- ment Strategy on Implementation of Good Practice and Innovation." World Bank, Washington, D.C. xxiv AGRICULTURE INVESTMENT SOURCEBOOK 1 BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY 1 D eveloping an enabling environment for pro-poor agricultural growth is essential for ensuring that the various types of public investments described in this Sourcebook are effective. Governments must provide public goods and establish supporting legal, administrative, and regulatory systems to correct for market failures, facilitate efficient operation of the private sector, and protect the interests of the disadvantaged.The role of the public sector is evolving, driven by trade liberalization and international agreements, and requiring new skills and analytical capacities. Investments should focus on public sector program and institutional reforms, adjustment lending, human resource development, and strengthening capacity of sector institutions, both public and private. RATIONALE FOR INVESTMENT IN POLICY AND INSTITUTIONAL CAPACITY The World Bank's Rural Development Strategy identifies two important elements of successful poverty reductionæcreation of an investment climate conducive to rural growth, and empowerment of the poor to share in the benefits of that growth. Investments in policy and institutional capacity are critical to ensuring that the public sector can effectively abling environment in which markets guide the carry out its functions, which include coordina- allocation of resources for efficient outcomes. tion, participatory development of sector Although specific policies relevant to various strategies, policy formulation, and allocation subsectors within agriculture (for example, land and monitoring of public investment in agricul- administration, natural resources management, ture. These governmental functions seek to and agricultural research) are addressed promote an environment conducive to private throughout this Sourcebook, the means by sector activity and competitive markets in which policy is established, and the structure of socially acceptable ways (see box 1.1). the institutions devised to do this and to pro- mote overall sector growth, are addressed here. Public policy is anchored in a set of values defining societal goals and a set of beliefs PAST INVESTMENTS about the best way of achieving those goals. Support for policy and institutional develop- Institutions are the rules, enforcement mecha- ment in the agricultural sector has evolved nisms, and organizations supporting market dramatically. In the 1970s and 1980s, much transactions. Institutions help transmit informa- investment went to building state organizations tion, enforce property rights and contracts, and to manage agricultural development programs. manage competition in markets, thus giving Ministries of agriculture, starting often with very people the opportunity and incentives to limited capacity, expanded their range of engage in fruitful market activity. Together, agencies and programs, many of which at- public policy and institutions create the en- tempted to supply inputs, credit, and services directly to producers, and to purchase and market agricultural products. Some of these Box 1.1 Key policies to promote a competitive agriculture public sector investments had high payoffs. However, economic returns to many of these · Macroeconomic ­ ensure undistorted exchange rate investments (such as large-scale irrigation) are policy, removal of implicit taxes and market barriers, now lower, and some interventions (such as nondiscriminatory taxation, macroeconomic stability, and government credibility. subsidies) are very costly in terms of the distort- · Trade ­ facilitate exports, participate in trade negotiations, ing effect that they have on domestic markets. reduce protection on import-substitute goods with relatively low and uniform tariffs, and remove nontariff The failure or lack of sustainability of many of barriers (while providing protection from acute price these programs led to a rethinking of the role 2 volatility). of the state in the agricultural sector. This was · Labor ­ ensure agricultural employment meets core labor responsible for a surge in adjustment lending standards especially in regard to child labor, hazardous work, and equal employment opportunities for women. (that is, lending to support policy and institu- · Competition ­ reevaluate the role of marketing boards, tional reforms conducive to growth) by the promote competition in input markets, establish labeling World Bank in the 1980s, when such annual regulations for grades and standards. lending averaged over US$900 million. From · Environment/natural resource use ­ establish sustainable 1990 through 2003, Bank agricultural adjust- management, internalize externalities where possible, and ment lending totaled US$5 billion. develop markets for pollution and carbon credits. · Land ­ develop land markets, security of tenure, titling and Although adjustment lending and associated recording of land transactions, and land reform for fair distribution of land ownership. policy and institutional reforms have had · Technology ­ maintain public good research activities, and significant impact on developing public policies foster private sector participation in research and exten- for the agricultural sector, the reform process is sion activities. not yet complete in many countries. Second- · Welfare and food security ­ establish social safety net generation policy adjustments are needed in programs to cope in times of extreme price changes and many cases, and capacity for effective imple- natural disasters. mentation of many reforms is lacking. In Source:World Bank 2003 particular, rapid changes in global markets and AGRICULTURE INVESTMENT SOURCEBOOK technology demand a renewed focus within the Box 1.2 Payoffs to public investment public sector to correct persistent market failures,1 efficiently provide core public goods2, Public investment reduces rural poverty through improved establish supporting systems that encourage growth in agricultural production, agribusiness development, private initiative and investment, and protect rural nonfarm employment, lower food prices, and migration. the interests of the poor (see box 1.2). While there are often long time lags between investment and visible impact, investments in agricultural research, education, Over the past decade, there has been increasing and rural infrastructure are often the most effective in promot- ing agricultural growth and poverty reduction (see inset table). recognition that "good governance" is key to Regional analysis within India also suggests that public invest- sustainable development and poverty reduction. ment in less-favored areas not only offers the largest poverty Good governance is reflected in a capacity for reduction per unit of spending, but also leads to the highest analyzing policy options and the capacity for economic returns. implementing the policies and programs with Returns of agricultural public investments and transparency and accountability. However, the impacts on poverty reduction in China and India speed and impact of improvements in gover- nance has been less in rural areas due to lower Economic Returns ­ levels of education, lower qualification of civil returns* poverty** servants, and more deeply ingrained traditions Sector China India China India of paternalism. The effectiveness of public sector R&D 9.59 13.45 6.79 84.5 institutions in promoting pro-poor agricultural Irrigation 1.88 1.36 1.33 9.7 growth is also hampered by the fact that there Roads 8.83 5.31 3.22 123.8 are often many different ministries or agencies Education 8.68 1.39 8.80 41.0 operating within the sector (for example, public works, water resources, trade, and environment) Electricity 1.26 0.26 2.27 3.8 each with a high degree of centralization. Poverty loan n.a. 1.09 1.13 17.8 *For China, yuan total rural GDP/ yuan exp., and for India, Rupee per Rupee spending KEY ISSUES IN POLICY AND INSTITUTIONAL ** For China, no. poor reduced/ 10,000 yuan exp., and for India, no. poor reduced/million Rupee exp. CAPACITY DEVELOPMENT The new generation of investments in policy Source: Fan, Zhang, and Zhang 2002 and institutional reform will likely be more challenging than in the past. Emphasis must be 3 on actually implementing reforms and fine- centralized. Although they may (arguably) have tuning these to suit local situations and evolv- been effective in the past, they are now inap- ing market conditions. The requirement for propriate to their new roles. Many public sector high-quality information and analysis to sup- agencies are still involved in areas where the port policy formulation and investment is now private sector would be more efficient (for greater than before, and there is a critical need example, marketing, and input supply), but to learn from experience, through improved lack the capacity and incentives to intervene monitoring and evaluation of policy impacts. effectively to promote the private sector. Privatization of noncore public functions and CHANGING ROLE OF GOVERNMENT . Many public decentralization of remaining programs and sector institutions are oversized and overly governance systems are critical to fostering 1. Market failure relates to high levels of risk and ineffective insurance markets, presence of economies of scale and indivisibilities, positive and negative externalities, and distributional inequalities. Governments must only act to correct such failures where interventions resulting in government failure are not worse than the original market failure. 2. Public goods are defined as those for which private suppliers cannot fully appropriate the benefits of their initiatives--they are nonrival (one person's consumption of a good or service does not reduce availability to others) and nonexcludable (individuals cannot be easily excluded from consumption). Interventions relating to goods that are undersupplied because of positive externalities (for example, agricultural research and roads) will be different to interventions where economies of scale and natural monopolies create a rationale for public investment (for example, irrigation and rural electrification). MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY market development and agricultural growth. · Develop capacities and institutions for gov- The role of government has shifted toward ernment to carry out regulatory, information, being more of a coordinator that develops and policy, and negotiation functions to promote enforces the rules by which private sector efficient markets and respond to international participants interact within market arenas. This agreements and standards (see box 1.3). change, however, requires considerable capac- ity to formulate and implement policies to INTER-MINISTERIAL COLLABORATION . Development and promote market development and coordina- implementation of policies affecting the agricul- tion, and create capacity to respond to markets. tural sector increasingly depend on ministries Although current development strategies and agencies outside of the agricultural ministry, provide for increased private sector leadership that deal with public finance, food security, trade and a declining role for the public sector, the negotiations, natural resource management, and quality and efficiency of public sector institu- science and technology. An effective strategy for tions and policy are increasingly important to pro-poor agricultural development must neces- the emergence of a modernized and competi- sarily seek to strengthen linkages and communi- tive agriculture. The major priorities are to: cation between the range of public agencies with a stake in agricultural development (for example, · Support implementation of unfinished environment, land, labor, finance, industry, trade reforms, such as reducing public sector ministries). The large number of private sector bureaucracies, privatizing state corpora- interests involved across these areas complicates tions, and devolving programs to lower this. Thus the government must adopt a coordi- levels of government for more efficient nating role whereby it encourages, ideally implementation. through incentives rather than regulations, cooperation among ministries, agencies, and the · Formulate coherent national agricultural private sector, and a comprehensive approach to development strategies and innovative cross-sectoral issues. This coordinating role must sector development programs. extend into the regional and international arenas in which agriculturally-related agreements are · Develop mechanisms for producers and the increasingly made. private sector to participate in policy and program formulation and implementation PUBLIC-PRIVATE PARTNERSHIPS . It is now clear that through public-private partnerships. more efficient outcomes can generally be 4 Box 1.3 Typical regulatory requirements of a modern agricultural and food system · Legal and business regulation (with low costs of compliance for doing business), transparency, adjudication of contract disputes, contract enforcement, market regulation. · Food safety regulations and standards (especially in processing facilities), and testing for contamination (including microbial) and chemical residues. · Natural/environmental and common property resource (waterways, forests, air, fauna) protection, and land and water use management including tenure administration. · Biosafety regulation with respect to genetically modified organisms, pest and disease control and appropriate quarantine border measures, and agricultural biodiversity preservation. · Intellectual property rights (IPR) regulations to provide incentives for innovation, enforcement of IPR laws and patents, balancing security of property rights with technology accessibility for smallholders. · Verification and certification of seeds and plant propagation materials and registration and regulation of agrochemical use. · Inspection services and issuance of phytosanitary certificates, and verification and certification of products for satisfying relevant grades and standards. · Labeling requirements and their enforcement. Source: Authors AGRICULTURE INVESTMENT SOURCEBOOK achieved if the private sector is involved in the Box 1.4 Food security, safety, and quality provision of public services. Many government functions can be contracted out to specialized Food security depends on there being adequate food availabil- private sector firms and nongovernmental ity, access, and utilization. Availability depends on production and organizations (NGOs) under competitive market supply, and access to incomes that enable the purchase bidding. Governments can also partner with the of food. Food utilization depends on health conditions and food private sector including producer organizations, quality that enables it to meet nutritional needs. As such, food NGOs, and trade associations, in areas such as quality and safety are essential to food utilization and food security. Potential investment areas for food safety and quality policy formulation, food safety regulation, and include: the provision of infrastructure.3 Other functions that need to be performed by the public sector General: are often better accomplished if the agencies · Policy analyses and food chain diagnostic studies are organized as financially autonomous enti- · Nutritional surveillance studies · Food fortification or supplementation programs ties, capable of securing much of their funding · Micronutrient-rich foods promotion through the recovery of costs from users. This Export focused: is typically the case with "toll goods" and · Developing laboratory capacity for residue testing and "natural monopolies" such as land registration biological agents, for example and titling bureaus, some phytosanitary ser- · Strengthening capacity for food inspection, auditing, and vices, plant varietal and agrochemical registra- certification tion, plant varietal protection, and seed certifi- · Training, risk analysis, and systems for product traceability cation. The financial viability of these public · Information on export market import standards service entities requires that commercial and Domestic market focused: social objectives be kept separate and distinct. · Investments in water and sanitation Where full cost recovery may exclude the poor · Hygiene training for street food vendors from a particular service, graduated fees or · Plant and animal quarantine infrastructure · Vaccination programs against livestock diseases targeted voucher systems for the needy can be introduced. These approaches will require a Source: Authors transparent definition of eligibility and a system that can be readily implemented. public goods to promote private sector invest- ment, but in ways that are focused more MULTIPLE GOALS FOR THE SECTOR . Formulation of sharply on addressing the needs of the poor. public policy requires difficult choices (given Also, environmental considerations are an 5 limited resources) among alternative (and often increasingly important element of agricultural competing) priorities. A traditional focus of development initiatives, and policies and ministries of agriculture has been on food institutions must provide a basis for valuing production and self-sufficiency. This focus must natural resources used in agricultural produc- be broadened to include poverty reduction and tion, internalizing environmental costs and environmental concerns. Food security will benefits in production systems, and developing remain an objective, but with greater concern markets for environmental services. for improved access by the poor to a variety of safe and nutritional foods (see box 1.4). In- REFORM OF SUBSIDIES . Despite the fact that rich creased employment and income opportunities countries continue to maintain trade-distorting complemented by better market integration and subsidies, developing countries must review more effective and targeted social safety nets their agricultural support policies (price sup- are needed for poverty reduction. Broad-based ports, border protection, and subsidies) with a growth led by the private sector is often the view to improving sector efficiency and equity. most effective means to reduce poverty. Public Subsidies on inputs create disincentives to use expenditures must support provision of core scarce resources efficiently (for example, subsi- 3. See Innovative Agricultural Project (IAP):"Guinea: Livestock Sector Partnership--Public Sector Herder Organizations and the Private Sector." MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY dized irrigation water), may have environmental because of low government salaries and poor costs (for example, pesticide subsidies), and incentive structures. The result was a "revolving draw scarce resources away from high payoff door" situation in key ministry units as the best- public investments, such as agricultural research trained staff left for the private sector or inter- and infrastructure. Numerous studies have national employment. Critical to future reforms shown that subsidies are disproportionately and institutional development will be the ability captured by the largest producers and do not to build and retain the necessary qualified meet the social equity objectives often used for human resources (with skills in areas such as their justification (see box 1.5). Finally, in the marketing and management), and the incentive longer term, subsidies may undermine competi- systems to staff institutions that formulate tiveness, since they typically become capitalized policy. Development of these human resource into land values, raising producers' production capabilities must also take into account the costs. Since subsidies generally create strong future needs of private sector agencies, such as vested interests, removal of subsidies is often producer groups, agribusiness associations, and difficult, and may require interim, transition commodity chain consultative groups. support so that producers have sufficient time and resources to adjust to changed conditions. BUILDING CAPACITY IN PUBLIC EXPENDITURE MANAGE - Countries that have successfully made this MENT . In many countries, capacity to manage transition have achieved a more dynamic and public expenditures (both budget formulation competitive agricultural sector (see box 1.6). and execution) is especially weak in ministries of agriculture. Efforts must focus on strength- LACK OF TECHNICAL AND HUMAN CAPITAL . Govern- ening capacity for: policy formulation and ments often lack the skilled staff, equipment, costing, using results-oriented budgeting, and management tools to efficiently implement management of budget execution, monitoring complex programs. A chronic lack of funds for and reporting, and mechanisms for stakeholder in-service training and persistent traditional participation and interfacing with donors. attitudes with regard to training have deprived Building capacity for the development of public servants of knowledge and skills to medium-term expenditure frameworks is design and manage interventions for a sector in critical to translating Poverty Reduction Strat- which the private sector is in the lead. Past egy Programs (PRSPs) into public expenditure institution-building efforts often failed in part programs, and ensuring that agricultural sector 6 Box 1.5 India: inequitable distribution of subsidy benefits The Government of India and most Indian states have subsidized agricultural inputs since the Green Revolution. In India, input subsidies to agriculture as a percent of agriculture GDP averaged 9 percent during the 1990s. In the state of Punjab, the largest subsidies are for electricity for pumping groundwater (a state subsidy) and fertilizer (a Government of India subsidy). Large farmers receive a disproportionate share of these subsidies (see inset table).The share of total subsidies that small farmers receive is less than the share of total land area that they farm, and the reverse is true for large farmers. Such subsidies are aggravating serious environmental degradation, especially over-exploitation of groundwater. Distribution of Punjab input subsidies by farm size, 1995-96 < 1 ha 1 - 2 ha 2 - 4 ha 4 ­ 6 ha > 6 ha Farms in size category (%) 18.6 16.8 29.3 16.8 18.5 Land area in category (%) 2.9 5.8 20.1 21.0 50.2 % of fertilizer subsidy 2.5 4.8 18.6 21.9 52.2 % of electricity subsidy 1.3 4.1 17.4 22.5 54.7 % of canal water subsidy 1.4 3.6 16.9 23.0 55.1 Source: Singh 2003 AGRICULTURE INVESTMENT SOURCEBOOK priorities are reflected in implementation of Box 1.6 New Zealand: benefits of unsubsidized agriculture: an PRSPs, and related programmatic assistance. OECD example Protection and subsidies often constrain growth and competi- FUTURE PRIORITIES FOR INVESTMENT tiveness of the agricultural sector. During the mid 1980s, Future investments in policy and institutional producer support in New Zealand accounted for about 40 capacity require sustained efforts over a consid- percent of farmer income.The fiscal unsustainability of these erable time to develop stable and competent subsidies, loss of preferential access to British markets, and spiraling inflation pressured the government to abandon most public sector institutions to support market support payments. Deregulation was rapid (nearly all subsidies development and address market failures. The were removed in 1984) and substantial (almost 30 different level of financing required for these initiatives subsidies and export incentives were removed and no industry will often be quite modest, but continuity of continued to receive preferential treatment). Around one support is critical. percent of New Zealand's farmers exited agriculture (with the help of a one-time exit grant valued at approximately one-third DEVELOPING AND IMPLEMENTING AN AGRICULTURAL STRATEGY . of annual income). A comprehensive agricultural sector strategy is Since the late 1980s, agricultural output has grown by more essential as a basis for investment for pro-poor than 40 percent, the rate of productivity growth has increased growth. Such a strategy might form a part of a almost six-fold, the share of farming in GDP has risen from 14.2 broader rural development strategy or PRSP, but to 16.6 percent, and the share of rural population has remained will usually need to be developed in greater detail constant. Reform prompted greater competition, lower input as a stand-alone agricultural strategy document. In costs, adoption of practices that were more environmentally sustainable, and a more diversified and adaptable sector providing a "vision" for the future role of the responsive to market needs. sector, strategies should focus the efforts of donor organizations and governments on the most Source:World Bank 2003. relevant problems and solutions, and should ensure that initiatives are complementary rather service. Although there is no easy solution to than conflicting. Translating strategy priorities into the problem of retaining qualified economists, budgetary allocations is often more difficult than a common solution is for government to formulation of sector strategies. Budgetary alloca- contract out policy research to universities, tions must be well planned and based on revenue consulting firms, and research foundations, and expectations, as well as realistic estimates of the to undertake joint analyses of policy implica- funding needs for different policy priorities. tions with relevant stakeholders. However, 7 Sequencing of funding allocations is also impor- ministries of agriculture still require a core tant. Budget allocations are, of course, largely capacity to tap available policy research, within the responsibility of ministries of finance. contract with outside institutions to fill research However, good analysis and effective information gaps, and analyze research output for use in systems within the agricultural sector, backed by the policymaking process. competent policy staff with good presentation and negotiating skills, are important for promoting A related need is to develop the capacity to public investment in agriculture and improving participate in negotiations at regional or global investment quality. levels (for example, the ongoing Doha Devel- opment Agenda negotiations under the auspices BUILDING POLICY AND NEGOTIATING CAPACITY . Devel- of the World Trade Organization (WTO) and oping and maintaining adequate policy formu- effectively represent the needs and concerns of lation, implementation, and analytical capacity domestic producers and citizens. Such negotia- has been a recurrent problem in most coun- tions include trade, the environment, grades tries. Retaining well-trained economists is and standards for market entry, intellectual especially important for policy formulation and property issues, foreign investment, and nego- analysis, since they often find attractive em- tiation with donor agencies (see box 1.7). ployment opportunities outside of government Donor agencies can provide technical assistance MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY and training in these areas so that public STRENGTHENING STATISTICAL AND INFORMATION SERVICES. officials can evaluate potential negotiating The quality of agricultural data systems is positions and the likely implications of these thought to have declined in many countries in on various groups, with particular emphasis on recent years, along with declines in ministry of the poor and vulnerable. agriculture budgets for these systems. Good information is an essential base for sound REFORMING AGRICULTURAL MINISTRIES . Ministries of policy formulation and for guiding investments agriculture are often inefficient and very by both the public and private sectors.4 Agricul- conservative, and may resist devolution of tural censuses, production and yield surveys, traditional core functions. Past investments in and market information systems can improve public institutions resulted in substantial decisions of government, producers, and bureaucratic structures ("over-dimensioned") agribusinesses. Market information systems are requiring large recurrent cost financing. especially important to efficient operation of However, reform of a single ministry is often the private sector. difficult unless carried out within the context of structural reform of the entire civil service Wide dissemination of information is particu- system, or at least of the ministries dealing larly important for maximizing the benefits of with the agricultural sector (see box 1.8). data collection and to ensure equitable access Reform is likely to be a long-term process to information on production and markets. and political changes can easily wipe out New information and communications tech- progress, requiring a new start on reforms. A nologies (such as Web portals) can help im- bottom-up effort that builds a base and prove the quality, dissemination, and cost- constituency for ministry reform among key effectiveness of data collection. Although there stakeholders is important. is a significant public good element in such Box 1.7 International agreements related to agriculture The international community through a variety of international agreements has addressed many issues facing the agricultural sector. Countries, signatories to the agreements, are required to implement their provisions. Some key agreements, conventions, treaties, or protocols that affect agriculture include: 8 · International Plant Protection Convention (1951) · International Code of Conduct on the Distribution and Use of Pesticides (1985) · International Code of Conduct for Plant Germplasm Collecting andTransfer (1993) · WorldTrade Organization (WTO) Agreement on Agriculture (1995) · WTO Trade Related Intellectual Property (TRIPS) Agreement (1995) · Code of Conduct for Responsible Fisheries (1995) · United Nations Convention to Combat Desertification (1996) · World Food Summit: Rome Declaration and Plan of Action (1996) · Cartagena Protocol on Biosafety (2000) · Stockholm Convention on Persistent Organic Pollutants (POPs) (2001) · InternationalTreaty on Plant Genetic Resources for Food and Agriculture (2001) Negotiations continue on a number of outstanding issues involving such areas as subsidies and market access for agricultural trade (WTO), market standards, and biotechnology (in the Food and Agriculture Organization/World Health Organization (FAO/WHO) Codex Alimentarius Committees). Governments, the private sector, and civil society need to understand the implications of agreements on these issues, have the institutional capacity to implement their relevant provisions, and the ability to formulate and present views in future negotiations. Source:WEHAB Working Group 2002. 4. See the IAP,"Ecuador: Commodity Chain Consultative Councils for Policy Formulation" AGRICULTURE INVESTMENT SOURCEBOOK systems, a portion of the costs may be recov- Box 1.8 Tanzania: reform of the Ministry of Agriculture ered from the private sector. Prior to the Agricultural Sector Management Project in FACILITATING ADJUSTMENT AND MANAGING RISK . A Tanzania, the Ministry of Agriculture was overloaded with pressing issue in many countries is to assist tasks for which it was ill suited. Reforms helped state agricul- producers to adjust to market and trade tural institutions to manage less, but better, in support of a liberalization--events that affect prices (and market-based economy.The government role in the agricul- so change competitiveness and profitability tural sector was better defined, enabling the ministry to focus on three major tasks--policy formulation and planning, among industries), and affect risks faced by development and provision of services in partnership with the farmers. This may require government assis- private sector, and regulation and inspection. Reform entailed tance to farmers (especially small farmers) to divestiture of many parastatals, spinning-off services of a make the transition to other enterprises in commercial nature to the private sector and reducing staff which they have a comparative advantage, or within the ministry. Staff skills were upgraded through on-the- in some cases to exit agriculture altogether.5 job training and higher education overseas, and agricultural In some circumstances, income support information systems were strengthened to support a market- programs can be helpful but must be based economy. Since reforms had implications beyond agriculture, other ministries were actively involved. "decoupled" (that is, not paid on the basis of current input use, output, or prices) so that Source:World Bank Internal Documents. these do not distort production. Similarly, market-based risk management systems for commodity prices and modern information All decentralization reforms need to recognize and communication technologies have poten- the limits of local government activity. Public tial to help producers to cope with risk investment will be necessary to develop capacity during the transition. of local governments and assist them in formu- lating coherent and effective strategies and DECENTRALIZING PROGRAMS AND AUTHORITY . Decentrali- programs for decentralization. However, this can zation is commonly promoted as a means of be difficult given the large number of (often empowering agricultural producers by enabling small) local governments and the frequency with local participation in the decision-making which they change. In addition, provision of process. This is expected to lead to more re- many agricultural services (for example, techni- sponsive and locally applicable policy decisions. cal advisory services) is in many cases the Although there can be a trade-off between domain of user groups, farmer organizations, 9 greater local government authority over expen- and trade associations. These may have different diture and potential misuse of funds, financial interests and priorities than local government, responsibility is an important element of effec- and agreements about how these responsibilities tive decentralization. If local governments and are divided, can be highly effective. private organizations are to carry out decentral- ized functions effectively, they must have DEVELOPING PARTICIPATORY SYSTEMS . Participation adequate revenues, either raised locally or enhances stakeholder influence and control transferred from the central government, and over priority setting, policymaking, resource must have authority to make decisions about allocations, and access to public goods and expenditures (that is, political decentralization). services. This in turn improves government While local governments have a role in provid- accountability and transparency, and increases ing "local" public goods, there are also many overall governance and economic efficiency of "national" or "regional" public goods that local development activities. Rural producer organi- government will not have the technical capacity zations can be central to a participatory system or interest to address. for agricultural decision-making, but frequently 5. See the IAP,"Turkey: Hybrid Adjustment/Investment Lending" MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY must make a transition from having been · The extent of liberalizing support and passive recipients of government assistance to protection policies for agriculture. being independent institutions developing their own policies, programs, and strategies Analytical work and policy dialogue is especially and negotiating with the government as important to assessing the needs for policy and equals. At the same time, initiatives to support institutional capacity building, and for preparing the development of such groups must do so investment proposals prior to scaling up. in a manner that avoids the potential for any one group (or a number of powerful individu- als within the group) to pursue narrow agen- SELECTED READINGS das at the expense of other groups (or other Asterisk (*) at the end of a reference indicates individuals within the group). Agribusiness that it is available on the Web. See Appendix 1 trade associations (often participating in for a full list of Websites. commodity chain or marketing chain interest World Bank. 2003. Reaching the Rural Poor: A groups) are other key stakeholders with Renewed Strategy for Rural Development. interest and influence in the sector. The Washington, D.C.: World Bank. public sector should explicitly seek to de- velop alliances with such groups, and build a Ellis, F. 1992. Agricultural Policies in Develop- strong constituency for agricultural institu- ing Countries. Cambridge and New York: tions, but in ways that avoid special interest Cambridge University Press. subsidies and protection. Monke, E. A., and S. R. Pearson. 1989. The Policy Analysis Matrix for Agricultural SCALING UP INVESTMENTS Development. Ithaca, N.Y.: Cornell Univer- Improving policy and institutional capacity is sity Press.* critical for designing and implementing sound programs for pro-poor agricultural growth. Timmer, C. P., W. P. Falcon, and S. R. Pearson. Some indicators for monitoring the extent of 1983. Food policy Analysis. Baltimore: Johns progress in this area include: Hopkins University Press.* · Existence of a sound agricultural sector World Bank. 2002. A Sourcebook for Poverty development and investment strategy. 10 Reduction Strategies. Washington, D.C.: World Bank. · Level of private investment in agriculture and agribusiness, and surveys of the investment climate for private investors in the sector. REFERENCES CITED Fan, S., Zhang, L., and X. Zhang. 2002. Growth, · Extent and quality of rural producer organi- Inequality, and Poverty in Rural China: The zation and agribusiness association input Role of Public Investments. Research Report into agriculture policy formulation and 125. Washington, D.C.: IFPRI. program design and implementation. Singh, K. 2003. "Punjab Agricultural Policy · Availability and quality of statistical infor- Review." Report for the World Bank. New mation on the agricultural sector, agricul- Delhi, May 31. World Bank, Washington, tural production, and markets. D.C. Processed. · Effective regulatory systems for emerging WEHAB Working Group. 2002. "A Framework areas such as food safety, biosafety, intel- for Action on Agriculture." World Summit lectual property rights, and phytosanitary on Sustainable Development Report. standards. WEHAB Working Group, Johannesburg. AGRICULTURE INVESTMENT SOURCEBOOK World Bank. 2003. "Agricultural Policies and Trade." In Global Economic Prospects: Realizing the Development Promise of the Doha Agenda. Washington, D.C.: World Bank. This Overview was prepared by Derek Byerlee, Sam Kane, and Gary Alex, with inputs from Jock Anderson, John Nash, and Pierre Rondot. Peer review comments were provided by Deepak Ahluwalia, Mark Lundell, Jock Anderson, Ralph Cummings (USAID), and Suresh Babu (IFPRI). 11 MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY AGRICULTURE INVESTMENT NOTE for government in promoting sustainable agricultural sector growth. An ADS is both product and process. As product, the written PREPARING A NATIONAL document serves to focus and facilitate the AGRICULTURAL process. The strategy combines analysis, DEVELOPMENT STRATEGY process, and required action, and usually has five elements: An effective agricultural development strategy (ADS) is critical for identifying the key issues · A snapshot of the current status of the and opportunities facing the agriculture sector, agricultural sector, which, depending on the and developing operationally sound programs state of existing knowledge, may involve to promote pro-poor growth. Strategies must new economic and sector analysis, perhaps provide a "vision" for the future role of the involving formal models such as discussed sector, and set forth a policy framework and in the final section of this note. the investment priorities needed to achieve this vision. Key areas for support include building · A national vision of agriculture within the the human and institutional capacity for strate- time frame of a generation. gic analysis and planning, and establishing a participatory consultative process to articulate · A diagnosis of the key constraints that an agricultural development strategy that can prevent the agricultural sector from achiev- result in real progress for the sector. ing the vision, and an analysis of the main opportunities, inevitably requiring new Too many countries continue to invest in analytical studies and likely involving agricultural development without a clear overall modeling of growth processes. strategy. Central planning of agricultural pro- duction seldom worked in the past and is · Action plans for implementing the vision, largely discredited. The role of government in including assignment of responsibilities and promoting economic growth and development estimation of costs, and a comprehensive has changed with the increased importance of program of monitoring and evaluation to private-sector investment in agriculture. This measure costs and benefits and to under- does not, however, mean that the government stand any required revisions. can abdicate its role in promoting agricultural 12 development, and unless this role is clearly Developing an understanding of agricultural defined, the payoffs from investment in the production and marketing systems and their sector are likely to be less than satisfactory. sources of vulnerability is a complicated task, particularly if it involves considering mecha- nisms to help some people leave agriculture. WHAT IS AN AGRICULTURAL DEVELOPMENT Common problems include: insufficient time STRATEGY? for broad consultation, gaps in the required An ADS is a roadmap to assist governments, knowledge base, particularly concerning civil society, and donors in defining interven- reliable data on poverty in agroecological and tions to meet key objectives for the agricultural local government areas, problems with in- sector--typically including improved produc- country expertise, and lack of political and/or tivity and competitiveness, reduced rural bureaucratic champions. poverty, enhanced household food security, increased capital accumulation by poor rural households, and more sustainable manage- BENEFITS ment of natural resources. Such articulation of Effective processes for preparation of an ADS strategy does not imply central planning, but rely on intensive fact-finding, diagnostic stud- rather an analysis of the options and priorities ies, analyses, and program monitoring, evalua- AGRICULTURE INVESTMENT SOURCEBOOK tion, and impact assessments. An ADS will Box 1.9 Uganda: plan for modernization of agriculture present combinations of policies and programs around which stakeholders can form a consen- In order to raise agricultural growth rates, the Ugandan sus and mobilize resources needed (see box Government developed a Plan for Modernization of Agriculture 1.9). This process helps to identify political through a broad-based consultative process.This plan is part of champions for reform, and can promote inter- Uganda's broader strategy, which is defined in the Poverty change of experiences among practitioners to Eradication Action Plan (PEAP).The plan has been used as an learn what works and what does not work in important input into its Poverty Reduction Strategy Paper (PRSP) and subsequent Poverty Reduction Support Credit sectoral institutions, programs, and markets. (PRSC) in which agriculture has high priority. A focus point of Overall, an ADS can focus efforts such that the plan is the transformation of subsistence agriculture to duplication of projects and conflicts among commercial agriculture to accelerate growth through technical different initiatives are reduced, and it can change throughout the sector. Priority areas for action are: enhance collaboration among stakeholders research and technology development; agricultural advisory (including donor agencies, governments, the services; rural finance; agro-processing and marketing; agricul- private sector, and farmer and community tural education; sustainable natural resource utilization and organizations). management; and supportive physical infrastructure, particularly roads.The plan provides the strategic and operational frame- work for sustainable agricultural transformation, but does not provide a detailed plan for action. It describes the types of POLICY AND IMPLEMENTATION ISSUES policy interventions required to promote agricultural and rural AGRICULTURAL AND RURAL DEVELOPMENT STRATEGIES. development, and defines the roles of the public sector, the There is now a recognition that rural develop- private sector, and the civil society in this process. ment is broader than agricultural development, Source: Government of the Republic of Uganda 2000. involving substantially more attention to social, off-farm, and infrastructural investments. While an ADS can be developed as a component of a Rural Development Strategy, this involves a · Mobilization of institutions and partnerships trade-off between the benefits of approaching at different levels and in different sectors to agriculture as part of the larger rural picture, implement the ADS. and the potential problems of coordination and dilution of focus in analyses and planning. · Broad local participation in regular monitor- Development of a stand-alone ADS is often a ing, and understanding of the likely impact useful and preferred option. on those who will benefit and those who 13 will lose. AGRICULTURAL STRATEGY AS PROCESS . The process of forging an ADS shapes its design and chances of COUNTRY LEADERSHIP . The country must take the being implemented, and its likely development lead in analysis and strategy formulation, but impact. Hallmarks of a successful process are: can benefit from donor support, especially through sharing relevant experience from other · Strong political and administrative leader- countries and regions. ship at central and local levels. TIME FRAME AND MACRO CONTEXT . Agricultural · A strategic document identifying desired development is a long-term process, involving outcomes of decentralized agricultural institutional change, market development, and development programs, specifying time- technological adaptation. The time horizon for tables, budgets, and responsibilities. an ADS should be about 5-10 years, with an expectation that it be revised and updated · Consensus building and ownership of a approximately every five years. Elections and vision of agricultural development by changes in government are important factors policymakers, sector stakeholders, and the affecting timing for strategy preparation. As development community. changes are not always predictable, preparation MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY produce a single strategy with support across a Box 1.10 Key snapshot data range of ministries. Profile of the agricultural population · Number of farmers by farm size, land use and tenure status. LESSONS LEARNED · Agricultural laborers and wages. DEVELOP BASELINE INFORMATION. A snapshot of the · Agribusinesses by size, type, and profitability. current status of agriculture is critical at the Public sector investment programs onset of the process, and this should include · Density and state of rural roads, public markets, agricultural details and data such as that listed in box 1.10. extension services. · Adult literacy rate: overall, male, and female. IDENTIFY KEY CONSTRAINTS AND OPPORTUNITIES . Con- · Share of agricultural value invested in research. straints are factors that impede improved sector Agricultural production systems performance. Opportunities are strengths that · Major agroclimatic zones and soil types (map). can be built upon to improve sector perfor- · Irrigated (surface and ground, large-scale and small- and- mance. These relate to policies, institutions, medium) and rainfed (map). · Farmers' organizations, NGOs in the sector. governance, public investment programs, and · Agriculture's share of GDP, employment, import and the sociopolitical environment (see box 1.11). export. · Major markets (domestic and foreign). DEVELOP ACTIONS TO OVERCOME CONSTRAINTS AND TAP · Indicators of productivity and comparative advantage. OPPORTUNITIES. This section of the ADS will usually · Details of sectoral protection and taxation. contain recommended actions in policy reform, The natural resource base institution building, decentralization, and invest- · Management systems of natural resource base. ment in infrastructure and human capital. · Trends in resource base change. Proposed actions should be based on worldwide · Frequency of natural calamities. experience of both success and failure. Source:World Bank Internal Documents IMPLEMENTATION AND MONITORING . Implementation of strategies should seek commitments across requires translating broad strategic directions the political spectrum. Since macroeconomic into institution-, budget-, and region-specific crises often accompany adjustment lending, action plans, focusing on the issues raised in an practitioners should be made aware of the ADS, mobilizing the financing for projects and need and rationale to focus on high-quality programs, building institutions, and 14 fiscal adjustment measures in agricultural mainstreaming agricultural development in spending in order to protect agricultural national plans. Monitoring development impact growth. Monitoring the effects of exchange is an integral component of an ADS, as it rates adjustments on agricultural terms of trade enables built-in flexible and effective response can lead to useful identification of policy in the course of implementation. problems and corresponding recommendations. MULTIPLE MINISTRIES . Many issues within a broad RECOMMENDATIONS FOR PRACTITIONERS concept of "agriculture" (for example, irriga- Recommendations for practitioners involved in tion, livestock, food, trade, input supply, agro- investments (see box 1.12) related to preparing industry, and agricultural education) are the agricultural strategies include: responsibilities of different ministries. It is critical that inter-sectoral linkages and interac- · Develop a vision for agriculture shared by tions (for example, macroeconomic policy and as many stakeholders as possible, with agricultural trade policy) are appropriately input from farmers themselves expressed accommodated. Strong participatory leadership through farmer and community organiza- skills and good coordination are necessary to tions, local government, NGOs, and AGRICULTURE INVESTMENT SOURCEBOOK others. Such a vision expresses what a Box 1.11 Illustrative data reflecting constraints and opportunities strategy is designed to achieve, without reverting to overly specific centralized Policy planning targets of the past. The vision · Nominal/effective protection coefficients and resource- should be specific enough to guide public cost estimates for selected agricultural commodities. policies and programs and allow monitor- · Subsidies on agricultural resources and inputs. ing by tracking defined indicators to · Food security and welfare policy. assess progress. Institutional · Price variability and postharvest losses for selected · Draw from global experiences, but recog- commodities. nize the context-specific characteristics that · Methods available for managing price risks. · Land tenure and ownership structure. will shape the relevance of this experience · Legal and regulatory environment (for example, contract to the local setting. Having strong and enforcement). committed "champions," both in national · Technology generation and transfer systems. governments and in key donor and civil- Governance society organizations, is critical to reaching · Degree of fiscal decentralization. early strategic agreement and focus. · Percentage of marketed inputs/outputs managed by public organizations. · Seek support at all levels as a national ADS Public investment programs involves multisectoral issues, and engagement · Investment in basic rural infrastructure. with a range of stakeholders concerned with · Investment in agricultural research and extension. agricultural development. Sociopolitical (in qualitative terms where applicable) · Constraints on specific groups. · In countries engaged in PRSP-like pro- · Hidden costs of doing business. cesses, link into the PRSP dialogue with Source:World Bank Internal Documents. government, private sector, and civil society representatives at national and local levels so that there is broad consultation at all Box 1.12 Potential investments stages of formulating strategy. · Technical assistance for review of past experience and · Examine the current status of agriculture to analysis of the current situation. establish the facts about rural poverty and · Systems for gathering, processing, and storing data and 15 the systems of production within which the information for ADS development. poor operate. Identify key constraints that · Technical assistance for developing approaches to ADS development that encourages and enables all stakeholders impede improved performance and oppor- to participate. tunities on which to build and prioritize Source: Authors. among actions for implementing the ADS. · Exploit available models of the economy and the agricultural sector, or contemplate undertaking new modeling to better under- around for decades, their guidance and stand key intersectoral linkages, and to insight are very relevant to the formulation more realistically model growth paths of a sound ADS (Tolley, Thomas, and Wong implicit in the vision being addressed. The 1982; Timmer, Falcon, and Pearson 1983; range of possible analytic models includes Tsakok 1990; Belli et al. 2001). computable general equilibrium models, social accounting matrices, simplified · Develop effective mechanisms for monitor- growth models, and multi-market models). ing the ADS implementation and develop- While some of these resources have been ment impact. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY SELECTED READINGS This Note was prepared by Jock Anderson, Sam Kane, and Asterisk (*) at the end of a reference indicates Gary Alex, based on "Reaching the Rural Poor; Annex 5 ­ that it is available on the Web. See Appendix 1 Guidelines for the Preparation of National Rural Develop- ment Strategies,"World Bank, 2003. for a full list of Websites. Timmer, C. P., W. P. Falcon, and S. R. Pearson. 1983. Food policy Analysis. Baltimore: Johns Hopkins University Press.* Tolley, G. S., V. Thomas, and C. M. Wong. 1982. Agricultural Price Policies and the Developing Countries. Baltimore: Johns Hopkins University Press. Tsakok, I. 1990. Agricultural Price Policy: A Practitioner's Guide to Partial-Equilibrium Analysis. Ithaca, N.Y.: Cornell University Press. REFERENCES CITED Belli, P., J. R. Anderson, H. N. Barnum, J. A. Dixon, and J.-P. Tan. 2001. Economic Analysis of Investment Operations: Analyti- cal Tools and Practical Applications. Wash- ington, D.C.: World Bank. Gittinger, J P. 1982. Economic Analysis of Agricultural Projects. 2nd ed. Baltimore: Johns Hopkins University Press. Government of the Republic of Uganda. 2000. 16 Plan for Modernisation of Agriculture: Eradicating Poverty in Uganda. MAAIF and MFPED: Entebbe, Kampala. Timmer, C. P., W. P. Falcon, and S. R. Pearson. 1983. Food policy Analysis. Baltimore: Johns Hopkins University Press. Tolley, G. S., V. Thomas, and C. M. Wong. 1982. Agricultural Price Policies and the Developing Countries. Baltimore: Johns Hopkins University Press. Tsakok, I. 1990. Agricultural Price Policy: A Practitioner's Guide to Partial-Equilibrium Analysis. Ithaca, N.Y.: Cornell University Press. AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE · The need for effective capacity for policy formulation is becoming greater, as global trends increase challenges to the agricultural DEVELOPING CAPACITY FOR sector, and more participants (public sector, AGRICULTURAL SECTOR private sector, and civil society) are involved POLICY FORMULATION in developing this capacity. Government policies and investment strategies PUBLIC POLICY FORMULATION AND PLANNING provide a critical base for agricultural sector Capacity for policy formulation can refer to development, and all governments need a individuals, organizations, or the country as a capacity for such policy formulation. However, whole. For investment purposes, the main focus many developing countries lack the people and is likely to be capacity of organizations in the institutions needed for effective agricultural public sector (for example, policy units, public policy formulation. New efforts to build local research organizations), private sector (universi- capacity to promote agricultural development ties, trade and farmer associations, consulting must take a broader view of the policy formu- firms), and civil society NGOs, institutes). lation process. It should involve different Capacity of an organization refers to its ability to stakeholders from the public and private successfully apply its skills and resources to the sectors and civil society in collaborative rela- accomplishment of its goals. Capacity develop- tionships, partnerships, and networks to guide ment is a process of improving an organization's public policy and investment decisions in the performance by increasing its potential in terms agricultural sector. of its resources (human resources skills, infra- structure, finance, technology) and management Addressing objectives of rural poverty reduc- (program and process management, strategic tion, environmental conservation, food insecu- leadership, and networking and linkages). rity, and economic growth requires a support- Capacity for agricultural policy includes capacity ing policy environment built on sound analysis, for policy analysis, policy formulation, and research, and formulation and dissemination of policy dissemination. agricultural policies. Many developing countries lack people and institutions able to provide this The balance of resources (infrastructure, techni- environment. Past capacity development efforts cal, financial) and technical and managerial focused on investment in university-level skills needed for policy formulation should be 17 education and short-term training of policy guided by external factors (political, social, units. New approaches advocate collaborative legal, cultural context) and internal features projects, partnerships, and networking to (organization culture, incentives, and manage- address the current situation, which is charac- ment style) of the relevant organization. While terized as follows: most projects focus on the capacity of govern- ment agencies, the private sector (including · Institutional capacity to conduct sound producer organizations) and civil society need agricultural policy analysis, formulation, capacity to participate in policy debates (capac- and dissemination is weak, and even when ity for policy communication, public aware- individual capacity exists in the country, ness, and negotiating skills). there is a dearth of effective mechanisms to use existing capacity. BENEFITS · Investments in capacity have not always Improved policy research can reduce wasteful been successful, especially in improving allocation of resources, increase incomes of institutional capacity. farmers and enterprises, better target the disadvantaged, improve farmers access to MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY services and infrastructure, accelerate policy concepts of capacity (involving mainly analyti- reforms, and improve the success of policy cal skills and the public sector) have often been reforms (see box 1.13). Further, the improved used. Fourth, the use of long-term technical communication among stakeholders associ- assistance can in some cases actually weaken ated with increased capacity improves nego- capacity development efforts. Finally, lack of tiation and helps enhance transparency and sustainability might be the result of linking ownership of adopted policies, resulting in capacity development to policy reforms. more likelihood of success in implementation. PARTICIPATION. Project design and evaluation needs to take into account the participants involved in POLICY AND IMPLEMENTATION ISSUES capacity development, and the type of policy SUSTAINABILITY. Various factors explain the lack of analysis, formulation, and dissemination they are sustainability of past investments in capacity pursuing. The identification of what capacity development. First, the long-term nature of needs to be developed, for whom, and how, capacity development requires a multi-year requires the participation of different stakeholders commitment of funds that can be rarely ex- (especially the poor, women, and disadvantaged pected from any single donor. Second, incentive groups). Participatory methods for improved and management problems are often a result of communication and building consensus are the lack of public sector reforms related to critical to improve policy formulation capacity. A salaries, performance incentives, hiring and demand-driven approach is most likely to identify firing practices, and accountability processes in the real capacity needs, and enhance the owner- the public service. Where fundamental public ship and sustainability of the project and pro- administration reforms are required, objectives cesses (see box 1.14). of capacity development projects should be revised and made more realistic. Third, narrow INSTITUTIONAL CONSIDERATIONS. An important issue is the flexibility the public sector has to use existing country capacity in the private sector, Box 1.13 Bangladesh: collaborative research and capacity NGOs, and civil society. Contracting out of strengthening certain functions (for example, agricultural policy research) to the private sector builds on Capacity strengthening in food policy analysis was one of the existing nation-wide capacity. The use of four main components of the Bangladesh Food Policy Project competitive or matching grants can be an 18 funded by United States Agency for International Development effective way of harnessing existing capacity in (USAID) and implemented by International Food Policy Research Institute (IFPRI) in collaboration with the Ministry of other organizations. Coexisting capacity devel- Food between 1989 and 1994.The policy analysis during the opment activities in the country should be project estimated the inefficiency and costs of the food- coordinated such that efforts are not duplicated. targeted programs and enabled the government to abolish the When policy formulation for the agricultural food rationing system, reinforce its Food for Work and sector depends on the inputs of several line Vulnerable Group Feeding Programs, and introduce the new agencies outside of the agricultural ministry, Food for Education program. Estimates of the internal rate of there may be issues as to where capacity return for food policy research investments ranged from 110 to development should be located to be most 260 percent. Other impacts included a saving of about US$60 million per year from abolishing ineffective targeted programs, effective. In general, sound policy formulation and increased school attendance of poor children by 27 relies on transparent debate and circulation of percent for boys and 31 percent for girls. Studies were ideas, and policy units that have an appropriate completed in a collaborative fashion with local organizations. level of autonomy from the central government. The project strengthened the technical and analytical capabili- ties of local institutions, and showed that capacity-strengthening ENVIRONMENTAL CONSIDERATIONS. Environmental activities, strategically tied to information sharing, increases the issues are increasingly important in the design of acceptance and adoption of research results. agricultural programs and policies. Both public Source: Babu 1999. AGRICULTURE INVESTMENT SOURCEBOOK Box 1.14 Ukraine: ownership in capacity building--the Ukraine Agricultural Policy Analysis Unit In 1998, the World Bank and other donors began supporting the Ukraine Agricultural Policy Analysis Unit (APAU, whose primary role is to advise the Cabinet of Ministers on major issues of reform in agriculture. Collaboration between foreign technical assistance and highly qualified local experts has built strong local capacity for policy analysis. As the APAU arrangement is not under Ministry control, it can provide relatively unbiased recommendations.The unit has developed a reputation through- out the government as a consistent source of high-quality policy advice. Because of this reputation, the APAU has been able to position itself to strongly influence the reshaping of the agenda of Ukrainian agricultural policy, by improving current policy outputs, facilitating policy coordination, and proposing more market- oriented approaches to current problems. Among the primary functions of the APAU has been provision of technical comments to draft agriculture-related laws as they are being developed.The unit has also published many papers, presenting original analyses of various sector issues, and has delivered, a wide variety of training activities. Currently, donors fund the professional staff and other expenses. It remains to be seen to what extent the unit capacity will be sustainable once foreign assistance is withdrawn. Source:World Bank Internal Documents. and private sector capacity is needed to address technical and process assistance. An exclusively issues such as environmental impact analysis, technical approach is not appropriate when trade and environment linkages, biodiversity, policy formulation is concerned, because of the and genetically modified organisms. need to involve different stakeholders who may not have technical backgrounds. Even for those who do, the process of analyzing, formulating, LESSONS LEARNED and disseminating policy is as important as CONTEXT, CONTENT AND TIME DIMENSIONS , . Capacity technical skills. A combination of methods and development for policy formulation depends approaches to improve both technical and on the context in which the capacity is devel- managerial skills is necessary for effective oped, the content of the capacity being devel- capacity development. oped, and the time horizon in which the process takes place. Confusion among these COLLABORATIVE ARRANGEMENTS AND COMMUNICATION . might lead to the wrong choice of capacity Methods of promoting collaboration and development activities. Context can relate to communication include hands-on research, policy reform (for example, agricultural input coauthorship of reports and presentations, joint 19 market liberalization), structural change (move- design and implementation of field work, and ment from central planning to market orienta- joint planning of workshops and training tion), strategy formulation (10-year strategy for activities (see box 1.15). Outsourcing of analyti- agricultural research), or evaluation of past cal tasks and dissemination activities can policies (policy review and impact analysis) promote collaboration between the public and and will determine the skills and amount of private sectors. Policy research in particular time needed. Similarly, emphasis will differ should be conducted by academic institutions with regard to analysis, coordination, dissemi- and private consulting firms--the capacity of nation and awareness, negotiation, policy which must be built in most cases. evaluation, and network management, depend- ing on the specific context. Choices made as to MONITORING AND EVALUATION . Monitoring and the time horizon (short to long) of the capacity evaluation (M&E) of capacity development development effort will depend on resources should clarify "what capacity" is to be moni- available and desired outputs. tored and how this is to be measured. Also, the purpose of M&E and how results will be used TECHNICAL AND PROCESS ASSISTANCE . Capacity devel- should be clear--if M&E is regarded mainly as opment projects should use a combination of a surveillance system rather than as a learning MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY Box 1.15 Viet Nam: collaboration for increased agricultural policy analysis capacity Since the late 1980s,Viet Nam has been developing capacity in policy formulation appropriate to the market system. Capacity building approaches in the agricultural sector have included short- and long-term training courses in-country and abroad, curricula development in the university, strategy formulation, policy analysis training, adoption of new research programs, and restructuring of the Ministry of Agricultural and Rural Development.These have been supported by different donors and have involved collaborative arrangements with various universities and research centers under the umbrella of the Consultative Group on International Agricultural Research (CGIAR). One of the most successful outcomes has been the renewal of the Information Center for Agriculture and Rural Development located in the ministry. The center includes some of the best agricultural policy analysts inViet Nam, is responsive to the policy formulation needs of decisionmakers, and has established a network including research organizations, universities, international agricultural research centers, and local experts. Source: Authors. tool for improvement, it is likely that the · Undertake extensive consultations with overall process of M&E will fail. The methods, stakeholders in the government, private baselines, and indicators used for M&E should sector, academia, and civil society to develop be clearly defined and agreed before starting a sense of what is needed and by whom, the process, and agreement should be reached what is available, who will support invest- as to who will conduct the M&E. This will ments, and how these will be monitored. minimize conflicts of interest and improve the reliability of information obtained. · Promote participation and ownership through national workshops, close association with project designers, follow-up meetings, and RECOMMENDATIONS FOR PRACTITIONERS sharing the initial project documents. Capacity building investments should (see box 1.16): · Ensure that investment initiatives have built- in flexibility that allows periodic planning. · Understand the context of the capacity development initiative as this will largely · Involve a consortium of consulting service determine the appropriate project content providers, as no single consulting service 20 and time frame. provider is likely to be able to meet all the requirements for capacity building. · Provide for contracting-out of research Box 1.16 Potential investments activities and competitive grants during project implementation. · Regional and in-country policy networks. · Partnerships among stakeholders in the private and public · Ensure that sufficient management oversight sectors, and civil society. is provided for policy-related investments · Participatory stakeholders workshop. and that adequate resources are available for · Collaborative research with international and local organizations. donor and agency coordination. · Competitive grants to conduct policy research and policy awareness. · Explore possibility of cofinancing both · Training and workshops for enhancing managerial capacity within the same time period and over time, at policy units, policy research organizations, and policy so as to improve long-term support to centers. capacity development. Source: Authors. AGRICULTURE INVESTMENT SOURCEBOOK SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. Capacity.org. 2003. "Evaluating Capacity Devel- opment." Capacity.org newsletter, no. 17 (April). http://www.capacitry.org. ECDPM. 1998. Approaches and Methods for National Capacity Building: Report of a Workshop. Maastricht: European Center for Development Policy Management.* IFPRI. 2000. "Best Practices: Strengthening Policy Research Capacity around the World." IFPRI, Washington, D.C.* Rice, E. 1999. "Capacity Building in the Agricul- tural Sector in Africa." Operations Evalua- tion Department Report Precis 180. World Bank, Washington, D.C.* World Bank. 2001. "Public Expenditure Man- agement and Accountability: Evolution and Current Status of World Bank Work." World Bank, Washington, D.C. REFERENCES CITED Babu, S. 2000. "Impact of IFPRI's Policy Re- search on Resource Allocation and Food 21 Security in Bangladesh." Impact Assessment Discussion Paper 13. International Food Policy Research Institute, Washington, D.C. This note was prepared by Francesco Goletti (ACI) with inputs from Derek Byerlee and Gary Alex. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY AGRICULTURAL INVESTMENT NOTE and can have major negative implications for producers, consumers, and the environment, both domestically and abroad. Agricultural support REFORM OF AGRICULTURE policies, especially in Organization for Economic SUBSIDY AND PROTECTION Cooperation and Development (OECD) countries, POLICY lower the world price of many commodities and increase world price variability, both of which are Past programs for providing support to farmers damaging to developing countries. Counter-cyclical (for example, input subsidies, guaranteed prices, policies in rich countries tend to increase resource border protection) have been market distorting transfers to farmers when world commodity prices and highly inefficient. Such policies are typically decline, leaving producers in developing countries costly to consumers, detrimental to the environ- to bear the brunt of fluctuations. ment, and regressive in terms of domestic income distribution. Impacts on world markets Protection for agricultural producers has re- have significant consequences for developing mained very high, especially in the large OECD countries where agriculture is of major economic economies (see box 1.17). This support has importance. Key elements for policy reform in closed markets that would otherwise have been this area include: reducing input subsidies, available to developing country producers, and decoupling support from production, converting led to surpluses that have been exported existing tariffs to ad valorem forms, reducing the (sometimes using export subsidies) onto world overall level of support/protection, and restruc- markets, depressing world prices. Average turing of the classification and commitment levels of border protection (tariffs and nontariff system governed by the WTO. barriers) are also high in developing countries, where governments have intervened heavily in Support to agricultural producers can be provided commodity and input markets, through through (1) border measures such as import tariffs parastatals and marketing boards, and with and restrictions that raise domestic prices (thus price supports and input subsidies. financed by consumers), (2) export subsidies (generally taxpayer funded), and (3) subsidies to farmers (on both agricultural inputs and output) BENEFITS that are also financed by taxpayers. While these The benefits to a country from reform of its policies are generally intended to support eco- support policy (irrespective of reform in other 22 nomic development objectives, the impacts of countries) are substantial and include: a freeing support policies extend across international borders of public resources for other uses; greater overall economic efficiency; and the transition to more dynamic and innovative farming systems Box 1.17 OECD Producer Support that can adapt more easily to changing market signals. Further, reform at the global level will Average producer support equivalents over 2000-02 equated to US$47 billion (United States), US$92 billion (European result in even greater benefits--the estimated Union), and US$48 billion (Japan) (total support being consider- annual gain to developing countries from ably higher).These producer supports also vary greatly among liberalization of agriculture and food by high- commodities: rice 81 percent, sugar 45 percent, wheat 36 income countries is more than US$30 billion and percent, beef and veal 36 percent, and poultry 16 percent. On an estimated US$114 billion from developing average, prices received by OECD farmers were 31 percent countries' own liberalization of agriculture and above world prices and almost one-third of total farm receipts food trade policy (World Bank 2002). originated from government programs. Of this support, 69 percent is administered via price support and output payments; the most distorting mechanisms. However, there may be losers in the overall reform process and the effects will differ across Source: OECD 2002. countries. Countries that are net importers of AGRICULTURE INVESTMENT SOURCEBOOK agricultural products--and consumers in all efficient private sector supply of inputs at countries that do not liberalize--will lose as prices that enable producers to compete in prices rise. These losses will be tempered to global markets. Sound economic analysis must the extent that agricultural production and underlie decisions to continue any input exports of some products expand, and price support policy. volatility declines. Also, some producers will face increased production costs as input subsi- POLITICAL NATURE OF SUPPORT AND BURDEN ON TAXPAY - dies are removed. However, overall, unilateral ERS. Agricultural support poses huge out-of- liberalization will usually result in significant pocket costs to taxpayers and consumers. net benefits to the country, with important During 2000-02, the average annual total sup- poverty reduction potential, despite some port to agriculture in OECD countries reached groups being made worse off in the short run. US$315 billion. Of that, the EU provided US$113 billion, the United States US$95 billion, and Japan US$65 billion. In India, input subsi- KEY POLICY AND IMPLEMENTATION ISSUES dies alone averaged about 9 percent of agricul- TAX ON DEVELOPMENT . The collective impact of ture GDP during the 1990s (Gulati and policies of those countries providing large Narayanan 2003). Although fiscal transfers are support to domestic producers, has significant lower in developing countries (due in part to an impacts for those countries that do not provide inability of the public sector to finance these), comparable support (whether by choice or protection levels in the form of trade barriers otherwise). Industrial country agricultural (which require less financing) are common. protection blocks growers in developing Such trade barriers often place a major burden countries from diversifying out of traditional on poor consumers, especially where such crops as a way of increasing value and reduc- protection is directed at traditional food crops. ing vulnerability to price fluctuations. The Although it is often evident that resources used escalating tariff structure in industrial coun- for support and protection would be better tries--with higher tariffs for processed than for allocated elsewhere, there is strong political primary goods--magnifies the protection of pressure to maintain support to primary produc- domestic processing industries above the ers. This is in part because the (greater) benefits nominal tariff rate. In the European Union (EU) of liberalization are more diffuse than the and Japan, fully processed manufactured food concentrated benefits of protection, so the products face tariffs twice as large as products incentives for the beneficiaries to lobby for 23 in the first stage of processing. These policies liberalization are correspondingly less. amount to a tax on development. LOW TRANSFER EFFICIENCY . In terms of income INPUT SUBSIDIES. Governments frequently provide transfer efficiency (the percentage of consumer support to farmers through subsidized inputs-- and taxpayer transfers that farmers actually water, power, credit, fertilizer, seed, and chemi- receive), no support policy linked to agricul- cals--that distort production incentives and tural activity is efficient. On average, only 25 impose net costs to taxpayers and consumers. percent of producer support actually finds its WTO rules allow the continuation of some way into the producer's pocket. Only 25 per- production subsidies that are non or "mini- cent of production subsidies and 20 percent of mally" trade distorting, such as for general input subsidies benefit farmers (OECD 2002). government services (research, disease control, infrastructure), structural adjustment assistance, INEQUITABLE DISTRIBUTION OF BENEFITS. Large farmers and regional assistance programs. In general, and landowners get a much larger proportion domestic support should be redirected to the of benefits than small-scale farmers. In Europe areas where greater public good elements lie-- the largest 4 percent of farmers receive 21 infrastructure and institutions that enable percent of support and have per-capita in- MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY comes that are more than double the average LESSONS LEARNED EU wage (Podbury 2000). In the US, the RESPONDING TO PROTECTIONISM IN THE NORTH. The largest 5 percent receive over 20 percent of continued high subsidies to farmers in many government payments. Similar trends exist in industrial countries makes agricultural trade developing countries. This is largely because reform in developing countries much more when support is given through either an difficult, as reducing their import barriers ap- artificially high price (for example, from pears to be "unilateral disarmament." The ques- import restrictions, export subsidies, or direct tion of whether this kind of reaction is good payments per ton of production) or through development policy is a complex issue. Contin- input subsidies, the biggest beneficiaries are ued protectionism in a developing country the biggest producers, who are also the represents a tax on their consumers, and in the biggest users of inputs. case of many food products, this falls dispropor- tionately on the poor. However, if it is likely that ADVERSE ENVIRONMENTAL IMPACTS. Agricultural industrial country subsidies on a product will be subsidies and protection can lead to excessive reduced or eliminated in the near term, with a use of chemicals and fertilizers that can harm consequent rise in its world price, temporary the environment. The high price paid to rice protection for domestic producers may be farmers in Japan, for example, encouraged justified. Given the slowness in global trade overuse of insecticides to protect crops. In negotiations, in most cases it is economically 1993, although Japan produced only 3 percent prudent for countries to adopt policies (and of the world's rice, their share of global expen- producers to allocate resources) that accept diture on rice insecticides was 34 percent. prevailing international prices, distorted though Reducing distortions forces farmers to base they may be. It must be recognized, however, input and output decisions on real economic that this may be politically difficult and require costs, thus promoting sound farming practices considerable policy dialogue among a range of and sustainable natural resource management. stakeholders. In any case, policies of the indus- trial countries cannot be used to rationalize INTERNATIONAL AGREEMENTS . New multilateral trade developing country tariffs higher than the per- negotiations were launched at the Fourth WTO centage by which these policies depress world Ministerial Conference held in Doha in 2002, prices, which (about 5 ­ 20 percent for most with the objective of significantly reducing all products). Decoupled income support programs types of barriers to agricultural trade including: (payments that are not linked to product prices, 24 barriers to market access, export subsidies, and input use, or outputs) can be important for trade-distorting domestic support. Developing making the process of tariff reduction more country policy reforms will take place within palatable for producers. this context, but will continue to be influenced by unilateral political realities (see box 1.18). BRING AGRICULTURAL PRODUCTS INTO THE GENERAL FRAMEWORK OF AD VALOREM TARIFFS . Reducing tariff Domestic agricultural support is classified in peaks on products important to developing the WTO Uruguay Round Agreement on countries is critical. Although developed coun- Agriculture (URAA) using a system of "boxes" tries boast average ad valorem tariffs of less that rank programs according to their effect on than 5 percent on manufactured goods, they trade (see box 1.19). Policies deemed as trade still have very high tariffs on many agriculture distorting are put in the "amber box" which products. Specific tariffs--a tax expressed per consists of direct subsidies and price support unit of quantity--are nontransparent, because reflected in the gap between a fixed world their impact on relative prices changes fre- reference price and domestic support prices. quently and unpredictably, as world prices For industrial (developing) countries, amber change. They also tax lower-value products box support was subject to a 20 (13) percent relatively more, thereby creating a systematic reduction by 2000 (2004). bias against developing country products. AGRICULTURE INVESTMENT SOURCEBOOK Tariff quotas (application of one level of tariff Box 1.18 What happened at Cancun? to imports within a certain quota, and a higher level of tariff to imports over that volume) The Cancun World Trade Organization (WTO) Ministerial result in a system whereby imports within the Meeting in September 2003 was originally planned to be a mid- quota are very profitable, generating a wasteful term review of progress in the Doha Round negotiations. use of resources geared toward obtaining Instead, because so little progress had been made in key areas, import quotas. Both specific tariffs and tariff it became an attempt to break the impasse. Ultimately, it failed quotas should be converted into ad valorem to do so.The proximate cause of the failure was disagreement over whether to include in the Doha agenda the "Singapore tariffs--that is, tariffs calculated on some Issues" of investment, competition policy, transparency in percentage of the border prices. Tariff escala- government procurement, and trade facilitation. But there is a tion also needs to be significantly reduced or widespread feeling that a compromise could have been eliminated by bringing down higher tariffs on reached in this area had not the atmosphere been poisoned by processed products (Hewitt 2003). the stalemate in agriculture.The EU and US made a joint offer, but developing countries considered it too little, too late, and UNDERTAKE with too many loopholes that would allow the rich countries to STRONG COMMITMENTS TO REDUCE TRADE - avoid serious reform. For their part, the developing countries DISTORTING DOMESTIC SUPPORT . Effective reform of were not very forthcoming; they made many demands, but few support policies across industrial and developing offers.What is now needed to put the negotiations back on countries will require changes to current meth- track is a grand bargain in which both developed and develop- ods of measurement and classification of sup- ing countries play their part. port as well as strong commitments to reduc- tions, and would be aided by changes to current Source: Authors. methods of measurement and classification of support. Many stakeholders (including donors, governments, and the private sector including trade associations and producer groups) have a role in the policy analysis, advocacy, and nego- tiations processes related to this. Key investment Box 1.19 Domestic support in agriculture: the WorldTrade areas for the public sector are outlined in box Organization's colored boxes 1.20. Potential changes that developing coun- AMBER BOX--includes all domestic support measures consid- tries, supported by donors, might advocate ered to distort production and trade, except those in the blue relate to both industrial countries and the and green boxes.These include measures to support prices, or developing countries themselves and include: subsidies directly related to production. Members are required 25 to reduce that support unless current levels are already low (5 · Commitment to reduce support on a policy percent of agricultural production for industrial countries, 10 type and commodity sector basis, rather percent for developing countries). than based on a single aggregate measure- BLUE BOX--is the Amber Box with conditions that reduce ment of support. distortion.Any support that would normally be in the Amber Box is placed in the Blue Box if the support also requires · Further reduction of amber box subsidies (for farmers to limit production.At present there are no limits on example. to a maximum of 5 percent of the spending on Blue Box subsidies. value of production at world prices), with a GREEN BOX--are subsidies that do not distort trade or at most commitment to extend that ceiling to each cause minimal distortion, such as research and extension individual commodity sector in the future. services.These are government funded and do not involve price support, but include direct income support for farmers, · Tighter criteria for policies included in the which is "decoupled" from current production levels or prices. green box, with a cap on these at 5 percent They also include environmental protection and regional development programs.There are no limits on Green Box of the total value of agricultural production, subsidies. as measured at world prices, or current levels of expenditures on the measures included in Source:WTO. the redefined green box, whichever is lower. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY Hewitt, A. 2003. "The Reform of Agricultural Box 1.20 Potential investments Policies in OECD Countries: A Developing · Analytical studies to identify the instances where subsi- Country Perspective." World Bank, Wash- dized inputs or price support might be appropriate. ington, D.C. Processed. · Support for the transition away from protection to market-led production systems. OECD 2002. "Agricultural Policies in OECD · Training for policy makers and representatives in interna- Countries: Monitoring and Evaluation 2002." tional trade regimes and negotiations. OECD, Paris. Source: Authors. Podbury, T. 2000. "US and EU Agricultural SELECTED READINGS Support: Who Does it Benefit?" ABARE Asterisk (*) at the end of a reference indicates Current Issues. (October): 1-5. that it is available on the Web. See Appendix 1 for a full list of Websites. World Bank. 2002. Global Economic Prospects and the Developing Countries 2002. Wash- Barry, P. J. 1999. "Risk Management and Safety ington D.C.: World Bank. Nets for Farmers." Choices 14 (3): 1. WTO. Domestic Support in Agriculture: The Ingco, M., and D. Nash, eds. In Press. Agricul- Boxes. http://www.wto.org/english/ ture and the WTO: Creating a Trading tratop_e/agric_e/agboxes_e.htm. System for Development. Conference Edi- tion. Washington, D.C.: World Bank. This note was prepared by Sam Kane and John Nash with inputs from Derek Byerlee and Gary Alex. World Bank. 2003. "Agricultural Policies and Trade." In Global Economic Prospects: Realiz- ing the Development Promise of the Doha Agenda. Washington, D.C.: World Bank.* World Bank. 2003. Market Access: Agricultural Policy Reform and Developing Countries. Trade Note 6. International Trade Depart- 26 ment. World Bank. Available at www.worldbank.org/trade. World Bank. 2003. "Export Subsidies: Agricul- tural Policy Reform and Developing Coun- tries". World Bank. Available at www.worldbank.org/trade. World Bank. 2003. "Domestic Support for Agriculture: Agricultural Policy Reform and Developing Countries" World Bank. Avail- able at www.worldbank.org/trade. REFERENCES CITED Gulati, A., and S. Narayanan. 2003. The Subsidy Syndrome in Indian Agriculture. New Delhi: Oxford University Press. AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE by focused transitional policies and appropriate investments for adjustment. Deregulation in isolation of complementary policy and invest- FACILITATING EFFICIENT ment initiatives may leave gaps that the private ADJUSTMENTTO LIBERALIZED sector is unwilling to fill, and may further TRADE marginalize the poor from participation in markets. These challenges provide a rationale Trade liberalization has potential to yield for public-sector intervention to assist with the considerable benefits to the poor in developing transition and adjustment process. The means countries, but often requires adjustments that by which this adjustment can be facilitated are are difficult or painful to execute effectively. many and include transitional income support Making the transition away from inefficient payments, formal market-based mechanisms to protected domestic industries to commercially manage risks, and general industry assistance oriented production based on global market for adjusting from one production system to forces presents several challenges, both eco- another. Many of these issues are addressed nomic and political. These include improving elsewhere in this Sourcebook, and this note competitiveness by overcoming existing policy will focus on those that are more directly biases within agriculture, participating effec- related to trade policy. tively in global negotiations, managing acute price volatility, providing safety nets for the poor that are adversely affected by liberaliza- BENEFITS tion, improving the investment climate to assist Outward-oriented countries tend to consistently emerging profitable industries, and retraining of grow faster than ones that are inward-looking. the workforce. The increase in aggregate welfare of develop- ing countries from global agricultural trade Rapid growth of the world economy has been reform could be some US$142 billion annually. driven in part by the even faster rise in interna- Most of these gains would come from trade tional trade resulting both from technological policy reforms within developing countries developments and concerted efforts toward themselves (about US$114 billion). Developing trade liberalization. Trade liberalization is the countries stand to gain significantly because reduction of trade barriers to allow price their exports face higher barriers, and the signals in world markets to guide the allocation agricultural sector is relatively large. 27 of resources. It involves the deregulation of both domestic and international market envi- Poor consumers stand to benefit the most ronments such that price signals are based through increased availability and variety of primarily on economic forces (demand and food at lower prices. And since poor consum- supply) that foster the development of com- ers spend more of their limited incomes on petitive markets. As a result of trade liberaliza- food, they benefit disproportionately, making tion, the relative price structures for both food market liberalization a very pro-poor agricultural inputs and outputs can change policy. Producers benefit from the emergence substantially, and this, coupled with the decline of profitable new production opportunities that in prices for traditional commodities, can have arise when inappropriate subsidies and barriers major implications for producers. to trade are reduced. Farm incomes can in- crease both from higher prices of traditional While trade liberalization can potentially help products, and from diversification to new the poorest move from extreme poverty, products that become profitable. Further, input liberalization alone will not necessarily contrib- costs can fall and access to new technologies ute to growth or poverty reduction and may in can be improved when input markets are fact make the poor worse off if not supported liberalized. Some producers whose govern- MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY ments heavily subsidize inputs may lose (via sense that they are highly regulated, and eco- increased production costs), at least in the short nomic signals are distorted by direct and indirect run, but stand to benefit in the long run pro- public sector interventions. vided they have an underlying competitive advantage in some products. Exit strategies or TRANSITIONAL ISSUES. The resistance to policy permanent transfers may be necessary for those changes presented by adversely affected groups that do not. in part reflects barriers to their exit from ineffi- cient production systems, as well as barriers to their participation in new opportunities as they POLICY AND IMPLEMENTATION ISSUES emerge. Imperfectly functioning capital and CHANGING ARCHITECTURE OF WORLD TRADE . While labor markets, inadequate public services, poor trade barriers in industrial countries are infrastructure, and research and extension generally low, the remaining barriers are systems that are biased toward traditional concentrated on agricultural products and (protected) production systems, all limit the labor-intensive manufactures in which devel- ability to transform farming systems and im- oping countries have a comparative advan- prove resource liquidity including labor mobil- tage. As agriculture has a larger tradable ity. Poorer farmers may be among the most component than most sectors, the trade adversely affected. Older persons, those who environment and trade policy strongly affect are less educated, and those with human capital the agriculture sector. New multilateral trade specific to farming are particularly affected. The negotiations were launched at the Fourth public sector must promote the development of WTO Ministerial Conference, held in Doha in supporting institutions and infrastructure, and 2001, with the objective of significantly of retraining programs for adjustment. reducing all types of barriers to agricultural trade, including trade-distorting domestic INCREASED PRICE VARIABILITY . Variable levies and support. For developing countries, the capac- quotas, as means of stabilizing the domestic ity to effectively participate in these negotia- price of tradable food commodities shifted tions must be increased so that they are fairly domestic instability of prices to world markets. represented, and their interests and concerns The URAA completed in 1994 had some effect relating to agricultural trade can be presented in reducing the trade-distorting effects of such in global efforts to achieve meaningful policies, and the Doha Round is expected to progress in global trade policy reform. result in much more significant reforms. At the 28 national level, there has been increased trans- POLICY BIASES AGAINST AGRICULTURE . Despite protecting mission of global price movements to domestic domestic producers, developing countries have in producers and consumers, which is further the past typically taxed their agricultural sectors, to complicated by other factors such as exchange some extent directly (for example, by taxes on rate fluctuations, climatic factors and poor exports or controlled food prices), but even more infrastructure. A challenge is to develop effec- so, indirectly, through trade barriers and macro- tive ways for farmers to manage price risks economic policies that overvalued the exchange while at the same time avoiding distorting price rate, and turned the internal terms of trade against signals and production incentives. agriculture. Commodity and input markets have been characterized by heavy government inter- CHANGING PRICE STRUCTURES. The biggest farm level ventions through centralized input procurement implication of trade liberalization and the measures (government parastatals and marketing movement toward competitive markets is boards), input subsidies, quotas, taxes on exports typically the adjustments of relative prices of agricultural commodities, and various regula- (both for agricultural inputs and outputs) that tory rules. These biases all reflect market and result from the removal of commodity-specific trade regimes that are far from "liberal" in the support or protection, either at home or AGRICULTURE INVESTMENT SOURCEBOOK abroad. Existing production systems that have are most likely to be adversely affected through provided often-stable livelihoods for genera- the transition phase. tions can suddenly become unprofitable, but new opportunities open up to producers for PRICE BANDS . Price bands and price floors are redeploying resources used in the now ineffi- tools that have been used to manage price risks cient industries. The key issue for policymakers resulting from moves toward trade liberaliza- is to recognize where and when adjustment is tion. Price floor schemes aim for the elimina- essential, and to provide an environment in tion of the worst-case scenarios associated with which the exit of inefficient farmers and entry several concurrent years of especially low to new market opportunities is enabled. world prices. For specific "sensitive" commodi- ties, a minimum world price or threshold level might be defined, below which a government LESSONS LEARNED would commit itself to intervention in order to There are several means of addressing issues maintain the domestic price received by pro- associated with trade liberalization and with ducers. The threshold price should be based on assisting the transition, such that potential the minimum-average cost of the least-cost international exporter. This leaves unhindered benefits for the poor are fully exploited. Infor- the development of market-based price risk mal measures such as growing a variety of crops management activities that programs of "price with different market and climatic risks can stabilization" have impeded. Similarly, many assist the transition to a commercially oriented countries are interested in price ceilings to agricultural sector. Contract farming and off-farm protect poor consumers from temporary sharp employment are also important. Some of the jumps in prices of food staples. These schemes more formal measures include: direct income should be approached with care, as although support, agricultural insurance, and market- they are based on solid theoretical underpin- based price risk management. These are nings, experience to date has been mixed. touched on here and discussed in greater detail in other chapters of this Sourcebook. WTO SAFEGUARDS . When there is either an abrupt and large inflow of imports, or a sudden INCOME SUPPORT AND SAFETY NETS . By decoupling decline in import prices that threaten a support from prices, direct income support country's import-competing sector, WTO programs can provide for transition from price- safeguards can be applied as a means of distorting subsidies to an efficient and liberal- assisting producers in the adjustment process. 29 ized sector. Payments should be fixed and These measures (see box 1.21) permit the guaranteed (usually per hectare up to a maxi- temporary suspension of WTO obligations. mum), and not influenced by ex-post realiza- tions of market conditions. Features that will COMPLEMENTARY PUBLIC INVESTMENT TO FACILITATE increase the effectiveness of a decoupling TRANSITION TO EFFICIENT SYSTEMS. To encourage scheme include: make the payment program the necessary overall reallocation of re- transitory and for adjustment purposes only; sources that is required to ensure sustainable impose no requirements on input use or on growth from trade and market liberalization, outputs; implement credible and time-consis- establishment of a supportive investment tent policies with no changes in the eligibility environment is critical, as is the means to or payment rules; discontinue all other pro- empower the poor to participate in it. Trade grams linked to price support; and bind pay- reform must often be combined with public ments and time frame into WTO to prevent expenditure reform that encourages produc- reversal or agreements. Public works programs, tivity growth, competitiveness, reduced incentive systems for exit, government distribu- transaction costs, and market development. tion of resources in-kind, cash payments, and Key issues largely relate to overcoming social funds can all be used to help those who supply side constraints and include: MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY · Development of physical infrastructure and Box 1.21 WTO safeguard measures for countries adjusting to industries essential to trade and the transi- liberalization tion to alternative production systems, such · Anti-dumping measures (based on injury to a domestic as transport, communications, financial industry) to counteract the effects of firms using price sector, and business services, particularly discrimination to lower export prices below home through introduction of regulatory policies market prices. that, where feasible, harness competition. · Countervailing duties also based on injury to a domestic Efficient and integrated input and output industry, but apply to the subsidization of the exporting markets will only evolve if ineffective country's government. parastatals are privatized or abolished. As · Emergency temporary safeguards that are immediately applicable without formalities in the event of imports for institutions, supporting industries and threatening serious injury to domestic industries. infrastructure may require various forms of · Other measures include those related to balance of public-private cooperation. payments,"general waivers," and modifications of schedules. Source: Foster and Valdés, in press. · Retraining labor so that displaced workers can develop new skills to productively fill emerging employment opportunities. · Building analytical capacity (in terms of Research and extension systems often need understanding policy reform options and reform to become more market-driven in impacts with respect to substitution effects, order to provide farmers with technologies supply response, exchange rate effects) for relevant to the new production opportuni- agricultural policy development, including ties. Elimination of testing requirements for the removal of the policy biases (that is, by imported and domestically produced inputs reducing explicit and implicit taxes on (seeds, fertilizers, and pesticides) not agriculture and reform of public sector related to environmental or sanitary or marketing arrangements), and developing phytosanitary threats will also ensure that macroeconomic policy that complements farmers can readily access a wider range of trade policy (for example, maintenance of a world-class technologies. stable real exchange rate at a realistic level--avoiding overvaluation). RECOMMENDATIONS FOR PRACTITIONERS Investments associated with facilitating 30 · Upgrading public sector institutions related to markets and trade--including customs, adjustment to trade liberalization (see box quality, grades and labeling standards, 1.22) should: certification agencies, financial supervision agencies, contract enforcement regulations, · Ensure that the interests of the agricultural and property rights laws. sector and consumers as a whole are represented in trade policy negotiations at · Development of private sector institutions global and regional levels. critical for markets--namely risk manage- ment systems (agricultural insurance, · Generally, accept the world price structure methods for price risk management), as a long-term characteristic of the environ- agencies for product certification, trade ment, and ensure that resource allocation associations and other frameworks for decisions are based on this, regardless of private sector organization and group whether the prices are depressed by the action, rural finance systems (including policies of other countries. inventory credit), and mechanisms for supply chain coordination (for example, · Provide support programs as temporary contracting and vertical integration). transitional tools. Industry-specific support AGRICULTURE INVESTMENT SOURCEBOOK should only be used where comparative Box 1.22 Potential investments advantage exists, and reductions in global barriers are highly likely in the near future. · Capacity building and advocacy to promote a fair liberaliza- tion process in international trade negotiations. · Consider using decoupled income payments · Assistance for governments to develop income support as a safety net (for example, support pay- and safety net programs that help groups made worse off ments based on land area rather than pro- by liberalization. duction level) to cushion farmer incomes · Technical assistance in the development of risk manage- ment mechanisms that protect viable industries from from precipitous price declines when other short-term acutely low prices. forms of support are phased out. Ensure that · Investments to develop retraining programs and reform income payments are transitional and do not research and extension systems. become entitlements. · Technical assistance and capacity building to improve the investment climate, key administrative services, and critical · Promote the development of supporting infrastructural needs. industries, institutions, and infrastructure. · Technical assistance to help small-scale farmers in developing countries use market-based risk management instruments. · Develop training programs to enable poor Source: Authors. farmers and agricultural workers to rede- ploy their skills to new industries. Training Trade Policy Reform: Lessons and Implica- should endow workers with skills that are tions. Washington DC.: World Bank.* flexible and so can be adapted to various industries over time. World Bank. 2002. Global Economic Prospects and the Developing Countries 2002. Wash- ington D.C.: World Bank.* SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 REFERENCES CITED for a full list of Websites. Foster and A. Valdés. In Press. "Managing Potential Adverse Inpacts of Agriccultural Baffes, J., and J. Meerman. 1998. "From Prices Trade Liberalization." In M. Ingco and D. to Income: Agricultural Subsidization Nash, eds., Agriculture and the WTO: without Protection?" The World Bank Creating a Trading System for Development. 31 Research Observer 13 (2): 191-211.* Conference Edition. Washington, D.C.: World Bank. Dollar, D., and K. Aart. 2001. "Trade, Growth, and Poverty." Policy Research Working This Note was prepared by Sam Kane and John Nash with Paper 2615. World Bank, Washington D.C.* inputs from Derek Byerlee. Ingco, M., and D. Nash, eds. In Press. Agricul- ture and the WTO: Creating a Trading System for Development. Conference Edi- tion. Washington, D.C.: World Bank. Sadoulet, E., de Janvry, A., and B. Davis. 2001. "Cash Transfer Programs with Income Multi- pliers: PROCAMPO in Mexico." FCND Discussion Paper 99. IFPRI, Washington, D.C. Valdés, A. 1998. "Trade Policy Reform and Agriculture." In J. Nash and W. Takacs, eds., MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY AGRICULTURE INVESTMENT NOTE After focusing on major infrastructure invest- ments in the 1960s and 1970s, attention turned to the "software" side of development ADJUSTMENT LENDING FOR and the provision of services and the policy AGRICULTURE POLICY environment for development. Policies that REFORM distorted private sector investment and activ- ity, especially with regard to the marketing of Adjustment lending for agriculture (lending to products and inputs, were an obvious con- support policy and institutional change for straint to growth during the 1980s. Strategies sustained economic growth) expanded greatly evolved for dealing with these distortions in the late 1980s and 1990s, but included through loans conditional on market-liberaliz- relatively little focus on poverty in project ing policy changes. These loans, variously design and analysis. Some programs have called "structural adjustment loans" (SALs) and tended to overrely on conditionalities and "sectoral adjustment loans" (SECALs), were tranching. Challenges for future investment in devised largely to encourage the government agricultural adjustment programs include im- to retreat from private sector activities and to proving analytical capacity, building govern- facilitate a more open economy. Agricultural ment ownership and support, improving the sector adjustment loans (ASALs) were de- design and application of repayment conditions, signed specifically for the agriculture sector. ensuring that the poor benefit, and improving collaboration with other donors. Within the World Bank, new operational policy guidelines LENDING FOR AGRICULTURAL SECTOR are expected to improve adjustment lending (or ADJUSTMENT "development policy lending") and eliminate Adjustment loans aim to support policy and some of the past restrictions on these programs. institutional changes needed to create an envi- ronment conducive to sustained and equitable growth. Adjustment operations generally aim to: promote competitive market structures (legal and regulatory reform); correct distortions in Box 1.23 Poverty and social impact analysis incentive regimes (taxation and trade reform); Poverty and social impact analysis (PSIA) involves the analysis of establish appropriate monitoring and safeguards (financial sector reform); create an environment 32 the distributional impact of policy reforms on the well-being of different stakeholder groups, with a particular focus on the conducive to private investment (judicial reform, poor and vulnerable. Important elements that PSIA needs to adoption of a modern investment code); encour- address include: age private sector activity (privatization and · Identification of the reforms likely to have the most public-private partnerships); promote good significant impact governance (civil service reform); and mitigate · Identifying stakeholders that influence the adoption and short-term adverse effects of adjustment policies implementation of the policy and which are being (establishment of social protection funds) influenced. (Jayarajah and Branson 1995). Eligibility for an · Understanding transmission channels by which stakehold- adjustment loan requires agreement on policy ers be affected. and institutional reform actions and satisfactory · Assessing institutions. macroeconomic management. Funds are dis- · Gathering data and information. · Analyzing impacts bursed in one or more stages (tranches) into a · Contemplating enhancement and compensation measures special deposit account, with tranches released · Assessing risks when the borrower complies with stipulated · Monitoring and evaluating impacts conditions such as the passage of reform legisla- · Fostering policy debate and feeding back into policy tion, the achievement of certain performance choice. benchmarks, or other evidence of progress Source: Arulpragasam et al. 2003. toward a satisfactory policy framework. AGRICULTURE INVESTMENT SOURCEBOOK Adjustment operations accounted for 17 per- implementation of ASALs and assists borrowers cent of total Bank lending in the 1980s, and in identifying problems in time for mid-course increased to 29 percent of total lending during corrections (though this cannot compensate for the 1990s. This is partly attributable to in- poor design or lack of commitment). Failure to creased lending in the post-Soviet bloc coun- monitor social impacts of adjustment lending in tries, where the need to reduce the role of the sufficient detail has been a deficiency of earlier state in the economy was great. Agricultural operations. In some cases, when supervision adjustment lending has varied widely, ranging ends with release of the final tranche, policy from 5 percent of total agriculture lending in reversals undermine reforms. Even after the 1998 to 48 percent in 2002. final tranche release, progress should continue to be closely monitored, particularly with regard to impacts on the poorer and more BENEFITS vulnerable groups. Successful adjustment lending can lead to a more stable macroeconomic environment, a OVER-RELIANCE ON CONDITIONS AND TRANCHING . As it more transparent incentive system, improved is rarely possible to implement the full array of efficiency of resource allocation, and strength- needed policy changes and institution-building ened institutions and capacity for policy analy- activities at the outset of a reform program, sis, all contributing to accelerated economic conditionalities are typically a necessary part of growth. There can be a positive effect on adjustment lending. For instance, actions poverty through the increased income and relating to upgrading institutions, trade liberal- employment opportunities resulting from ization, and deregulation of licensing systems adjustment, although in the short term there and financial markets, can take several years, may be adverse effects on poverty reduction. so drastic reform may not be possible over Since a sound policy environment is essential relatively short periods. Past adjustment lending to sustainable growth, adjustment lending can however, has tended to over-rely on conditions be an important development tool to facilitate and tranching. An even distribution of the policy and institutional reform and implementa- priority conditionalities, and making the first tion. However, if not well designed and imple- tranche release conditional on the more impor- mented, policy-based lending can be highly tant reform actions can help reduce delays of ineffective. important reform activities. Conditionalities should be realistic, both economically and 33 politically, and seen to be so by both the POLICY AND IMPLEMENTATION ISSUES lender and the government (Jayarajah and EFFECTS ON THE POOR AND MONITORING . With adjust- Branson 1995). Future programs should include ment lending, conditionality can lead to major fewer conditionalities representing well-focused changes in agriculture that have large conse- and monitorable policy actions and clear quences for various stakeholder groups. The expectations for the borrower.6 lag-time between adjustment and economic growth is substantial, and the poor can be CONTENT AND COVERAGE . The overall conclusion of adversely affected through this transition phase. a recent study is that the analytical underpin- Poverty and social impact analysis (PSIA) is nings and relevance of the components of critical for ensuring that the design of reforms ASALs have been appropriate on most issues pays particular attention to impacts among (Feder and Anderson 2003). Typically, thematic different social groups and on the long-term coverage of agricultural adjustment operations effect on poverty (see box 1.23). Also, supervi- includes domestic market reforms and sion and monitoring is critical for effective privatization, external trade reform, land reform 6. See the IAP,"Bulgaria: Adjustment Lending in a Transitional Economy" MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY carry certain measures through a noncoopera- Box 1.24 Generating ownership tive parliamentary system or a noncohesive A 1995 World Bank study found that the most important governmental apparatus. Sufficient scrutiny and factors generating program ownership were (1) political realism to identify potential political risks and stability; (2) support of (or lack of opposition from) various government weaknesses is an important part of constituencies; and (3) preconceived official attitudes toward agricultural adjustment operations. Donors can reform. Conversely: (1) a specific regime type did not intrinsi- support the process by (1) strengthening the cally exhibit a greater degree of political will; (2) the intensity of external and exogenous shocks neither facilitated nor posed institutions involved; (2) assessing the capacity obstacles to achieving a consensus toward reform; (3) the initial of the borrower and tailoring conditionality conditions in the economy had little relevance in either accordingly; and (3) providing an appropriate encouraging or impeding ownership; and (4) the frequency and mix and sequence of program and project amount of government-Bank interaction was neither a neces- support to maintain critical expenditures and sary nor a sufficient guarantee for program ownership in the promote investments for longer-term growth. face of binding constraints. Source: Jayarajah and Branson 1995. SUCCESS FACTORS. Success of adjustment initiatives is likely to be greater where infrastructure is well developed, educational levels are high, institu- to allow private ownership/user rights, removal tions in the public and private sectors are mature, of input subsidies and other price distortions, trade regimes are less highly distorted, and there and rural finance reforms. Domestic market is an ability to withstand or cope with exogenous reforms and privatization are still the core of shocks (such as droughts). Governments imple- adjustment operations, reflecting the fact that menting policy reforms need to be insulated from recent ASALs have been funded in regions still adverse impacts on income and savings to dominated by state-controlled domestic markets protect the reform process and maintain credibil- where most marketing and processing (and in ity. This may require governments to provide Eastern Europe and Central Asia, agricultural transitional support to ensure both the success of production) was handled by parastatals or the reforms and to minimize the effects of the state-supported entities. Most ASALs address reform on the most vulnerable groups. Successful domestic market and external trade reform adjustment often results in agricultural production components as well. moving from low to higher value-added activities. This requires policies conducive to resource IMPLEMENTATION PROBLEMS . Implementation has a 34 mobilization, development of infrastructure, trade mixed record, particularly regarding the re- and risk management, and technology transfer. moval of state control over the domestic Many countries that have failed to relax entry and economy and the privatization of large exit barriers for investment, and to sufficiently parastatals, where vested interests (and their open their economies to private investment, both political patrons in and around government) domestic and foreign. had much at stake. In some cases, subsidies have been removed, then reintroduced in different, less direct, forms. Even officially LESSONS LEARNED privatized parastatals are on some occasions ANALYTICAL FOUNDATIONS . Sound design of adjust- still not fully delinked from government control ment lending agricultural programs begins with and budget support (and consequently, not operationally oriented analytical work carried likely to operate as efficiently as expected). out well before program initiation. Ongoing policy dialogue on major macroeconomic and The relatively weak actual performance of sectoral issues is an important element in the governments in implementing ASALs reflects an design process to build consensus for reform overly optimistic assessment of political com- both within the government and among varied mitment, and/or of government capacity, to stakeholder groups. It is important to have AGRICULTURE INVESTMENT SOURCEBOOK adequate knowledge of the public enterprise Box 1.25 Potential investments sector before embarking on privatization or public sector reforms. Also important are fiscal · Design of adjustment program reforms and implementa- adjustment measures in agricultural spending that tion plans, including identification of unambiguous and protect agricultural growth from crisis, and realistic conditions. understanding the effects of exchange rate policy · Situation and problem analysis to identify key thematic on agricultural terms of trade. This reflects the issues to be addressed and possible reform options. importance of basing phasing and sequencing of · Building ownership and administrative capacity of the borrower through training and education programs. reform activities on thorough analytical work that · Program budget support. accounts for time lags, substitution effects, and the linkages between agricultural policy reforms Source: Authors. and reforms in other sectors. adjustment lending needs to ensure consistency ESTABLISHINGOWNERSHIP . Ownership increases the between the conditionalities imposed by the success of adjustment lending (Jayarajah and Bank and those prescribed by the IMF. In Branson 1995) (see box 1.24). Despite its general, a synergy exists between Fund policies importance, borrower ownership remains on stabilization and Bank support for structural conceptually elusive and insufficiently explored change. Policy Framework Papers for low- with regard to policy and practice of adjust- income countries can foster agreement be- ment lending. It is seldom clear as to what tween the two institutions and the borrower. constitutes adequate ownership or what can be done to increase and sustain commitment to an adjustment program. For ASALs, for instance, RECOMMENDATIONS FOR PRACTITIONERS having allies outside ministries of agriculture As is the case for any lending program, adjust- and ministries of finance is helpful because of ment operations must be built on strong ana- strong intersectoral linkages. lytical foundations, giving primacy to good prior economic and sector work. Adjustment PUBLIC ENTERPRISE REFORM . In many cases, adjust- lending interventions (see box 1.25) should: ment lending for public enterprise reform must accompany le.ding for agricultural sector policy · Coordinate the design and implementation reform. Public enterprise reforms include those of adjustment loans with the International related to divestiture of public enterprises Monetary Fund and other donors, and 35 (privatization) and those aimed at enterprises ensure reforms are consistent with reforms retained in the public sector. Both require in other sectors and are supported by an constant attention to governance issues such as appropriate macroeconomic framework. corruption and transparency. Privatization requires that enterprises appear viable to · Look for highly visible borrower commit- investors with the primary consideration in ment to, and ownership of, a definite reform negotiations (that need to be transparent) being plan. Conditionalities should be kept to a the quality of the investors and their plans for minimum, be realistic, and clearly indicate the enterprise, not the prices they offer. the expectations of the borrowing country. COOPERATION AMONG DONORS . Donor assistance is · Identify what should be analyzed at the often part of a wider international effort; and donors expense and what governments many groups typically have a significant say in themselves, with technical assistance, the policy dialogue with borrowers. Close should analyze. cooperation among donors and NGOs is necessary to avoid duplication of effort and · Progress in a logical sequence and disburse conflicting advice and objectives. World Bank funding via appropriate tranching that MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY requires that higher priority conditions be Jayarajah, C., and W. H. Branson. 1995. Struc- met first. Efforts to reduce price and other tural and Sectoral Adjustment: World Bank sector distortions should cover both outputs Experience, 1980-92. Operations Evaluation and inputs. Study. Washington D.C.: World Bank. · Consider appropriate increases in investment This Note was prepared by Jock Anderson and Sam Kane lending to complement adjustment lending, with inputs from Gary Alex and Derek Byerlee. and in particular, to overcome infrastructural constraints faced by producers. SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. Arulpragasam, J., S. Beddies, S. Brown, et al. 2003. "A User's Guide to Poverty and Social Impact Analysis." World Bank, Washington D.C.* Easterly, W. 2001. "The Effect of International Monetary Fund and World Bank Programs on Poverty." Policy Research Working Paper 2517. World Bank, Washington, D.C.* Jayarajah, C., and W. H. Branson. 1995. Struc- tural and Sectoral Adjustment: World Bank Experience, 1980-92. Operations Evaluation Study. Washington D.C.: World Bank.* World Bank. 1994. Adjustment in Africa: Reforms, Results, and the Road Ahead. New 36 York: Oxford University Press. World Bank. 2001. "Adjustment Lending Retro- spective: Final Report, Operations Policy and Country Services." World Bank, Wash- ington, D.C. REFERENCES CITED Arulpragasam, J., S. Beddies, S. Brown, et al. 2003. "A User's Guide to Poverty and Social Impact Analysis." World Bank, Washington D.C. Feder, G. and Anderson, J. R. 2003. "Review of Agricultural Adjustment Lending: FY1996 ­ FY2002." ARD, World Bank, Washington, D.C. Processed. AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE Gauthier, Simeon, and de Haan 1999). A similar trend has been observed in South Asia. Lack of operating funds for public sector field veteri- IMPROVING ANIMAL HEALTH nary services is partly responsible for major SERVICESTHROUGH PUBLIC/ outbreaks of rinderpest in Sub-Saharan Africa PRIVATE PARTNERSHIPS and the Middle East in the 1980s and, more recently, of Rift Valley fever in East Africa and An efficient animal health service is critical to foot-and-mouth disease in Zimbabwe, livestock production. Most such services in Botswana, and South America. developing countries have historically been provided by the public sector but have been IMPROVING ANIMAL HEALTH SERVICES set back by quality problems. Over the past 20 Animal health services in developing countries years, service efficiency has declined dramati- are typically based in a public sector agency cally. A better balance between the public and where veterinarians lacking sufficient resources the private sector and between professional try to cover all aspects of animal health. To and paraprofessional veterinary staff may offer improve animal health services, reform must considerable potential to improve services. provide for more efficient distribution of Actions needed to ensure an efficient animal service delivery responsibility at two levels: health service include refocusing and strength- between public and private service providers, ening public sector activities to undertake as well as between professional veterinarians public goods, such as policy development, and paraprofessionals (lay animal health quarantine and disease surveillance, vaccina- workers). In defining this responsibility, both tion against major diseases, food safety, and public health and food safety issues need to be establishing, especially in more marginal areas, adequately considered, and lay animal health networks of community animal health workers. workers need to be directed by a responsible Private services for private good tasks, such as veterinarian (public official or mandated clinical treatments, vaccination, and animal private veterinarian). breeding, should also be promoted. PUBLIC/PRIVATE DISTRIBUTION OF SERVICE DELIVERY Poor animal health is the main reason for RESPONSIBILITY. The economic characteristics of losses in livestock production. Direct and services should help define the distribution of indirect losses of meat, milk, and work output responsibilities between the public and the 37 are estimated at about US$2 billion a year in private sector. For the public sector, service Sub-Saharan Africa alone. Better animal health delivery focuses on "public goods," which service is the production input in highest involve market failures, externalities, or moral demand by livestock farmers and is, therefore, hazards. Government strategy should be to a key point of contact between the government strengthen the public sector to "do less but and the farmer. better" and to create an enabling environment for private sector development. The less but Over the past 20 years, the quality of public better approach implies that public sector tasks veterinary services has declined in many must be supervised but not necessarily imple- developing countries. Structural adjustment mented, by public agencies (see table 1.1). programs reduced funding for university veterinary departments while recruitment of PROFESSIONAL/PARAPROFESSIONAL DISTRIBUTION OF new staff continued. As a result, the ratio of RESPONSIBILITIES . A more efficient distribution of expenditure on salaries to expenditure on responsibilities between professional and recurrent costs increased to 85:15 in many paraprofessional veterinarians and lay animal African countries, compared to an optimal health care workers can improve the efficiency 60:40 (de Haan and Bekure 1991; Gauthier of delivery of animal health services. Herder- MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY Table 1.1 Economic characteristics and delivery of animal health services Type of economic good Sectoral Delivery Service Public Private Public Private Clinical diagnosis Private but some YY consumption externalities Clinical treatment Pure private YY Vaccine production Pure private YY Vaccination, major contagious Public because Y YY diseases of strong (contracted by consumption public sector) externalities Vaccination against minor diseases Private but some YY consumption externalities Veterinary surveillance Public because Y Y (quarantine, epidemiology) of strong (contracted by consumption public sector) externalities Control of vet. pharmaceutical Public because Y Y sales of moral hazard (contracted by public sector) Food safety control (meat inspections) Public because of moral hazard Y Y (contracted by public sector) 38 Veterinary research/extension Public because of Private for Y Y market failure commercial (contracted by (poverty focused) purposes public sector) "Y" =Yes, acceptable;"YY" = "Yes, strongly recommended" Source: Umali, Feder, and de Haan 1994. auxiliaries or low- and mid-level technicians which official controls are necessary to are important in most private animal health prevent major disease outbreaks, public systems, especially in traditional livestock health threats, or loss of important markets. production systems. These technicians are Animal health services should ensure effective familiar with local conditions and are often communication between professional and more readily accepted by the local population paraprofessional animal health providers, as than are public veterinarians. Although well as regulate paraveterinarian use of paraprofessionals generally have extensive products that carry public health risk knowledge of the local situation (including of (antibiotics), disease quarantine risk gender roles), they need to distinguish tasks (attenuated vaccines), or drug resistance undertaken by auxiliaries from those for (antibiotics or trypanocides). AGRICULTURE INVESTMENT SOURCEBOOK BENEFITS Box 1.26 Former Soviet Union countries: privatization of Since the early 1990s, in Sub-Saharan Africa, veterinary services policy change has resulted in the number of private veterinarians increasing from almost Under the former Soviet Union's centralized economy, most zero to about 2,500 in 2000. Veterinarians in veterinarians were employed by collective farms. In the 1990s, private practices almost unanimously indicate these farms were broken up and many workers and veterinar- that they are now better off than as public ians received farm assets.Veterinarians had few alternatives servants. In Eastern Europe, a private service other than to start private practice, though on a small scale. It took most governments a decade to acknowledge private system evolved, almost by default (see box services and formalize this in their veterinary legislation. In a few 1.26). Morocco shifted from a public system in countries, viability of private veterinary services was enhanced 1980 to an entirely private system in 1990 (see by the state contracting veterinarians to carry out mandated box 1.27). Progress has been slower in South disease control programs.The change in the state role from and East Asia, where public sector services are executing veterinary services to overseeing quality of services still dominant. was much slower. A major problem for veterinarians was their limited lack of business management experience. A vast network of auxiliary veterinary assistants Source: Schillhorn vanVeen, forthcoming. (estimated at 10,000 or more) is now operating in Sub-Saharan Africa, and paraprofessionals are increasingly common in South and East "moonlighting" by public service veterinarians) Asia. Farmers generally view these private is a most serious entry barrier to the systems as better than public systems in deliv- privatization of animal health services and can ering timely services, providing services to the be addressed by introducing full cost recovery poor, and reducing livestock mortality. A by the public sector for curative and "willingness to pay" survey in three Indian noncompulsory interventions. Given the choice states has shown that the landless poor are between unreliable public services and high- willing to pay for good quality services. In a quality private services, farmers will pay for variety of settings, animal health service re- services. Decentralizing revenue collection by forms have reduced the incidence of human introducing a revolving account at district level brucellosis and other diseases transmitted from also creates a direct incentive for cost recovery. animals to humans; reduced mortality in cattle by 45 percent to 60 percent and in small stock by 20 to70 percent; and increased family Box 1.27 Morocco: privatization success 39 incomes by US$48 to US$300 per year. The Moroccan government (the Moroccan Livestock Service Directorate) privatized its veterinary services in 1983. From only two private veterinarians in that year, the number in- POLICY AND IMPLEMENTATION ISSUES creased to 76 in 1989 and 318 by 2000, or about one-half the CLARIFY PUBLIC AND PRIVATE SECTOR ROLES. The first total number of veterinarians in the country. Private veterinar- step for every policymaker is to define or ians now provide care for 70 percent of the country's cattle redefine public and private sector roles, taking and 60 percent of its sheep. Factors in this success were: into account standards and guidelines from the · The political will of the livestock service to make world body for animal health (OIE). Experience privatization a success. shows that this should be done in a public · Support from a well-functioning, national association of debate and that the political change to a veterinarians. multiagent setup is critical. Since there are · A clear subcontracting policy for compulsory vaccination often significant vested interests such as public campaigns.The government pays the veterinarian a fee for sector employees working at two or more jobs, each vaccination. this is often a complex and sensitive process. · Suspension of public provision of curative services and noncompulsory vaccinations once a private veterinarian has established a practice in an area. PREVENT UNFAIR COMPETITION. Unfair competition (continued subsidization of public services and Source: de Haan 1993. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY private animal health workers has occurred Box 1.28 Potential investments spontaneously. This partly resulted from credit · Policy analyses and technical assistance in policy reform. from pharmaceutical companies, providing an · Strengthening animal health training in universities and important source of funds for private animal training centers. health workers. Although many prospective · Public-private partnerships to strengthen paraprofessional private veterinarians argue that they need a car, skills. less expensive means of transport can often · Financing for contracted private provision of food safety serve as well. inspections, vaccination for major diseases, and other public goods services. · Financial services for private animal health workers. · Public veterinary laboratories. RECOMMENDATIONS FOR PRACTITIONERS · Research and extension on animal production and health. Distribution of responsibilities between public and private sectors is the key policy issue, and Source: Authors. once defined they should be confirmed through appropriate regulations. Rather than EXTENT OF PRIVATIZATION . Many feel that liberaliza- copying regulations from industrial countries, tion has gone too far, and that inadequate rules should be adapted to the needs of the regulatory control over the quality of veterinary prevailing production systems, allowing a treatment has led to indiscriminate use of broader scope of responsibility for herder- dangerous substances. Moreover, the reorgani- auxiliaries and lower-level technicians in areas zation of ministries of agriculture as part of that cannot profitably maintain a professional structural adjustment and decentralization veterinarian. Legislation should also allow other reforms, has left central veterinary departments activities, such as subcontracting of public weak and poorly equipped to carry out their sector work or artificial insemination, that are tasks. Privatization has left marginal areas with often critical for the economic survival of the inadequate veterinary coverage. The need for private practitioner (see box 1.28). efficient, official veterinary services operating under a direct chain of command principle Professional veterinarian training in most must be considered in any decentralization and developing countries still focuses on public privatization reforms. sector tasks, with little hands-on skill develop- ment and often complete neglect of commer- LESSONS LEARNED cial and management skills and herd-health 40 ELIMINATE BARRIERS TO IMPORTS OF VETERINARY INPUTS . management. Training in those areas is critical Sales of drugs are important to the financial to the successful restructuring of animal health viability of private veterinarians. Veterinarians services because public sector veterinarians are should not, however, be given a monopoly on notoriously poorly equipped in economics and all drug sales, in particular the sale of items that policy areas. pose little or no risk to public health, such as feed additives, anthelminics, and certain Quality of paraprofessional animal health work- acaricides. Government intervention in veteri- ers depends on selection of mature personalities, nary drug trade should remain normative and both men and women, from the community regulatory, establishing lists of drugs that can with an interest in a part-time occupation be imported. (shopkeepers, farmers). Paraprofessionals should undergo training in regular short courses RECONSIDER FINANCIAL SUPPORT MECHANISMS . Although (two to six days because part-time workers can donors have tried to accelerate animal health not afford more time) and should also be part of service restructuring through targeted credit networks of private veterinarians to enhance schemes, in some cases the emergence of quality and availability of supplies. AGRICULTURE INVESTMENT SOURCEBOOK SELECTED READINGS Schillhorn van Veen, T. W. Forthcoming. East- Asterisk (*) at the end of a reference indicates ern Europe and the Former Soviet Union: that it is available on the Web. See Appendix 1 Animal Health Systems in Transition. Office for a full list of Websites. of International Epizootics Scientific and Technical Review 23. Place: Publisher. Catley, A., S. Blakeway, and T. Leyland. 2001. Community-Based Animal Healthcare A Umali, D. L., G. Feder, and C. de Haan. 1994. Practical Guide to Improving Primary "Animal Health Services: Finding the Bal- Veterinary Services. London: Intermediate ance Between Public and Private Delivery." Technology Development Group Publishing. World Bank Research Observer 9 (1): 76-9. FAO. 1991. "Guidelines for Strengthening This Note was prepared by Cees de Haan with inputs from Animal Health Services in Developing the Sustainable Agriculture (SASKI)Thematic Team of the Countries." FAO, Rome.* World Bank. FAO. 1997. "Principles for Rational Delivery of Public and Private Veterinary Services with Reference to Africa." Rome, FAO.* OIE. 2003. "Guidelines for the Evaluation of Veterinary Services." In Terrestrial Animal Health Code. 12th ed. Paris: OIE. REFERENCES CITED de Haan, C. 1993. "The Delivery of Livestock Services to Smallholders." In P. W. Daniels, S. Holden, E. Lewin, and S. Dadi, eds., Livestock Services to Smallholders: A Critical Evaluation. Proceedings of a seminar held in Yogyakarta, Indonesia, November 10-15, 1992. Indonesia International Animal 41 Science Research and Development Foun- dation, Bogor, Indonesia. de Haan, C., and S. Bekure. 1991. "Animal Health Services in Sub-Saharan Africa: Initial Experiences with Alternative Ap- proaches." Technical Paper 134. World Bank, Washington, D.C. Gauthier, J., M. Simeon, and C. de Haan. 1999. "The Effect of Structural Adjustment Programs on the Delivery of Veterinary Services in Africa." Proceedings for Re- gional Conference of Office International des Epizooties for Africa, Dakar, and Senegal, Paris. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY AGRICULTURE INVESTMENT NOTE political liberalization often remains symbolic and, in practice, decisions are made without them. Increasingly governments are aware of STRENGTHENING FARMER the importance of having farmers participate in ORGANIZATIONAL CAPACITY agricultural policymaking, and therefore sup- TO INFLUENCE AGRICULTURE port RPO capacity building. This requires POLICY institutional frameworks that recognize their potential role, and mechanisms for farmers to Lack of capacity to use economic opportunities voice their concerns at the local, national, and and an inability to access resources and services international levels of policy formulation. contribute to poverty--a condition that is also profoundly affected by a lack of empowerment. In the competition for economic and political RURAL PRODUCER ORGANIZATIONS power, the voices of the poor, particularly the In all rural societies, traditional organizations rural poor, are usually not heard. Rural producer have an inward-oriented or "bonding" function organizations (RPOs) help address these prob- to facilitate collective actions that mitigate lems by empowering rural people, building rural against the uncertainties of agricultural produc- social capital, increasing farmers' voice in public tion, and regulate relationships within the sector decision-making. Building this capacity group. In contrast, formal producer organiza- requires: identifying rural producer organiza- tions perform a "bridging" function to organize tions, strengthening their internal governance relationships between the group and the structures and information systems, developing outside world. In the context of developing an active policy dialogue with government countries, RPOs typically include elements of agencies, and building technical, strategic, and both traditional and formal organizations. They negotiating capacity of RPO leaders. are rooted in local customs, but organized on economic principles. Inclusion is characteristic In most countries, economic liberalization has in traditional groupings, where everyone is been accompanied by political liberalization inherently a member, but formal producer that offers new opportunities for action by organizations tend to be more exclusive. RPOs economic agents, including rural producer are membership organizations created by organizations. The withdrawal of the state from producers to provide services. They differ from some activities has left a vacuum in the institu- NGOs, which also provide services to produc- 42 tional and organizational framework for ad- ers, but are not necessarily membership based. dressing rural needs. This vacuum has only RPOs can be local and serve only at village and been partially filled by the private sector. There inter-village levels, or can operate at regional is also a need for improved governance in the and national levels (as unions and federations). regulatory environment and the correction of market failures (public goods, externalities). BENEFITS Many of the world's poor live in rural areas Adjusting to new economic and market condi- with agriculture or agriculture-related activities tions is made more difficult in rural areas by as the mainstay of their livelihood. When poor the imbalance of power between poorly orga- producers band together, they gain bargaining nized agricultural producers and powerful power and may access the services and re- public or private operators. This imbalance is sources they need to diversify, improve com- largely related to producers' limited access to petitiveness, access markets, increase incomes, information and education, and a relative lack and equitably distribute associated benefits. of capacity to formulate objectives and define a strategic vision for development. Their partici- RPOs play an important role in policy dialogue pation in public debates on economic and and in some cases, rural federations are in- AGRICULTURE INVESTMENT SOURCEBOOK volved with macroeconomic and political the poor, who lack the minimum assets and, in issues. Examples include the Indigenous and general, do not belong to formal groups that Afro-Ecuadorian Peoples Development Project can help them take advantage of what an RPO (Ecuador) and the Agricultural Services and can offer. The cost of reaching the unorganized Producer Organizations Project (Senegal; see can be high, but projects financed by donors box 1.29). In both countries, RPOs are at the may help RPOs improve inclusion to reach the forefront of a larger civil society movement, poorest, and make sure that their voices are advocating political and socioeconomic heard in policy development processes. changes. Strengthening the capacity of pro- ducer organizations to influence policy in an RESISTANCE TO RPO EMPOWERMENT . Empowering informed and democratic manner builds social producer organizations should create forces in capital that complements investments in other a society that can lead to a shift in power forms of capitalænatural, human, physical, and relationships. Since existing elite groups may financial. Effective RPOs can improve policy try to counter these forces, wide communica- outcomes and the efficiency of rural service tion and careful monitoring of ongoing change providers. This in turn can have major benefits processes are necessary. Governments and for poor people if they are able to organize civil servants are likely to resist change be- themselves effectively. cause they are afraid of losing control and privileges. Political parties and individuals will try to co-opt the process and use RPOs as POLICY AND IMPLEMENTATION ISSUES vehicles to promote their own agenda. An MULTIPLE FUNCTIONS OF RPOS. Rural producer effective RPO support program should there- organizations typically perform multiple func- fore analyze stakeholder interests to identify tions, generally including: advocacy or policy potential opponents and resistance to reform, functions (syndicates or unions), economic and and design specific activities that bring about technical functions (cooperatives or associa- win-win situations. tions), and local development functions (espe- cially when decentralization has not yet taken INCREMENTAL PROCESS OF DEVELOPMENT . Empower- place and local governments do not exist). ment of RPOs through learning-by-doing will Most RPOs address all three functions to frequently entail some failures and misuse of varying degrees. funds by the emerging organizations. Appropri- ate controls and audits are necessary and a 43 EQUITY. RPOs are not necessarily inclusive. phased program of institutional development There may be entry barriers for the poorest of and delegation of responsibilities is frequently Box 1.29 Senegal: strengthening RPO capacity to participate in policymaking The National Cooperation and Consultation Committee of Rural People of Senegal (CNCR: Conseil National de Concertation et de Coopération des Ruraux) was created in 1993 by 19 national federations to represent rural producers in agricultural policy formulation and negotiation processes. CNCR goals are to: (i) strengthen the unity of the farmers movement and represent rural producers, (ii) defend farmers' interests in decision-making processes regarding agriculture and rural develop- ment, and (iii) contribute to sustainable development of family farming systems. Since 1994, CNCR has been recognized by the Government of Senegal and the World Bank as a partner in preparation and implementation of a US$6 million RPO capacity-building component of the Agricultural Services and Producer Organization Project. CNCR also chairs the board of directors of the National Agricultural Research Fund, and is an influential member of the Board of the National Agency for Agricultural and Rural Advisory Services. CNCR (http://www.cncr.org) is systematically associated with any agricultural policy formulation in Senegal, and at a regional level participates in West African Monetary Union policymaking meetings as a member of the West African Network of Rural Producers Organizations http://www.roppa-ao.org). Source: Bosc et al. 2002. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY beneficial. Capacity building of producer Often the best-established producer organiza- organizations is a slow and uneven process tions are commodity-based associations regulated by existing social behavior and dominated by large farmers. These are cultural norms. Donors may get impatient and legitimate representatives of the sector, but force the process artificially, thus engendering do not necessarily represent the interests of unsustainable advances. small farmers. Still, such organizations usu- ally open membership to smaller farmers to maintain the association's credibility as a LESSONS LEARNED representative of all-farmer interests. Public IDENTIFYING ORGANIZATIONS TO SUPPORT . Experience support should encourage such develop- indicates that any membership organization ments and effective integration of small- should be eligible for program support as long farmer interests in the association agenda. as members are agricultural producers living in Small-farmer influence and participation is rural areas and providing it meets three criteria: facilitated by having local and regional meetings and activities in addition to national · It should be recognized as useful (principle activities, and by carrying out programs of utility) by its members--members must targeted to the needs of small producers. value the ability of the entity to promote beneficial policy. DEFINING WHAT TO STRENGTHEN . Investments need to help RPOs become more effective at provid- · It should have an identity (that is, a history ing the services for which they were created. and effective operating rules) that, even if This often requires improvements in: not formalized, regulates the relationships among its members and between members · Internal governance structures and account- and the outside world. ability mechanisms. · It should be legally recognized, with gov- · Internal and external information systems. erning bodies functioning effectively, in particular holding regular elections and · Capacity to articulate members needs and meetings with accountability mechanisms. negotiate. · Technical and managerial capacity to 44 Box 1.30 Colombia:The Colombia Coffee Growers Federation implement activities. The Colombia Coffee Growers Federation represents approxi- mately 250,000 farms with the objective of serving the welfare · Strategic capacities for policy analysis and of the country, and promoting the economic and social well- defining a vision and strategy to achieve being of Colombian coffee growers.The Federation engages in objectives. activities such as transport, coffee storage, agricultural research, and public works programs.The Federation has a democratic ESTABLISHING A POLICY DIALOGUE WITH GOVERNMENT . hierarchy based on Municipal Committees that are democrati- Investments to strengthen RPO capacity need cally elected. Managers are accountable to the democratically to promote an enabling environment through elected Coffee Congress.The large volume of coffee produced means that producers can achieve economies of scale and have projects and policy dialogue with government effective negotiating power.The Federation has demonstrated (see box 1.30). This might entail: obtaining considerable political influence.The Coffee Fund, financed from recognition of RPOs from governments and membership fees and a levy on production, is large enough to ending mistrust from public services; ensuring influence Colombia's macro-economy. As a result, the Federa- that RPOs are seen as full partners in develop- tion works in consultation with the government to manage this ment; and providing up-to-date information to fund. Some Committees have negotiated with local government RPOs to facilitate their participation in devel- to put up 30 percent matching funds for local projects. oping rural development policies and prepar- Source: Bosc et al. 2002. ing and implementing rural projects. RPOs AGRICULTURE INVESTMENT SOURCEBOOK must be given enough time, resources, and Box 1.31 Potential investments information to prepare effectively for partici- pation in these activities. · Legal and regulatory reforms to facilitate rural producer organization growth. LEGITIMACY. RPO leaders may be isolated from · Assistance to national or regional federations to: (a) train their base and lack accountability to their leaders and members, and (b) build strategic planning skills members. Although programs to strengthen and develop operation and management procedures. RPOs are intended to resolve these problems, · Study tours and exchange visits. · Assistance in forming local, regional, and national RPO access to funds and services may still be avail- consultative forums. able only to RPO leadersæoften the local · Demand-driven funds to finance, on a matching grant basis, eliteæto the detriment of members. To mitigate RPO services, programs, and productive investment. against such risk, support programs for RPOs Source: Authors. should be extensively advertised to ensure that those who have problems accessing the infor- mation, often the poorest, are aware of the fund's existence. Close monitoring and system- atic evaluation is essential. limitations of RPOs--work with them at ALLOW SELF MANAGEMENT OF FUNDS - . Providing a their pace in a "learning-by-doing" manner. flexible development fund or demand-driven services linked to a productive investment fund · Concentrate on agreed-upon transparent allows RPOs to define activities to be financed decision-making processes and procedures, and determine the timing and pace of imple- and let RPOs decide the nature of the mentation. RPOs manage the funds they have activities they want to finance. been granted, and typically are able to select service providers from a list of regularly certi- · Target activities that RPOs have chosen and fied vendors. Such a funding mechanism that fit within their working capacity. requires that donors, RPOs, and the govern- ment agree on procedures and criteria for RPOs · Ensure that supported RPOs are legally to access funds. To ensure compliance with registered, with transparent governing rules, procedures and quality of services, close procedures, accounting, and reporting monitoring is required, as well as systematic, systems. 45 random, and post-activity audit by government and/or donors. · Guarantee independence from government or donor agencies, yet develop a strong and active policy dialogue with relevant RECOMMENDATIONS FOR PRACTITIONERS government agencies. There is no blueprint for supporting RPO development to improve policy analysis and · Promote a conducive legal environment advocacy capacities, as this must be tailored to with laws and regulatory systems that country circumstances (especially the political promote growth and recognition of RPOs. environment), and the characteristics of RPOs in that country. However, one principle applies: · Promote effective decentralization and support should empower RPOs--not make deconcentration of public services to them instruments of donor or government provide a basis for empowerment of local policy. Key recommendations for investment communities. include (see box 1.31): · Promote a dialogue among donor agencies · Guarantee equal access to all RPOs that to harmonize approaches and procedures meet funding criteria, and accept the in support of RPOs. MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. Bosc, P., D. Eychenne, K. Hussein, B. Losch, M.-R. Mercoiret, P. Rondot, and S. Mackin- tosh-Walker. 2002. "The Role of Rural Producer Organizations in the World Bank Rural Development Strategy." Rural Devel- opment Strategy Background Paper 8. World Bank, Washington D.C.* Hussi, P., J. Murphy, O. Lindberg, and L. Brenneman. 1993. The Development of Cooperatives and Other Rural Organiza- tions: The Role of the World Bank. Technical Paper 199. Washington, D.C.: World Bank. Pratt, D., F. Le Gall, and C. de Haan. 1997. Investing in Pastoralism: Sustainable Natural Resource Use in Arid Africa and the Middle East. Technical Paper 365. Washing- ton, D.C.: World Bank. Rondot, P., and M.-H. Collion, eds. 2001. "Agricultural Producer Organizations: Their Contribution to Rural Capacity Building and Poverty Reduction." Report of a Workshop, June 28-30, 1999, Washington, D.C. World Bank, Washington D.C.* 46 Subramanian, A., V. Jagannathan, and R. Meinzen-Dick, eds. 1997. User Organizations for Sustainable Water Services. Technical Paper 354. Washington, D.C.: World Bank. REFERENCES CITED Bosc, P., D. Eychenne, K. Hussein, B. Losch, M.-R. Mercoiret, P. Rondot, and S. Mackin- tosh-Walker. 2002. "The Role of Rural Producer Organizations in the World Bank Rural Development Strategy." Rural Devel- opment Strategy Background Paper 8. World Bank, Washington D.C. This Note was prepared by the Sourcebook team based on the AgriculturalTechnology Note "Investing in Rural Producer Organizations" by Pierre Rondot. AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE agriculture, contribute to rural employment generation, improve living standards, and provide more consumer choices by: BULGARIA:ADJUSTMENT LENDING IN ATRANSITIONAL · Developing an active land market. ECONOMY · Developing a grain market by privatizing Bulgaria has a diversified agriculture, with the grain marketing agency and limiting the fertile soils and favorable climatic conditions. operations of State Grain Reserves. By the end of the communist period in 1989, 90 percent of the land was in large coopera- · Privatizing agro-industrial and processing tives or agro-industrial complexes averaging firms, including grain mills, seed, and food 24,000 hectares. Input use was intensive and industries. livestock production was highly subsidized. · Privatizing irrigation systems by decentraliz- What's innovative? Agriculture sector adjustment ing operations management and mainte- reform in a transitional economy ­ privatization, nance to water user associations. commercialization, land, and financial sector reform. · Improving agricultural financing to rural After 1990, priority was given to dismantling areas by private providers. large production complexes and to distributing land and nonland assets, including livestock, to · Liberalizing trade, improving market regula- former owners. Most input prices were decon- tions, and increasing competitiveness of trolled. However, new owners were often ill- tradable commodities. equipped to manage their new assets, and price controls (together with export controls · Improving forest legislation and increased and taxes) were maintained on outputs in order community-based participation in forest to keep food prices low for the urban popula- management. tion. This led to large illegal exports and shortages, especially in grains. There was great · Supporting Bulgaria's accession process to instability in the trade regime, and import tariffs the EU. were high on fertilizer, a key input. Fertilizer 47 use declined by 75 percent and agricultural production in 1997 was only 45 percent of the BENEFITS AND IMPACTS 1989 levels. State intervention in cereal market- Both loans were one-tranche operations, ing and credit continued. By the mid 1990s, supporting a program of about 2 years. The both macroeconomic imbalances and lack of government took all of the designated steps structural reforms caused a financial crisis. before each of the loans went to the Board. A key feature of the Bulgaria adjustment program A new government was elected in 1997 with a was that it had the full support of the elected strong commitment to market reform. The government and parliament. Another feature government eliminated export bans and con- was the willingness of the Bank to adjust the trols on agriculture and food profit margins, state food reserves condition in response to eliminated most import quotas and duties on perceived risks of food shortages over the cereals, liberalized markets, and abolished period of the loan by the Bulgarian Govern- subsidized agricultural credit. ment, in light of tensions in Kosovo. PROJECT OBJECTIVES AND DESCRIPTION Under ASAL I & II Bulgaria transformed itself, The Agriculture Sector Adjustment Loans in a very short period of time, from having one (ASAL) I & II sought to promote efficiency in of the worst agricultural trade regimes to one MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY of the most open in the region. The loans also · Timing of Bank interventions was impor- had significant institutional development impact tant. Constructive disengagement in a through privatization in the areas of grain period of poor policy environment prior to marketing, input marketing, and farmer services 1997 helped develop credibility with a ­ all key steps toward EU accession. Grain crop new government serious about economic production in 2002 was 4 million metric tons reforms. (the highest since the start of reforms) and was due in part to increased farmer access to high- · The "big bang" approach for transitional quality seeds and fertilizer supported by the economy reform can work under the right ASAL. Land market development led to an conditions, with the caveat that this success increase in land transactions of about 190 followed a long period of slow or no percent in 2000-01. change. Achievements are particularly significant given · Single tranche adjustment can work when the politically challenging nature of the needed there is strong commitment and when reforms. Strong borrower ownership, with undertaken within a well-elaborated, constructive dialogue between the Bank, medium-term framework. Moreover, single- borrower, and other stakeholders, and high- tranche loans are more flexible than multi- quality economic sector work contributed tranche loans since they avoid locking into significantly to this success and to the likely legal conditions and policy targets that may sustainability of the outcomes. not be fully supported by the Government. However, despite agriculture performing better The project shows the positive impact of the than the economy as a whole, some major Bank's proactive and constructive engagement problems remain. Rural poverty reduction with the borrower, ensuring progress on all cannot be determined and privatization of reform package elements, and preventing agro-enterprises and institutional changes in backsliding in key areas. However, a major irrigation have not yet revitalized these sub- issue is whether greater priority should have sectors (irrigation requires an investment been given to targeted poverty reduction in a program). As well, agricultural exports have rural sector with a serious and increasing been declining given higher quality products poverty problem. from competitors, and neither land markets nor 48 rural finance are yet stimulating the rural economy as desired. These shortcomings COUNTRY PROFILE: BULGARIA notwithstanding, the country has continued to Project Name Agricultural Sector Adjustment stay on track in its bid for EU accession, fulfill- Loan (ASAL I and II) ing one of the top policy priorities. Project ID ASAL I: P057925, and ASAL II: P057926 LESSONS LEARNED AND ISSUES FORWIDER Project Cost ASAL I: US$75.8 million, and ASAL APPLICABILITY II: US$50.0 million · Timely and quality sector work is essential. Dates ASAL I: FY 2000 ­ FY 2001, and The Bank began analytical work two full ASALII: FY 2002 ­ FY 2003 years before the ASAL I was approved. Policy Notes effectively engaged the Contact Point Henry Gordon government and other stakeholders, to The World Bank, 1818 H Street NW,Washington D.C. 20433 build support and consensus for difficult Telephone: (202) 473-2961; broad reforms. Process and substance are Email: Hgordon@Worldbank.org equally important. AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE public and private sector. The project includes four components: ECUADOR: COMMODITY · An Agricultural Policy Component to CHAIN CONSULTATIVE strengthen sector policy analysis capacity, COUNCILS FOR POLICY budget analysis, and investment monitoring. FORMULATION · An Agricultural Information and Dissemina- Ecuador's agricultural sector is characterized by tion Component to improve crop and a variety of production systemsæboth temper- livestock information services, market news ate and tropicalæand a natural resource base and price information, agroclimatic impact with high production potential. There is a very forecasts, and the computer and informa- competitive export sectoræbanana, flowers, and tion system capacity of the Ministry of shrimpæas well as a large traditional small- Agriculture. holder sector producing rice, potato, coffee, cacao, maize, and livestock. The sector is · An Agricultural Sample Census Component characterized by low productivity even in the to support design and execution of a export sector, and most growth over the past national sample census, and strengthen 30 years has come from the expansion of data processing capabilities. agricultural area. · An Agricultural Farm Production Survey What's innovative? Using new data to bring stake- Component to improve production survey holders together into market chain consultative methodology, speed processing of two councils with the government. surveys per year, and finance one farm expenditure survey. Widespread improvement in agricultural pro- ductivity will require the government to pro- vide key public goods, including information BENEFITS AND IMPACTS on which farmers, traders, processors, and The project financed the 2002 Ecuadorian financial institutions can base decisions. Im- Agricultural Census, which has provided an proved information is equally important to the abundance of data on the agricultural sector Ecuadorian Government, as it moves away and on the various commodity subsectors. As from past broad-based programs to more 49 part of the process of analyzing and interpret- targeted interventions aimed at helping the ing these data, the Ministry facilitated the poor. Unfortunately the information base for formation of Consultative Councils for eleven public policy has been weak. The last agricul- subsectors (coffee, banana, potato, dairy, and tural census was conducted in 1974, and data others). Each Consultative Council comprises sets no longer provide a sound basis for deci- producers, traders, input suppliers, exporters or sion-making. An improved database was processors, and key ministry officials. essential for sound policy formulation and development of business plans. The Councils met originally to review data from the census. The census information was a critical motivating factor in forming the coun- PROJECT OBJECTIVES AND DESCRIPTION cils, because it filled a void where there had The Agricultural Census and Information been little hard data on the size and character- System Technical Assistance Project aims to istics of the subsectors. Much of the census improve availability, consistency, validity, and data were originally controversial, as the data timeliness of agricultural information to facili- conflicted with prior views and assumptions on tate decision-making processes in both the the sector. The Councils helped to verify and MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY interpret census information and to promote sectors, and between different private sector awareness and use of the data. Councils con- stakeholders in a commodity production and tinue to meet to discuss and seek solutions to marketing chain. Linking such Councils with subsector problems and to represent subsector data from an Agricultural Census or other interests with the government. analytical work on a subsector may be useful to encourage participation and provide coher- The main contribution of the Councils has been ence for initial Council meetings. to facilitate dialogue between the government and the various actors in the production chain (producers, marketers, processors, exporters, COUNTRY PROFILE: ECUADOR and importers). Use of up-to-date, reliable Project Name Agricultural Census and Informa- information has enabled these groups to agree tion System Technical Assistance to manage the production chains in a rational Project and efficient way. There have been agreements Project ID P077949 reached on milk prices and imports, corn prices, soybean imports, and various other Project Cost US$4.8 million commodities. Dates FY1999 - FY 2004 Contact Point Matthew McMahon The major factor contributing to the success of The World Bank, 1818 H Street the 14 Councils has been their ability to discuss NW,Washington D.C. 20433 policy options based on factual data. The Telephone: (202) 473-8586; formation of the Councils was not defined in Email: Mmcmahon@worldbank.org the project design, but was introduced later and seen as an opportunity to make better use of and to confirm the validity of census data. LESSONS LEARNED AND ISSUES FORWIDER APPLICABILITY The Councils provide a mechanism for inter- vening to address problems, as all participants in the subsector are represented. This in some 50 cases enables the Council to negotiate or initiate action to address a problem, where the government--with its limited capacityæacting alone would be unable to intervene effectively. The Councils will continue with the active encouragement of the government, which will consider promoting formation of Consultative Councils for other subsectors as needed. Future modifications of the Consultative Council structure will likely increase the representation of smaller farmers. Consultative Councils based on commodity market chains and industry clusters would be useful in most countries as a mechanism for consultation between the public and private AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE hectare basis to partially mitigate adverse impacts on income of removal of distortionary subsidies. TURKEY: HYBRID ADJUSTMENT/INVESTMENT · Facilitate farmers' transition out of tobacco LENDING and hazelnut production through per hectare grants for a switch to alternative In the late 1990s, one of the most critical crops such as maize, soybean, sunflower, issues in Turkey's agricultural sector was the beans, vegetables, and medicinal plants, inefficient and costly system of agricultural and more efficient production patterns. support policies. Subsidies for fertilizer, credit and price supports, mainly for sugar, hazelnut, · Promote more efficient cooperative market- and tobacco, were distortionary and failed to ing channels by assisting the execution of enhance productivity growth. These agricul- the Law on Agricultural Sales Cooperatives, tural policies favored larger farmers, were a through restructuring and cooperative heavy burden on consumers and taxpayers, development programs and financing labor and contributed to Turkey's macroeconomic retrenchments. problems. Reforming this system was a pri- mary goal of a dialogue initiated with Bank · Build public support for politically sensitive policy notes and workshops in 1998, leading reforms. to inclusion of agricultural policy reform elements in the Bank's Economic Reform One-third of the loan is adjustment lending that Loan, effective 2000, and in an IMF macroeco- seeks to enable the government to make up nomic stabilization package. The reforms are some of the anticipated shortfall in funds also important to assist the government in needed for the critical first rounds of the DIS meeting preconditions for EU accession. payments in 2001-03. Recent work in Turkey highlights the latest usage of hybrid lending, moving the reform BENEFITS AND IMPACTS agenda forward quickly, but requiring "hands- A recent supervision report noted that the on" coordination to ensure success. government is on track with key elements of the ARIP supported program. With payments to What's innovative? Agricultural sector reform over 2.18 million farmers, more than 50 percent 51 through a hybrid loan with an adjustment compo- of all DIS-eligible farmers were paid under the nent supported by investment components. 2001 DIS Program, exceeding by four-fold the target 12.5 percent of all farmers to be paid. In 2002, direct and indirect agricultural subsidies PROJECT OBJECTIVES AND DESCRIPTION (not including DIS) totaled US$1.1 billion, The Agricultural Reform Implementation Project compared to US$7.2 billion in 1999. No new (ARIP) evolved from the Economic Reform subsidies have been introduced. Loan to ensure sustainability of the reforms, including change and formation of sustainable Uptake on farmer transition grants has been institutions. slow because farmers are uncertain that hazel- nut and tobacco support prices are being Two-thirds of the loan is for an investment permanently removed. However, as govern- program with objectives to: ment credibility on this improves, uptake of this component should increase. · Substitute subsidies with an incentive- neutral support system of Direct Income After a slow start, the Agricultural Support Support (DIS) payments, made on a per Cooperative Union reform program has had MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY some success, but progress in two of the largest early resolution of design and implementa- unions is uneven. Turning the unions into true tion problems. The budgetary support member-owned cooperatives is still incomplete aspect of an adjustment loan allows more because this takes time. Bank engagement in policy dialogue, compared to a pure investment operation. LESSONS LEARNED AND ISSUES FORWIDER · The investment portion of a hybrid loan APPLICABILITY makes it significantly more resource-inten- In the political economy of reform, "a spoonful sive than a straight adjustment loan, and of sugar helps the medicine go down." Com- requires "hands-on" attention by the Bank. bined adjustment and investment lending may provide the appropriate mix ­ drawing atten- · Giving farmers a range of options, rather tion of higher-level government officials than preselecting an alternative crop, was through adjustment components while also wise. A selection menu encourages adop- providing needed long-term investment. Typi- tion of and participation in programs. cally adjustment lending is negotiated through the Ministry of Finance with implementation of · Cooperatives financed and directed by policy (and painful reforms) carried out by line government often degenerate and lose ministries. Adding an investment component efficiency and member participation. makes these often-painful adjustments more Member ownership and participation and palatable to all parties involved, and can prove relevance of services are key to sustainable particularly beneficial for reforms affecting the development of such cooperatives. rural sector. In the past, hybrid lending was tried and discarded due to the mismatch of COUNTRY PROFILE: TURKEY time frames for these two instruments; how- ever, recent evolution in approaches increases Project Name Agricultural Reform Implementa- the likelihood that they can prove positive tion Project complements for policy reform. Project ID P070286 Lessons learned include: Project Costs US$662.0 million Dates FY 2002 ­ FY 2006 · Laying a base for policy dialogue pays off, 52 even if advice is not adopted right away. Contact Point Mark Lundell The World Bank, 1818 H Street NW,Washington, D.C. 20433 · Conditionality must be clear and straightfor- Telephone: (202) 458-4655; ward with strong government ownership. Email: mlundell@worldbank.org; · Given the macroeconomic implications of agricultural subsidies, cooperation with the IMF and integration of other Bank opera- tions is helpful. The Bank took part in all key meetings; the Fund integrated key agricultural policy reforms into its program. · For policy reform, a hybrid loan has impor- tant advantages over pure investment or adjustment loans. Preparing and supervising investment components keeps Bank staff involved in program details, and facilitates AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE (iii) herders organizations structured around socioeconomic objectives. The program estab- lished or facilitated: GUINEA: LIVESTOCK SECTOR PARTNERSHIP--PUBLIC · A unique mechanism for generating and SECTOR HERDER diffusing technologies at the grassroots ORGANIZATIONS ANDTHE level through private agents (paraprofes- PRIVATE SECTOR sionals such as auxiliaries or paravets) within herder communities to offer basic Guinea has a strong pastoral tradition, with animal health services and broader live- more than 2.2 million cattle and 1.5 million stock services. small ruminants kept by 210,000 households. Before 1984, the sector was overwhelmingly · An environment conducive to national and dominated by the public sector. The govern- foreign private firms to supply wholesale ment set cattle prices and imposed a mandatory inputs and livestock products. off-take of 10 percent from each herd. The livestock public sector was overstaffed, highly · Private veterinary clinics to assist parapro- centralized, poorly trained, and unable to fessionals in herder groups distribute provide adequate services to herders. inputs. What's innovative? Reform of livestock services in- · Coverage of the country's main livestock cluding developing a community system of parapro- zones by private veterinary clinics and fessionals, private sector services, and public sector private input providers to respond to the policy formulation. herders' ever-increasing demands. From 1987 to 1995 a structural adjustment · Downstream construction of small commer- program for national livestock services rational- cial animal and meat markets for processing ized the sector, and prepared for future transfer of livestock products and sub-products of productive and commercial functions to (hides and skin for exports). herders and the private sector. The public sector terminated 1200 government jobs, · Strong involvement of producer organiza- retraining dismissed agents as producers or tions in production commodity chains. 53 animal health service providers. A line of credit, training plan, and study tours supported · Lighter, deconcentrated public management this reorientation. The government transferred of livestock sector institutions. state-owned clinics to the private sector, where private veterinarians demonstrated greater With this project the National Directorate for efficiency with better cost/benefit ratios. Herder Livestock (NDL) refocused on its public service organizations were formed to facilitate easier mission, and completed the transfer to the access to basic livestock services. private sector of animal health care and inputs distribution. The NDL remained responsible for policymaking, support to the development of PROJECT OBJECTIVES AND DESCRIPTION herder and other professional organizations The National Agricultural Services Program (including research and extension), and epide- helped to establish a new animal health services miological surveillance and control. system based on (i) a rationalized, restructured public sector, progressively deconcentrated and BENEFITS AND IMPACTS refocused on core public functions, (ii) a grow- The program put in place a nationwide live- ing network of private services providers, and stock services system (input delivery, technol- MODULE 1: BUILDING AGRICULTURAL POLICY AND INSTITUTIONAL CAPACITY ogy transfer, advocacy, training) based on LESSONS LEARNED AND ISSUES FORWIDER private delivery (veterinary clinics, private farms APPLICABILITY and paraprofessionals). This improved efficiency The Guinea experience can serve as a model of services and strengthened social linkages in for rehabilitation of the livestock sector. Spe- transhumance zones of conflict (see table 1.2). cific strategies and investments will vary de- Strengthened herder organizations and private pending on local situations, but four conditions operators improved demand and quality of are likely to be required for any successful services, such that the total numbers of auxilia- reform initiatives: ries nationwide is expected to reach 21,000 in the near futureæa 1/10 ratio of auxiliaries to · Reform is a long-term process that spans the herders, compared to a 1/20 ratio today. life of more than one project. It requires the adoption of an agreed approach by all Reforms contributed to an annual growth rate concerned parties to be successful. The case of the livestock sector of 5.6 percent, growth of the livestock reforms is such an example. in livestock numbers from 2.4 to 3.5 million, It has taken over a decade to implement and and an increase in meat production of 12,750 has broad support of all involved. metric tons. There was better coverage of herders' needs in basic animal health care · Working through existing national director- and creation of additional employment. ates instead of project units, and using civil Annual fiscal revenues from the sector rose servants instead of contractual personnel and herder organizations have been able to for project implementation, strengthens pay for basic services, thus ensuring the government's capacity and ownership. sustainability of the investment in the sector. With privatization of two state agencies, the · Political buy-in of the government into a distribution of animal health products is now major privatization initiative is an absolute entirely assumed by the private sector. necessity for its successful implementation. This can be achieved by demonstrating up- About 1,050 groups were provided with support front that privatization can be a win-win (primarily capacity strengthening) by the DNE. proposition as in the case of the DNE. In addition, DNE provided support to more than 200 departmental, provincial, regional, and · Motivating and equipping staff to leave the public sector is not merely achieved through 54 national coordination committees. A total of 54 conflict management committees were estab- training. A sound program must also assist lished in transhumance migratory areas to help concerned staff during the transition. resolve conflicts between farmers and herders. COUNTRY PROFILE: GUINEA Table 1.2 Changes in the Guinea livestock sector, 1987-2000 Project Name National Agricultural Services Program (Livestock Health and Sector Stakeholders Pre-1987 2000 Animal Health Component) Project ID P001081 Herders' Associations 0 1050 Project Component Cost US$5.9 million PrivateVeterinarians 0 42 Dates FY 1997 ­ FY 2001 Auxiliaries Animal Health Workers 0 11,800 Contact Point Francois Le Gall Government Livestock Agents 1800+ 691 The World Bank, 1818 H Street Government Livestock Staff in Cities 1080+ 55 NW,Washington D.C. 20433 Telephone: (202) 473-0355; Email: Flegall1@worldbank.org Source:World Bank Internal Documents. AGRICULTURE INVESTMENT SOURCEBOOK 2 INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY 55 H igher rates of growth in agricultural productivity are essential to promote broad-based eco- nomic growth, reduce rural poverty, and conserve natural resources. Productivity growth, in turn, is based largely on application of science, technology, and information, provided through national agricultural research and development (R&D) systemsænot just public organizations, but all organizations that generate, share, import, and use agricultural knowledge and information. RATIONAL FOR INVESTMENT Investment in agricultural science and technology (S&T) has been critically important to past growth performance, and is likely to be even more important for achieving future global development priorities, especially the Millennium Development Goals (MDG) of halving poverty and hunger by 2015.The chal- lenge in deciding future investments in agricultural R&D is to maintain past productivity gains, while supporting technological innovation in more diverse agricultural systems that will differentiate products and add value by processing, to enable rural producers to capture a larger share of the gains.Accordingly, the World Bank's current rural strategy,Reachingthe Policy Research Institute (IFPRI) studies on RuralPoor, places high priority on investments in impacts of public investment in India and agricultural S&T. China show agricultural R&D to have higher impacts on poverty reduction than do most GROWTH AND COMPETITIVENESS . S&T underpin other public investments, behind only invest- innovation needed to promote economic ment in education in China and rural roads in growth, and enhance competitiveness. Agricul- India (Fan, Zhang, and Zhang 2000; Fan, ture is a critical sector in many countries, Hazell, and Thorat 1999). Studies show that in especially in low-income countries. Although low-income countries, a one percent increase complementary investments in policy reform, in agricultural yields leads to a 0.8 percent markets, and institutions are necessary, invest- reduction in the number of people below the ment in S&T is a key element in enhancing a poverty line (Thirtle, Lin, and Piesse 2003). country's competitive advantage by reducing Over the long term, effects on food prices are production costs, improving product quality, especially important, as food is a large share of and generally increasing efficiency along the the expenditures of poor households. Employ- commodity chain. ment and wage effects of labor-intensive pro- duction and value-added processing are espe- POVERTY REDUCTION . Investment in agricultural cially important to poor people, who depend research has major impacts on poverty reduc- relatively more on wage labor (see box 2.2). tion through direct effects on producer incomes, indirect effects on consumer welfare through FOOD SECURITY. By 2020, IFPRI projects food lower food prices, employment and wage needs in developing countries to increase by effects, and growth-induced effects throughout nearly 600 million tons which is equal to one- the economy (see box 2.1). International Food third of current world food production. Contin- ued investment to increase productivity and enhanced environmental sustainability of Box 2.1 Past contributions of science and technology production systems is needed to ensure global food security. Investments in technology must The historical focus of research efforts on food crop technolo- also enhance household food security by gies, with emphasis on genetic improvement, has been undeni- increasing productivity of household food ably successful. Average crop yields in developing countries have increased by 71 percent since 1961, while average grain yields production, smoothing seasonal availability, 56 have doubled (to 2.8 tons per hectare).Yields of many com- mitigating the effects of drought, and improv- mercial crops and livestock have also grown rapidly (see inset ing nutritional content. figure below). ENVIRONMENT AND NATURAL RESOURCES. Future Yield growth in developing countries, 1961-2001 increases in agricultural productivity must come 200 from intensification, rather than exploitation of additional natural resources. Agricultural 160 systems must use natural resources more efficiently and repair past damage to eco- 120 Increase systems. This depends on application of scien- 80 tific knowledge, developing farmers' skills, and Yield a policy framework to improve resource use % 40 and conservation. 0 PUBLIC GOODS . Many products of agricultural Oilseed Cereals Tea Milk research are public goods that the private Source: FAOSTAT 2002. sector lacks incentives to produce. Small AGRICULTURE INVESTMENT SOURCEBOOK Box 2.2. Agricultural research and development and poor people Experience indicates that a broad-based approach to promoting agricultural growth can have substantial impacts on poverty reduction, providing agriculture is important to the incomes of rural poor; the agro-ecological base allows significant potential for productivity growth; land distribution is relatively equitable; and the poor consume nontradable food staples.This is illustrated by evidence from India (see inset figure A) and Nigeria (see inset figure B).Without these preconditions, agricultural research may still have strong poverty reduction impacts, but must be carefully targeted at poor producers and consumers. India: elasticity of poverty reduction with Nigeria: impact of cassava research and respect to yield growth development e) 2.0 Food price effect 10 (-v Wage effect come in 8 1.5 Direct reduction 6 sehold effect 1.0 hou price 4 poverty in of se by 0.5 2 increa % Elasticity 0 0 Short-run Long-run <2 2-4 4-6 6-8 8-10 >10 Income level ('000 Naira) Source: Datt and Ravallion 1998 Source: Source: Afolami and Falusi 1999 Source: Datt and Ravallion 1998; Afolami and Falusi 1999. farmers with limited purchasing power are not cycles. The paradox is that, despite such organized to finance research. Private firms, with evidence off high returns, agricultural R&D limited opportunity to appropriate profits from funding is stagnating in many countries. provision of technologies, will not invest sufficiently in research. Because of these market failures and because of long-term risky PAST INVESTMENT ACTIVITY 57 payoffs, the public sector funds most agricul- In the early 1980s, as the Bank recognized the tural research, especially in developing coun- major contribution of R&D to increasing agri- tries (see figure 2.1). Although private sector cultural production, lending for agricultural funding for agricultural research is expanding R&D increased rapidly to become a priority in rapidly, due in part to the application of stronger the agricultural loan portfolio. Since 1980, the intellectual property protection, this private research Bank has provided over US$2.5 billion for often relies on knowledge provided by publicly- agricultural research in about 100 countries fundedresearch. (see figure 2.2), accounting for a large share of all external support for agricultural research in ECONOMIC RETURNS TO INVESTMENT IN SCIENCE AND developing countries. In addition, the Bank is a TECHNOLOGY . Studies consistently show high leading contributor to the Consultative Group returns to investments in agricultural research on International in developing countries, averaging over 40 percent (see table 2.1). Rates of return tend to Agricultural Research (CGIAR), granting US$50 be higher for research in industrial countries million annually to the system. However, and for commodities with short production despite the high priority accorded to agricul- MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY FIGURE 2.1 PUBLIC AND PRIVATE AGRICULTURAL R&D INVESTMENT, 1976-95 Source: Pardey and Beintema 2001. tural S&T in the Bank's rural strategies, lending mortar" period up to the early 1980s empha- has fallen sharply since 1998. This is especially sized expanding public sector research through so in Africa and South Asia, where past invest- investment in physical infrastructure, equip- ments often failed because borrowing countries ment, and human resource development, in had not committed to a program of sustainable many cases to create centralized national institutional development. agricultural research organizations/institutions (NAROs/NARIs). From the late 1980s, emphasis World Bank support to agricultural technology shifted to improving management of existing programs has evolved over time. A "bricks and public sector research organizations through better planning, improved financial manage- ment, greater accountability, and increased relevance 58 Table 2.1. Estimated rates of return to investment in of programs to clients. In the mid-to-late 1990s the agricultural research instability and inefficiency evident in many public research organizations (see box 2.3) led to an empha- Number Median rate sis on development of institutionally pluralistic Region of estimates of return (%) agricultural knowledge and information systems (AKISs) with greater client and private sector partici- Africa 188 34 pation and financing. Asia 222 50 A 1997 evaluation of World Bank lending for Latin America 262 43 agricultural research from 1980 through the early 1990s suggested that portfolio perfor- Middle East/North Africa 11 36 mance should be rated as "unacceptable" All developing countries 683 43 (Purcell and Anderson 1997). The evaluation recommended that the Bank provide compre- All developed countries 990 46 hensive assistance for research systems, only All 1,772 44 when the borrower makes a clear commitment to adequately fund the system and to adopt Note : Information based on studies carried out from 1953 to 1997. sound management principles. Source: Alston et al. 1998. AGRICULTURE INVESTMENT SOURCEBOOK FIGURE 2.2 LENDING FOR AGRICULTURAL RESEARCH, 1981-2002 Source:World Bank Internal Documents. Since 1997, the Bank has supported agricultural other rural people, must be central partners. R&D within the framework of the development Investments in this system must be long term, of effective and efficient AKISs that "link people focused on support to increasing rural innova- and institutions to promote mutual learning and tion and competitiveness, and follow a set of generate, share and utilize agriculture-related guiding principles (see box 2.4). technology, knowledge and information" (FAO/ World Bank 2000). Such a system integrates farmers, agricultural educators, researchers, and FUTURE DIRECTIONS FOR LENDING extensionists to harness knowledge and infor- PROMOTING PLURALISTIC SYSTEMS . Public research mation from various sources for improved agencies will remain central to providing livelihoods (see figure 2.3). Farmers are at the coherence to many research efforts.1 Strategies, heart of this knowledge triangle and, along with however, must enhance, not restrict, participa- 59 Box 2.3 Common problems in public research organizations Common problems identified in reviews of World Bank support to agricultural research result from strong path-dependency in institutional development and slow institutional and policy change: · Lack of a consensus on a strategic vision for public sector research organizations and the evolution of the research system. · Ineffective leadership for many research organizations, resulting in internal management problems and lack of political support and funding for research. · Continued emphasis on building centralized national agricultural research organizations/institutes (NAROs/NARIs) at the expense of fostering a public-private system, including universities. · Difficulties in establishing an appropriate legal and governance framework for research organizations to provide the efficiency and flexibility needed in management of financial, physical, and human resources. · Loss of highly qualified scientific staff, and difficulties in recruiting the best and the brightest. · Weak links of NAROs with other research providers, clients, technology transfer agencies and developmental organizations. · Weak accountability to clients and funders. Source: Authors 1. See the AIN,"Strengthening Public Research Institutes" MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY FIGURE 2.3 ARGRICULTURAL KNOWLEDGE TRIANGLE tion by the full range of research providers, including universities, private firms, nongovern- mental organizations (NGOs), and farmer Research organizations. This will require: · Defining public and private roles. Effective research systems incorporate both public and private organizations, each filling the role for which it has an advantage. Public funding is critical to provide public goods and to establish the rules of the game that Farmers encourage an efficient overall research system. Not all countries can afford exten- sive public systems, but all must have institutional capacity to provide rural people access to benefits from advances in S&T, Education Extension whether developed at home or elsewhere. Efforts to promote greater private sector Source: FAO/World Bank 2000. Box 2.4 Guiding principles for investment in research systems The World Bank and FAO developed the following guiding · Accountable for use of funds and for results, with principles for agricultural knowledge and information systems incentive structures that ensure assignment of qualified (AKISs) program design: staff who are given adequate support and held respon- sible for results. Defined role for the public sector. Research investments need · Relevant to the needs and resource constraints of to target public funding for the provision of public goods so different categories of clients, balancing objectives of that investments are: profitability, productivity, and sustainability. · Made within a sound policy framework. · Pluralistic, involving a range of institutions with different · Based on clear national strategies that articulate a long- comparative advantages undertaking different research term vision and national policies, plans, and objectives for activities. research. · Well monitored and evaluated to ensure a results- 60 · Economically efficient with benefits and expected orientation; account for impacts on human, social, and outcomes that justify the investment. environmental capital; and demonstrate cost effectiveness. · Equitable with research results available to the poor and Based on a sustainable system. Institutional sustainability minority groups. depends on principles listed above and on financial sustainability Strengthened demand for services. Strengthening demand is and development of institutional capacity through investments critical to improving their efficiency, effectiveness, and that: sustainability, and requires that investments be: · Develop human and social capital necessary for clients · Demand-driven responding to farmer needs and interests and local institutions to be capable of continuous learning and involving clients in program governance, priority and problem solving. setting, and evaluation. · Are cost-shared by major stakeholders, based on agreed · Participatory, empowering local people to solve problems criteria including ability to pay for and use research and mobilize resources. results. · Based on subsidiarity with responsibilities devolved to · Develop political support from stakeholders as a basis for the lowest possible level of government consistent securing future financing. with competency, comparative advantage, and efficient Source: FAO/World Bank 2000. use of funds. Improved quality of services. Management improvements essential to improving research execution require that research programs are: AGRICULTURE INVESTMENT SOURCEBOOK participation in developing country research tion, and evaluation of research programs. To systems have mixed results but remain a be effective and sustainable, research systems long-term priority for science policy. must become more responsive to client de- mands and interests and become more ac- · Improving science and technology policy. countable to clients by: Many countries have invested substantially in technology development, while restrict- · Encouraging participation. Empowering ing import of "free" technology available farmers as purchasers, providers, and co- through access from abroad i.e. "spill-ins". financiers of research helps ensure that Sound policy frameworks for innovation research systems respond to their needs. (intellectual property rights (IPRs), biosafety Rapid appraisals and participatory on-farm regulations, genetic resources policy, and research draws on farmer knowledge and seed and input market regulations) are provides opportunities for them to partici- prerequisites to efficient functioning of pate fully in planning, executing, and scientific organizations and to enabling develop- evaluating research. Farmer and other ing countries to reap benefits from global stakeholder participation on research advances in S&T. governing boards and advisory panels can have real influence over research decisions · Delinking funding and execution. Deci- and priorities. Participation of women sions on financing of public goods can farmers is particularly important, given often be separated from responsibilities for their crucial role in rural production sys- producing them and, even when public tems; the special constraints under which financing of services is justified, the private they operate (for example, time con- sector (for-profit or not-for-profit) is often straints); and their range of activities and more efficient in delivering the product. enterprises, including marketing, agro- Initial experiences show that competitively processing, and food storage. contracting S&T services divides responsi- bility between the public and private · Decentralizing and deconcentrating re- sectors and improves the quality, account- search. Decentralization strategies being ability, and impact of services. pursued in many countries lead to complex trade-offs in the case of agricultural re- · Promoting partnerships. An efficient and search. Deconcentrating research involves 61 effective division of labor for S&T depends establishing research facilities under a on partnerships to integrate the various central research institute but located in players into an overall system. Partnerships different agro-ecological zones or political allow for specialization, exploit institutional units (for example, provinces). Decentrali- comparative advantage, and may reduce zation devolves funding, governance, and costs. Partnerships are often particularly administrative responsibilities to regional, useful in linking institutions with differing state, or local governments. Both ap- competitive advantages for work at differ- proaches can bring scientists closer to ent levels of the research continuum, as clients and better focus research on local with international research centers for problems and opportunities, but they can strategic research, and NGOs and producer also result in inefficient and fragmented organizations for adaptive research. systems that fail to take advantage of important economies of size and scope in STRENGTHENING DEMAND FOR RESEARCH PRODUCTS . Past much R&D. However, where possible, investments in S&T have mostly focused on decentralizing adaptive research is desir- supply of research products. Farmers, and able, by ultimately allocating funding to especially poor farmers, generally lack ability to users, who then contract needed research participate in funding, priority setting, execu- services (see figure 2.4). MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY FIGURE 2.4 PUBLIC AGRICULTURAL RESEARCH FUNDING 62 · Responding to consumer demand. Increas- · Right-sizing. Sustainability demands that ing consumer purchasing power and national governments provide adequate changes in food preferences will promote budgetary support to agricultural R&D, and the market signals to direct private R&D. `right-size' research organizations to the Public research programs also must also resources available, using funds saved for learn to respond better to market demands. operating costs and for paying scientists competitive salaries. Without evidence of SUSTAINABILITYOFR&D INVESTMENTS . Many public government commitment to such policies research organizations have suffered financial and reforms, external investment directed crises with declining budgets leading to to public research organizations is ineffi- minimal operating budgets and erosion of cient and unsustainable. Agricultural R&D salaries and incentives. Financing a recurrent must receive priority in national budgets. cycle of expansion and decline of public research organizations under consecutive · Ensuring sustainable financing. Public Bank projects is inefficient and requires investment in agricultural research in greater attention to: developing countries must increase sharply AGRICULTURE INVESTMENT SOURCEBOOK FIGURE 2.5 AGRICULTURAL RESEARCH INTENSITY BY REGION; PUBLIC SECTOR ONLY Source: Pardey and Beintema 2001. in order to promote a dynamic and com- tory evaluation are key to ensuring ac- petitive agricultural sector (see figure 2.5). countability. Such reforms should help to In almost all cases, government must develop a local political constituency for provide core funding for public research sustainable organizations, but this will institutions (or universities) that maintain a generally require better evaluation of core scientific capacity to undertake long- impacts and diffusion efforts to increase term public good research. public awareness of these impacts. · Improving management. Currently, many CHANGING RESEARCH PRIORITIES . Research systems research organizations are unproductive, must reconcile national priorities derived from suffering from poor leadership, onerous national development strategies and policies, bureaucratic procedures, political interfer- with demand driven and market-oriented 63 ence, low morale, and weak links to clients. priorities arising from clients. However, future Reforms are needed, through long-term investments will often give priority to the support for institutional development to following areas: address problems of inadequate operating funds, weak human resource policies, lack of · Improved poverty targeting. With the private performance incentives, and lack of clear sector increasingly serving the commercial priorities. In many cases, this requires the farming sector, public funding must focus creation of flexible and efficient autonomous more sharply on the poor. Public R&D research organizations that are run along organization must carefully set priorities in private-sector lines, with independent govern- terms of commodities, regions, and types of ing boards representing key stakeholders. technology important to the poor, com- bined with bottom-up processes of partici- · Accountability. Reforms must make re- patory priority setting, executing, and search institutions and researchers ac- evaluating research. Poverty targeting leads countable to clients and funding agencies. to quite different strategies for different Client co-financing of research, participa- types of farmers (see table 2.2). Gender is tion in governance bodies, and participa- relevant also in targeting S&T investments MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY Table 2.2 Strategies for enhancing poverty reduction of agricultural research by farm type Sector Direct impacts Indirect impacts Major R&D actors Commercial farmers · Increase micronutrient · Increase productivity to · Private agribusiness content of food to provide reduce food prices for · Public regulatory nutritional benefits non-tradable food staples framework · Generate employment in · Producer/trade high-value industries, organizations processing and handling Small, market-oriented · Diversify production to · Increase agricultural · Public research farmers increase value-addition productivity to stimulate · Public-private partnerships and high value crop/ overall economic growth · Producer organizations livestock production · Diversify production · NGOs · Develop technologies to systems to generate reduce production risks employment · Strengthen producer · Increase productivity to organizations to improve reduce food prices demand for research and · Increase value-added build human and social capital Subsistence-oriented · Increase productivity and · Build human and social · Public research farmers reduce production risks capital necessary to · Producer and community and improve storage and address a range of organizations utilization of food livelihood opportunities · Women's groups · Reduce labor require- · NGOs ment for tasks performed by women and the very poor · Encourage market access 64 for higher value crops/ livestock · Improve natural resource management (NRM) Source: Byerlee and Alex 2002. to reduce poverty, as a large share of poor prove product quality and food safety, meet farmers are women in most developing more demanding grade and standard require- countries and the number of women farmers ments, and diversify to higher-value and niche is increasing as men migrate to off-farm products. Nontraditional exports (for example, employment. horticultural exports, cut flowers, organic foods) offer potential for major increases in · Aligning R&D to market trends. Improved rural employment and incomes, but fre- technology and information, especially at the quently require substantial research and an postharvest stage, is essential to help farmers entirely new base of knowledge and skills not to orient to market needs, lower costs, im- generally available in country. AGRICULTURE INVESTMENT SOURCEBOOK · Natural resources and environmental country science capacity and level of devel- conservation. Degradation of natural re- opment, all countries will need to strengthen sources and public concern over environ- their policy and regulatory frameworks for mental issues, are shifting research priori- IPRs, biosafety and food safety, and identity ties and funding toward broader issues, preservation (that is, tracability of products many global in nature such as land, water, from farm to consumer). forests, and biodiversity; pesticide safety, and residue minimization; livestock waste · Strategic alliances and partnerships. All management; water quality preservation; countries can benefit from regulatory and watershed protection. There are also frameworks favorable to technology spill- increasing opportunities for agriculture to ins, public-private partnerships, and re- provide environmental services through gional and international alliances. Links to carbon farming and conserving biodiversity. the CGIAR enable many developing coun- Success in meeting these challenges re- tries to tap sources of new knowledge and quires sharply increased skills in research innovations. However, since many com- on natural resources management (NRM), modities are not covered by the CGIAR (for social sciences, and environmental issues. example, horticulture, tropical fruits, and coffee) research organizations must seek a · Social science and policy research. In many broader range of partners. Regional re- research systems, there is a perennial search initiatives led by regional or subre- problem of maintaining capacity to carry gional agricultural research organizations out socioeconomic research. This will are especially important in sharing the cost become even more crucial in future, with of research for many small countries. the need to provide support to public policy formulation, poverty reduction, a · Managing IPRs. Proprietary technologies are more market-oriented agriculture, and natural important in providing incentives for private resourcemanagement. sector research investments, but the results of such investments often do not benefit the ACCESSING NEW KNOWLEDGE . Developing countries poor. Public research institutions need the will need to make use of the latest advances in capacity to form partnerships or contractual S&T to address intractable problems in agricul- arrangements to obtain use of proprietary tural production and exploit new opportunities. scientific knowledge and to patent their own 65 Country size and level of technological devel- research in ways that will protect the inter- opment will shape different strategies for ests of resource-poor farmers. different countries, as they seek to overcome both scientific and institutional constraints STRENGTHENING UPTAKE PATHWAYS. Linear systems of associated with the use of new technologies. research that pass recommendations to exten- Key strategies to tap benefits from new tech- sion, which then transfers them to farmers, are nologies include: largely obsolete. AKISs have become more pluralistic, and farmers now seek out advisory · Investing in advanced science and technol- and information services from a variety of ogy. Biotechnology and information and sources. R&D organizations must use a range of communications technologies provide new potential uptake pathways or institutional tools to address the needs of the rural poor. mechanisms to provide research results to users. To a large extent, developing countries are not sharing in the benefits from these · Commercializing research products. Public advances, thus creating "molecular" and research institutions will increasingly rely "digital" divides. While strategies to access on private sector market mechanisms for these new technologies will vary with dissemination of research products. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY Establishing links early in the research sustainability of investments is a continuing process is often critical to ensure that challenge. Long-term commitments, through appropriate partnerships are established adjustable program lending and sequential and that the final research product can be operations, are important to building institutional used. Clustering of industries and R&D capacity and sustainability of agricultural knowl- organizations into science parks may edge and information systems. The level of facilitate commercialization of public sector financing provided might be less per year than innovations. The success of the industrial in the past, but continued over a longer period. clusters has varied greatly and seems to relate to the level of critical mass in the Increased agricultural S&T sector analysis and cluster, the diversification of the companies, policy dialogue are needed in many countries the economic incentives provided, and the that have yet to commit to reform of their intensity of interaction between R&D agricultural research systems. In these cases, bodies and business communities. policy dialogue will provide options for moving forward with reforms, before Bank support to · Linking to demand-driven extension sys- agricultural S&T is renewed. Better monitoring tems. Decentralized extension services and evaluation of research programs at all accountable to local user groups should levels is essential to improve program manage- facilitate client "purchase" of research ment and impacts, enhance scientific quality, services and products that respond to their and demonstrate results to funding agencies. needs. Matching grant programs for farmer and community groups can allow them to Finally, important gaps in established good test and disseminate new technologies. A practice that need to be addressed in future number of countries have introduced work include new approaches to research- competitive grant programs to provide such extension linkages in decentralized systems, grants to farmer groups. commercialization of research products, decen- tralizing research, involving producer organiza- tions in financing and executing research, and SCALING UP INVESTMENTS multicountry research investments. Investments in S&T to support rural develop- ment remain a priority for the World Bank SELECTED READINGS 66 Group. Research reforms such as competitive funding, contractual mechanisms, user funds, Asterisk (*) at the end of a reference indicates decentralization, science parks, and regional that it is available on the Web. See Appendix 1 and international partnerships, have promise. for a full list of Websites. However, for most of these initiatives, experi- ence is still limited, and more in-depth evalua- Byerlee, D., and R. G. Echeverria, eds. 2002. tion is required prior to wider scaling up. Agricultural Research Policy in an Era of Privatization. Wallingford, U.K.: CABI Biotechnology is also a key investment priority, Publishing. but monitoring of risks, both actual and per- ceived, must be an integral part of Bank sup- Chema, S., E. Gilbert, and H. Roseboom. In port. Complementary investments in agricul- Press. A Critical Review of Key Issues and tural education have been neglected, but are Recent Experiences in Reforming Agricul- essential to ensure a new generation of agricul- tural Research in Africa. Research Report tural scientists and leaders. 24. The Hague: ISNAR.* Agricultural investments must be tailored to Gijsbers, G., W. Janssen, H. Hambly Odame, individual country conditions and needs, and and G. Meijerink, eds. 2001. Planning AGRICULTURE INVESTMENT SOURCEBOOK Agricultural Research: A Sourcebook. between Government Spending, Growth, Wallingford, U.K.: CABI Publishing. and Poverty in Rural India. Research Report 110. Washington, D.C.: IFPRI. ISNAR. International Service for National Agricultural Research. http:// FAO/World Bank. 2000. "Agricultural Knowl- www.isnar.cgiar.org. edge and Information Systems for Rural Development: Strategic Vision and Guiding Pardey, P., and N. Beintema. 2001. Slow Magic: Principles." FAO, Rome; World Bank, Agricultural R&D a Century after Mendel. Washington, D.C. Food Policy Report. Washington, D.C.: IFPRI.* FAOSTAT. 2002. FAO Statistical Databases. http://apps.fao.org/default.htm. Tabor, S., W. Janssen, and H. Bruneau, eds. 1998. Financing Agricultural Research: A Pardey, P., and N. Beintema. 2001. Slow Magic: Sourcebook. The Hague: ISNAR.* Agricultural R&D a Century after Mendel. Food Policy Report. Washington, D.C.: IFPRI. World Bank. AKIS Sustainable Agriculture. http://www.worldbank.org/akis. Purcell, D. L. and J. R. Anderson. 1997. Agricul- tural Extension and Research: Achievements REFERENCES CITED and Problems in National Systems. Opera- Afolami, C. and A. Falusi. 1999. "Effect of Tech- tions Evaluation Study. Washington, D.C.: nology Change and Commercialisation on World Bank. Income Equity in Nigeria: The Case of Im- proved Cassava." Paper presented at Assess- Thirtle, C., L. Lin, and J. Piesse. 2003. "The ing the Impact of Agricultural Research on Impact Of Research Led Agriculture Produc- Poverty Alleviation workshop, sponsored by tivity Growth On Poverty Reduction In CIAT, San Jose, Costa Rica. Africa, Asia And Latin America." Contrib- uted paper for the 25th conference of the Alston, J. M., M. C. Marra, P. G. Pardey, and T. International Association of Agricultural J. Wyatt. 1998. Research Returns Redux: A Economists, Durban. Meta-Analysis of the Returns to Agricultural R&D. EPTD Discussion Paper No. 38. This Overview was prepared by Derek Byerlee, Gary Alex, 67 Washington, D.C.: IFPRI. and Eija Pehu, with inputs from the Sustainable Agriculture (SASKI) Thematic Team of the Bank. Peer review comments were provided by Marie-Hélène Collion, Howard Elliott, Byerlee, D., and G. Alex. 2002. "Designing JuergenVoegele, and Jacob Kampen. Investments in Agricultural Research for Enhanced Poverty Impacts." SASKI Good Practice Note. World Bank, Washington, D.C. Datt, G., and M. Ravallion. 1998. "Farm Productiv- ity and Rural Poverty in India." FCND Discus- sion Paper 42. IFPRI, Washington, D.C. Fan, S., L. Zhang, and X. Zhang. 2000. Growth and Poverty in Rural China: The Role of Public Investments. EPTD Discussion Paper 66. Washington, D.C.: IFPRI. Fan, S., P. Hazell, and S. Thorat. 1999. Linkages MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY AGRICULTURE INVESTMENT NOTE scientific peer review to allocate funding. CRGPs are often linked to establishment of an agricultural research fund, open to a variety of COMPETITIVE RESEARCH potential contributors who may wish to finance FUNDS specific research on technology transfer activi- ties through the fund. CRGPs complement Competitive research funds are being introduced "core" funding or "block" grant funding, which in many countries for financing agricultural annually allocate funds to specified public research, to mobilize available research capacity, research organizations for their core research stimulate scientific creativity, and promote programs, infrastructure, and human resources. efficiencies in the research system. Competitive research funds can be an effective mechanism for allocating resources for agricultural research BENEFITS and can drive reform of the overall research CRGPs are flexible and can be used to accom- system. High-quality review, administrative plish objectives difficult to achieve through efficiency, and transparent processes are essen- block funding. CRGPs can restrict funding to tial to program credibility, but most programs specific research topics (for example, rice); have yet to develop sustainability strategies. types of research (for example, adaptive on- farm research); projects requiring collaboration Many countries are seeking to reform to national between organizations or with farmers; or agricultural research systems that have become research within a specific region or discipline unproductive due to lack of operating funds, (see box 2.5). Their flexibility makes CRGPs a incentives, and flexibility. Competitive research useful tool in building national agricultural funds are used as financing mechanisms to research systems, as they can: mobilize available scientists for work on key problems, develop institutional linkages and · Mobilize the best available scientists, research capacities across organizations, and to including those in universities and the link scientists with users of new technologies. private sector, for work on specific high- priority projects. COMPETITIVE RESEARCH GRANTS PROGRAMS · Develop a pluralistic research system by providing operating costs to better utilize 68 In competitive research grants programs (CRGPs) research providers are selected on a available human and physical infrastructure competitive basis, using calls for proposals and from a wide range of institutions. Box 2.5 Ecuador: competitive grants The Program for Modernization of Agricultural Services in Ecuador finances a competitive research grants program (CRGP) that has funded 112 research projects.The program has supported strategic work on innovations to open new export markets through controlling fruit fly (cherimoya, guava, zapote, and other Andean fruits), decreasing production costs for new export products (snails, tree tomatoes, babaco, mushrooms, and artichokes), and controlling disease and insects in traditional exports crops (banana, cacao, and coffee). The program introduced a new research culture and brought new organizations into the research system. Research projects are being executed by 45 different public and private organizations, with most projects directly linked to potential users of the technologies.The government contracted program management to a private agency to develop procedures and ensure objectivity in program operations. Research project costs averaged US$116,000, of which 54 percent is financed by grants and 46 percent by executing agencies, mostly through in-kind contributions. By leveraging of cofinancing for research projects, the program helped increase national research funding by 92 percent to approximately 0.54 percent of agricultural GDP. Source:World Bank Internal Documents AGRICULTURE INVESTMENT SOURCEBOOK · Promote research partnerships and collabo- Box 2.6 Brazil: EMBRAPA competitive grants scheme ration between different organizations, disciplines, or countries. In 1997 EMBRAPA (the Brazilian Agricultural Research Corporation) launched a competitive grants program to · Make research more demand-driven by diversify funding for research and stimulate efficiencies and involving clients in setting priorities and change in the national research system.World Bank financing financing, executing, and evaluating (two-thirds for competitive grants and one-third for capacity research. building) supported a program targeting small-farm production technology, advanced technologies, natural resource manage- ment (NRM), and agribusiness. · Increase total research funding by mobi- lizing funds from farmers, industry, and By 1999, the program had funded 69 projects (212 sub- other sources. projects) from 506 proposals submitted in five calls for proposals. Several factors facilitated the fast start-up. Brazil has a large agricultural research establishment with 5,500 full-time · Improve research quality and innovation by researchers distributed equally in EMBRAPA, state research selecting projects based on rigorous techni- agencies, and universities.The country had extensive experience cal review of scientific merit, sound work with competitive research programs, though not in the plan, and expected results. agricultural sector.The staff of the program secretariat traveled extensively to solicit stakeholder views on the program, and to publicize the program and procedures for grant proposals. POLICY AND IMPLEMENTATION ISSUES Source: Reifschneider, Byerlee, and de Souza 2000. Success with competitive funding generally requires realistic expectations, clear priorities, efficient and transparent program management, PRIORITY SETTING . Competitive funding can and involvement of stakeholders in setting promote demand-driven research by involving priorities. It is important to be especially clear key stakeholders, especially users, in setting about objectives and desired long-term out- priorities, formulating projects, and screening comes, and to design CRGPs accordingly. proposals. However, purely demand-driven approaches with individual proposals consid- BASE FOR COMPETITION. CRGPs require sufficiently ered in isolation can lead to a fragmented large numbers of potential research providers portfolio of projects that lacks synergies to ensure a competitive environment and between activities and does not address adequate expertise for peer review and moni- national priorities. Important technological or 69 toring activities--a problem in small countries. market opportunities can be lost because of CRGPs must also enjoy strong support from farmers' lack of information and preference research organizations and relevant govern- for short-term results. ment ministries (see box 2.6). Protection from political interference in resource allocation is PROGRAM SUSTAINABILITY . Most programs financing crucial to maintaining program credibility. CRGPs envision them as permanent features of the agricultural research system. This requires LIMITATIONS. Competitive grants can be an mechanism to ensure institutional and financial important element of overall research funding, sustainability. The institutional structure for a but are inherently unstable and do not provide CRGP must be efficient and transparent if it is the continuity required for some types of to win ongoing support from researchers and many programs. CRGPs should therefore be clients. An independent, influential, and re- used to complement core funding that pro- spected governing board can help defend the vides infrastructure, human resource develop- program and sustain its institutional vitality. ment, salaries, and support for long-term research programs requiring continuity (such COSTS AND COFINANCING . Introducing CRGPs can as crop breeding). involve high upfront costs--although established MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY funds in industrial countries have held overhead mentation with strict standards for accepting costs to less than 5 percent. Continuity of program and evaluating proposals. funding is critical, and program design should consider sources for future funding, including: PROPOSAL PREPARATION . Competitive grants are being introduced where there is no history of · Cofinancing from the research provider (a competitive funding, where there are poor grantee) to increase overall funding and incentive systems in research organizations, and demonstrate commitment to projects being where producersæespecially smallholdersæare financed. not well organized to express their demands. Proactive support for applicants to develop · Phasing in government funding for the proposals helps ensure good quality proposals CRGP, with donor financing gradually declin- by investing up front in building capacity for on- ing as a percentage of total program funding. farm diagnosis, problem definition, socioeco- nomic evaluation, and writing proposals. This · Building the CRGP into existing research may include workshops, field exercises, and funding so that competitive funding is used establishment of local networks with farmer to complement the core research program. organizations and extension. "Affirmative action" might be needed to strengthen capacity of · Establishing an agricultural research fund to poorer regions or weaker institutions to enable support the CRGP with funding from a them to compete for grants. variety of sources, including in some cases, an endowment. GOVERNANCE AND MANAGEMENT STRUCTURE . A sound governance and management structure is critical · Creating mechanisms for the private sector to efficient operation and integrity of a CRGP (farmers' organizations, NGOs, and (see table 2.3). Pluralistic governance typically agribusiness) to finance grants in areas of requires an umbrella council, board, or steering special interest to the financier. committee with strong private and nongovern- mental participation. A program secretariat with financial management powers and an appropri- LESSONS LEARNED ate level of technical expertise is necessary for Programs must maintain operational efficiency, efficient day-to-day program operations. vitality, and transparency throughout imple- 70 Table 2.3 Typical governance structure for a CRGP Governing board Responsible for overall policy for program; oversees operations; establishes program priorities and policies; represents program with funding agencies. Technical advisory committee Responsible for technical oversight of operations; provides technical input to preparation of calls for proposals; advises on peer reviewer selection; monitors technical quality of research projects.This is sometimes a subcommittee of the governing board or is combined with the technical review panel described below. Secretariat Responsible for management of program and daily operations; provides support for governing and technical bodies; facilitates communications regarding program operations. Technical review panel Responsible for evaluation, scoring, and ranking proposals and making recommendations for funding. Source: Authors. AGRICULTURE INVESTMENT SOURCEBOOK DECENTRALIZATION. Research--both basic and Box 2.7 Potential investments strategic--usually requires competition and selection at the national or international level, whereas adap- · Capacity building for research organizations. tive research CRGPs might be managed entirely · Analytical studies for program priority setting. at the state or district level. Decentralized · Administrative secretariat with adequate technical management is especially useful in developing assistance. regional capabilities for adaptive research and · Program promotion and assistance in preparing research developing linkages with producers. Decentral- proposals. · Funds for research grants. ized CRGPs often benefit from oversight by a · Monitoring and evaluation systems and impact studies. national secretariat. Source: Authors. CLIENT PARTICIPATION . Farmer participation at all levels is desirable and is probably best sus- community enhance efficiency and quality of tained through participation in project prepa- research. Sound programs require: ration and execution, rather than in governing and review bodies. Rural producer organiza- · Clear program objectives that are estab- tions (RPOs) should be encouraged to col- lished from the outset to determine the laborate in, or lead adaptive research projects size, structure, duration, and type of grants under competitive grant programs. Rural to be madeæwhether for bringing new women need to be fully represented in such institutions into the research system, build- organizations. ing institutional capacity, promoting part- nerships, enhancing quality of research, INSTITUTIONAL REFORM AND CAPACITY BUILDING . Com- developing linkage to clients, resolving a petitive funding can be an important tool in the high priority problem, or increasing the reform process, gradually changing the mental- total level of research funding. ity of tradition-bound research organizations. In Eastern Europe and Central Asia, CRGPs have · Specific priorities for funding that conform worked around entrenched institutional struc- to national research strategies and objec- tures resistant to change, financing critically tives to avoid a highly dispersed portfolio. needed research and demonstrating mecha- nisms that better link research to clients · Eligibility and screening criteria for propos- als and grant recipients as these provide the 71 PHASED GROWTH . Programs should start small basis for proposal review and ensure and build on experience as scientists and quality proposals. Criteria generally cover: administrators become familiar with program scientific quality, clarity of work plan, operations and until the program's reputation timeliness of completion, relevance to and credibility have been established. New priorities, experience of proposer, adequacy programs require a learning period as scien- of institutional support, adequacy of bud- tists come to understand and accept the get, and compliance with cofinancing proposal-writing process, and as the funding arrangements. Review sheets with scoring body gains experience with proposal solicita- and ranking systems provide a transparent tion and review. basis for selection decisions. · Calls for proposals to provide comprehen- RECOMMENDATIONS FOR PRACTITIONERS sive information on program objectives and Care in each step of the program implementa- priorities and clear, detailed guidance for tion process is essential for efficient and effec- submitting proposals. Eligibility require- tive CRGP operations and related investments ments should be as flexible as possible to (see box 2.7). In all programs, transparency enhance participation of nontraditional and good communications with the scientific research suppliers. Calls for proposals MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY should be advertised widely to ensure that all Echeverria, R. G., and H. Elliot. 2002. "Financ- eligible candidates are aware of the program. ing Agricultural Research by Competitive Funding." In D. Byerlee and R. G. · Technical review of all eligible proposals to Echeverria, eds., Agricultural Research evaluate each proposal according to the criteria Policy in an Era of Privatization. established. High standards of review from the Wallingford, U.K.: CABI Publishing. beginning of a program contribute to quality projectsinthelongterm.Technicaladvisorypanel members should have clear terms of reference REFERENCE CITED and be selected for their scientific expertise. Reifschneider, F. J., D. R. Byerlee, and F. B. de Souza. 2000. Competitive Grants in the New · Formalawardofgrantsgenerallymadebythe Millennium: A Global Workshop for Design- governingboardbasedonrecommendationsfrom ers and Practitioners. Proceedings of an technicalreviewpanels,possiblywithconsider- international workshop sponsored by the ation of additional criteria, such as regional equity, Brazilian Ministry of Agriculture and Food, strategicpartnershipdevelopment,andfunding Embrapa, IDB, and the World Bank, May mobilization. 16-18. Brasília, Brazil: Embrapa. · Monitoringandevaluationbasedondetailed This Note was prepared by Derek Byerlee and Gary Alex targets and milestones provided in project based on the Good Practice Note "Competitive Research proposals, and on semiannual and annual reports Grant Programs Good Practice for Design and Management" with inputs from the Sustainable Agriculture (SASKI) from grant recipients. Program evaluations must ThematicTeam of the World Bank. be planned when the program is launched, and should focus on project outputs, outcomes, and impacts. The monitoring and evaluation system must cover individual grant projects, portfolio management by the CRGP secretariat, and institutional, economic, and social impacts of the CRGP. SELECTED READINGS 72 Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. AKIS Thematic Team. 1999. "Competitive Research Grant Programs: Good Practice for Design and Management." World Bank, Washington, D.C.* George, Pamela. 1999. "Designing and Manag- ing Competitive Research Grant Programs: Good Practice and Lessons Learned." Draft prepared by AKIS Thematic Team. World Bank, Washington, D.C. AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE many such organizations to seek greater au- tonomy and sufficient flexibility to efficiently manage financial, physical, and human re- STRENGTHENING PUBLIC sources for agricultural research. Autonomy RESEARCH INSTITUTES was expected to allow the research institute to get rid of excess staff, and improve manage- In many countries, institutional reforms are ment systems and personnel policies. Three essential to make public research organizations major types of national agricultural research more effective and efficient. A frequentæand organizations have evolved: often soundæstrategy for reform involves provid- ing public agricultural research organizations · Semiautonomous organizations have a legal with an independent legal status and mixed status different from the regular civil service public-private system of governance. This can but lack a legal corporate identity. Such provide operational flexibility essential for sound organizations provide some flexibility in management of research, diversification of financial and personnel management, but funding, and recruitment of productive scientists. often continue to follow civil service rules. The success of these reforms depends on free- Their power to set their own business rules dom from political interference, a clear vision is often ambiguous, and they lack adequate and strategy, respected leadership, a stable flexibility to carry out modern scientific funding base, and close links to stakeholders. research. Most NAROs fall into this category. Public agricultural research systems provide a · Publicly-owned corporations have a mixed, basis for innovation and increased productivity public-private governing body that, in necessary for a sustainable and competitive principle, has the power to set the rules for agricultural sector. National research systems financial, personnel, and asset manage- are becoming increasingly pluralistic, with a ment. However, since such organizations growing role for the private sector, new mecha- remain in the public sector, their flexibility nisms for research funding, and more global is often constrained by political factors and scientific linkages. Despite these changes, public funding continues to dominate. public sector NAROs continue to have a central Research organizations in Colombia, Uru- role to undertake basic and long-term research, guay, and Brazil are in this category. to provide public goods products, and to 73 support overall development of the research · Private or nongovernmental research system. However, many public research organi- corporations are fully private entities that zations need to resolve problems of low pro- operate for-profit or not-for-profit. These ductivity and relevance if they are to effectively organizations have full powers and more carry out these roles. independence from political processes, though they might still receive considerable financial support from government. The AUTONOMOUS NATIONAL AGRICULTURAL Crown Research Institutes in New Zealand RESEARCH ORGANIZATIONS (private for profit) and some research Most public research organizations were estab- foundations such as FUNDAGRO in Ecua- lished in the 1950s and 1960s as research dor (private not-for-profit) are examples. departments under ministries of agriculture. These grew over time with strong donor In practice, newly created autonomous or semi- support, but soon ran into problems due to autonomous research organizations have lack of compatibility between civil service rules generally found themselves still reliant on and the requirements for efficient research public funding, and substantially under the execution. By the 1980s, these problems led control of the ministry of agriculture. Autonomy MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY has not solved all problems, but it has gener- unproductive scientists, and a collegial, ally proven preferable to managing research nonhierarchical, and nonbureaucratic institutional programs within a government bureaucracy environment. (see box 2.8). Whatever their legal base (public or private), national or subnational organiza- Increasedpoliticalstatusofanautonomousorganiza- tions will likely continue to form the backbone tion can give the director the same political of national research systems, and will continue status as the most senior government official in to rely on public funding (Eicher 1999). Long- the sector and can increase the influence of the term development of these organizations must research establishment in national policy be planned in the context of the overall na- debates, and can be an asset in negotiating tional research system, and with a view to the agreements with local or international organiza- roles that the research organization will play in tions. that larger system. Increasing stakeholder involvement includes farmers and their associations, the broader BENEFITS scientific community, and other branches of Major reasons for creating legally independent government in the governance and financing of NAROs include administrative flexibility and the research organization (see box 2.9). This increased stakeholder involvement. helps focus research on the most critical prob- lems facing agriculture, informs users of new Administrative flexibility enables NAROs to technologies being developed, and diversifies obtain competent management, maintain a the base of funding for research. Participation creative environment, and have dependable by the broader scientific community, especially operating budgets. Good research depends on by universities, facilitates research collaboration respected leaders and highly qualified scientists and enhances scientific rigor in evaluating motivated to perform. This requires a flexible research programs. recruitment and promotion system, the ability to reward outstanding performance and dismiss POLICY AND IMPLEMENTATION ISSUES Many initiatives to create autonomous NAROs in the 1980s and 1990s failed. Reasons in- Box 2.8 Uruguay: effective reform cluded: fear by government officials that the organization might abuse its autonomy; 74 During the 1980s, it became apparent that the Uruguayan institutional cultures that were too weak to Agricultural Research Center under the Ministry or Agriculture prevent NARO officials from abusing flexibil- was constrained by civil service regulations and poor linkages to ity; defective design (such as statutes that farmers.As a result, in 1989, the National Agricultural Research poorly defined roles for the governing body); Institute was created as a publicly owned legal entity, but with full powers to set its own business rules along private-sector lines. flawed implementation (such as government The institute is governed by a Board of Directors, with two interference with NARO management); and members from government and two from farmer organizations. external and internal resistance (such as Farmers contribute about 40 percent of its budget through a levy opposition from staff who feared loss of job (0.4 percent) on sale of agricultural products. Government is security). Overcoming such opposition and obliged by law to provide a matching contribution. establishing new operating procedures re- Total research funding has increased and the institute has quires time and consistent support for man- developed a good reputation for its research work. One key to agement improvements. success was strong links to clients through decentralized research stations with regional advisory councils of farmers. Commodity Decentralization reforms are being pursued in working groups, roundtable consultations, and a technology many countries with a view to improving public diffusion unit further strengthen relations with clients. services. For research systems, especially in Source: Allegri 2002. larger countries, these can serve to provide AGRICULTURE INVESTMENT SOURCEBOOK Box 2.9 Cote d'Ivoire: private National Agricultural Research Center By the early 1990s, poor human and financial management, weak staff accountability, and lack of farmer input to program content caused inefficiency within the Cote d'Ivoire public research institute. Agricultural research came under strong pressure to provide technical support to producer organizations (POs) and extension staff and as a result, the National Agricultural Research Center was established as a private company with minority financial participation by the state. Board members are elected by the general assembly, which has a majority of users. After an external selection process, researchers were appointed and given three years to choose between remaining as civil servants with the Ministry of Sciences or becoming Center staff with private status.The researchers agreed to take Center employee status, provided their retirement and health insurance rights were guaranteed. The Center's structural reforms and decentralization facilitate relationships with the private sector; a new salary and incentives system is enjoyed by researchers; and POs, which have strong representation on the board, support the new structure. Follow- ing four years of discussion, POs, the Center, the extension agency, the Ministry of Agriculture, and donors are setting up a National Decentralized Interprofessional Fund for Agricultural Services Financing, which will finance research, extension, training, and PO development.The Fund will be managed by users, with funding from levies on major crops to ensure financial sustainability for core agricultural services.The government and donors may provide additional funding. Source:World Bank Internal Documents. administrative flexibility, facilitate closer links to for consulting or contract research, liberal clients, and allow for better focus on problems training and sabbatical policies, and arrange- of a particular province or agro-ecological zone. ments to commercialize research innovations. Both decentralization and deconcentration can realize some of these outcomes, but may sacrifice economies of scale and scope, and LESSONS LEARNED lose the critical mass of scientists and facilities There is no single "right way" to reform re- that is often necessary for productive re- search organizations, as the specific country search. Still, decentralizing adaptive research context and maturity of the existing research is important in almost all cases as a means of organization must be considered. improving responsiveness to client needs. KEY REFORMS . To be truly independent, NAROs Salary scales for scientists are a recurring must have an independent governing body to problem in public research organizations. prevent undue political interference. A governing 75 Although good scientists generally compete on body representative of major stakeholders, international or regional markets, many NAROs selected on the basis of professional merit, should maintain civil service salary scales for research have freedom to select the chief executive officer scientists that are inadequate. While this is based on merit and to establish policies for open, indefensible, there is no easy solution without transparent,merit-basedrecruitmentandpromotion, broader civil service reform, as senior civil andperformance-basedevaluationandrewardsystems. servants generally resist increasing salaries for Thechairofthegoverningbodyshouldgenerallybea scientists above those of other government highlyrespectedindividualfromoutsidegovernment. officials. Ongoing reforms in China are using a rigorous review process to identify about one- SEPARATION OF FUNDING AND EXECUTION . Increasingly, third of the scientists who are internationally the bodies that fund research are separate from competitive and who will be put on a special those that perform research. Competitive and pay status that will quadruple their salaries; contractual funding mechanisms favor organiza- other scientists will be assigned to privatized tions that can deliver high quality, relevant research organizations or retired. Other incen- research (see box 2.10). They need to compete tive options include: providing opportunities for grants, and the signing of results-oriented contracts often improves performance. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY Box 2.10 Bangladesh: failed reform The Bangladesh Agricultural Research Management project (1996-2001) failed to achieve projected efficiencies through institutional reform relating to the structure and role of the Bangladesh Agricultural Research Council, and associated national agricultural research organizations (NAROs). As a result, despite having financed useful research, the project outcome was considered "moderately unsatisfactory" and sustainability "unlikely." Problems started early. Although the government passed an act to empower the Council there were requests for "flexibility" in the reform agenda even before appraisal. At appraisal, the government announced that personnel reforms were not possible, and research institutes could not be separated from parent ministries. During implementation, three major problems were not addressedælack of the Council's authority over research institutes, lack of central budget and program coordination, and excess numbers of institutes and stations. Fundamental problems included the lack of a high level champion for reforms, and inability to subordinate individual interests of ministries and institutes to the need to improve overall coordination and efficiency. As a result, research efficiency suffered and the Council is considered "unsustainable." Source:World Bank Internal Documents. BROADER PUBLIC SECTOR REFORM . Many countries are tion should be paid to developing human attempting to modernize and reorganize the resource management and incentive systems. public sector as a whole. In reforming research organizations, consultations with those manag- ing broad public sector reforms are important. RECOMMENDATIONS FOR PRACTITIONERS Past experience provides a number of good OPERATING RULES . In creating or reforming an practices for the successful NARO reform and autonomous research body, considerable time related investments (see box 2.11). and resources are required to develop appro- priate rules and policies. A governing body and · A thorough analysis of current performance a chief executive officer with requisite skills is required to lay the foundation for clear and experience from outside the public sector mission and vision statements that establish facilitates this process. Those with only public a clear role for the organization, define sector experience are likely to copy govern- public sector roles, and link the organiza- ment business rules and policies, defeating tion to funding sources, technology transfer major objectives of autonomy. Particular atten- agencies, and national policy organizations 76 (see box 2.12). Box 2.11 Potential investments · Planning should be fully participatory through workshops and consultations that · A management change team. include a full cross section of farmer · Technical and legal assistance for developing the legal documentation for establishment. categories. · Technical assistance and training for establishing operating procedures, manuals, and guidelines. · Identifying a leader, or a "change" manager", · Civil works and equipment. is important as independent research organi- · Training for governing board members, NARO manage- zations with poor leadership often fail. ment staff, and key stakeholders. · Core operational funding for research programs and for · An effective governing body that is highly capacity development on a declining basis. · Funding for competitive grants programs. professional, representative of key stake- · Technical assistance in developing diversified sources of holders, and independent is critical. Terms funding. of reference for the governing body should · Partnerships and linkages with international research clearly define its role in formulating policies programs. and priorities for the organization, but avoid Source: Authors. interference in its day-to-day management. AGRICULTURE INVESTMENT SOURCEBOOK · Institutional and legal reform should be Box 2.12 Stakeholders to include in the governing body accompanied by strategies to diversify funding usually through: participation in · Producer organizations competitive grants schemes, commercial- · Agribusiness sector ization of research products, tapping of · Ministries of Agriculture, Science andTechnology, and private funding through production Finance levies, contracts with the private sector, · Technology transfer agencies-public or private, including and joint ventures. NGOs · Distinguished university scientists · The price of flexibility is greater account- Source: Authors. ability for results. Funding agencies must establish realistic, clearly understood performance measures of evaluating perfor- mance. The staff of funding agencies need training in this area. SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. AKIS Thematic Team. 1998. "Reforming Agricul- tural Research Organizations: Creating Autonomous Bodies and Managing Change." AKIS Good Practice Note 01/99. World Bank, Washington, D.C.* Byerlee, D., and R. G. Echeverria, eds. 2002. Agricultural Research Policy in an Era of Privatization. Wallingford, U.K.: CABI Publishing. 77 REFERENCES CITED Allegri, M. 2002. "Partnership of Producer and Government Financing to Reform Agricul- tural Research in Uruguay." In D. Byerlee and R. G. Echeverria, eds., Agricultural Research Policy in an Era of Privatization. Wallingford, U.K.: CABI Publishing. Eicher, C. K. 1999. "Institutions and the African Farmer." Issues in Agriculture 14. CGIAR, Washington, D.C. This Note was prepared by Derek Byerlee and Gary Alex based on the Good Practice Note "Reforming Agricultural Research Organizations Creating Autonomous Bodies and Managing Change" with inputs from the Sustainable Agriculture (SASKI) Thematic Team of the World Bank. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY AGRICULTURE INVESTMENT NOTE sustainability and establishing sound research programs. This is changing as CRGPs have increased university participation in agricultural ENHANCING UNIVERSITY research of national importance in a number of PARTICIPATION IN NATIONAL countries, including Ecuador, Brazil, and Chile. AGRICULTURAL RESEARCH SYSTEMS International donors have invested heavily in universities and faculties of agriculture. From Universities, with their functions of educating 1964 to 1990, World Bank-financed projects students and generating and disseminating provided US$713 million for 41 projects sup- knowledge, are central to productive AKISs. porting universities in 25 countries (both The number of agricultural faculties has grown agricultural and general). From the 1950s to rapidly, and since about half of the agricultural 1996, the United States Agency for International scientists in developing countries work in Development (USAID) provided US$456 million universities, they have considerable potential to for 63 agricultural universities in 40 countries. carry out research. University faculties devote In the 1990s, donor support to universities about 25 percent of their time to research, and declined sharply, but there has been a renewed the balance to teaching programs, supervising interest in the important symbiotic relationships postgraduate students, and consulting. Agricul- between investments in agricultural higher tural universities and faculties of agriculture in education, research, and extension. Three universities face challenges of providing rel- recent examples illustrate the "new directions" evant and high quality training for future in donor strategies for supporting tertiary agricultural scientists, mobilizing funding for (higher) education: research, disseminating research findings, and recruiting, promoting and retaining gifted · The World Bank publication Constructing teachers and researchers. Knowledge Societies (2002) stresses the powerful role that universities play in Agricultural universities and faculties of agricul- creating and disseminating knowledge, ture in universities in developing countries are building professional capacity, and reduc- central to building a comprehensive AKIS. They ing poverty. train future research staff and have the poten- tial to use existing staff and facilities, such as · Four United States foundations have com- 78 libraries, laboratories, and demonstration farms mitted US$100 million to assist in reforming to carry out research at marginal additional universities in six countries in Africa over cost. Many universities also provide consulting the 2000-2005 period. services to various public, private, and NGOs. · USAID in 2002 launched a new global Degree training is the primary function of training and capacity-building initiative to agricultural universities. From the early 1960s to increase graduate training in food and the mid 1980s, agricultural universities helped agriculture in United States universities, and to quadruple the number of developing coun- to strengthen agricultural higher education try agricultural researchers. However, results in developing countries. from the early phase of donor investment in university research have been mixed. Some UNIVERSITY CONTRIBUTIONTO NATIONAL agricultural universities actively participate in AGRICULTURAL RESEARCH SYSTEMS AKIS and generate high-quality research, but in Many universities have the potential to partici- others, research capacities have eroded. Many pate in national agricultural research systems universities have expanded training capacities, (see box 2.13). Competitive grants, contracts, but have been unsuccessful in achieving fiscal and other mechanisms provide the necessary AGRICULTURE INVESTMENT SOURCEBOOK Box 2.13 Uruguay: linking universities to the National Research Institute In Uruguay, effective linkages have established a research partnership between universities and the National Research Institute. · Ten percent of the Institutes research budget is set aside for competitive contracting for research with outside agencies. Universities receive almost half of this funding. · University and Institute staff meet annually to prepare joint research programs. · Senior Institute staff spend up to 20 percent of their time teaching at universities. · The Institute facilitates university linkages with international programs (especially the international agricultural research centers. · University students receive National agricultural research institute fellowships. Source: Hobbs et al. 1998. links to do this (see box 2.14). In addition, as · Regional research. A university can assume private universities are becoming more lead responsibility for work on a particular important in the provision of higher education, commodity or production system within its these also should have an equal opportunity to region. compete for government support for technol- ogy development programs. · Consultant services. A university can pro- vide consultant services by providing its The complementary nature of research, educa- research findings to NARIs, NGOs, interna- tion, and extension indicates a need for close tional agencies, and commercial firms. communication and cooperation among the core institutions in pluralistic national technol- ogy development systems. Agricultural universi- POLICY AND IMPLEMENTATION ISSUES ties and agricultural faculties can make the Universities must adapt to a changing global following contributions: agricultural environment and address new training and research challenges related to · National research. A university can assume NRM, agribusiness, biotechnology, and trade. full responsibility for public sector agricul- tural research by establishing a NARI within TRAINING FUTURE RESEARCH SPECIALISTS . Historical the university. support of donor-funded overseas postgradu- ate training is declining. World Bank support 79 · Basic research. A university can focus on for such training declined by 34 percent from basic and strategic research, leaving applied 1990 to 1997, and the number of USAID- and adaptive research to other institutions. financed postgraduate students studying Box 2.14 Ghana: establishing a university role in national agricultural research programs In Ghana, the Bank-supported National Agricultural Research Project, initiated in 1992, helped bring universities into the national research program through two mechanisms: · The Ghanaian National Commodity/Factor Research Programs, established for 17 strategically important research areas, are led by Program Coordination Committees. Scientists from universities serve on these committees and may serve as program coordinators. · A research grants scheme was designed to draw universities and other institutions into the research system, and to complement research activities under the national program.The scheme gave priority to basic and strategic research. By mid 1998, it had funded 110 research projects, including 34 that supported postgraduate research at local universities. Source:World Bank Internal Documents. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY agriculture in the United States fell from 310 in their university salaries, research programs are 1990 to 82 in 2000. often disrupted and the time available for research and supervision of postgraduate Long-term training for most masters' students is students is curtailed. now undertaken in developing countries, and doctoral students are educated in both indus- FINANCING UNIVERSITY RESEARCH. Competitive fund- trial and developing countries. The next ing mechanisms are becoming increasingly challenge is to improve the quality and fiscal important for financing university research (see sustainability of universities that have devel- box 2.15), but if overhead costs are not cov- oped a regional reputation for high-quality ered, there can be a net loss of funds available masters' and doctoral training. for the university's own research program. A sustainable agricultural research program UNIVERSITY RESEARCH AND NATIONAL STRATEGIES . requires funding for: Research priorities must balance the university's independence against strategic national re- · Infrastructure (building laboratories, estab- search needs, with policies and strategies lishing electronic communications, procur- designed to encourage, not stifle, individual ing equipment, and acquiring land or other initiative by scientists. Tying national funding to facilities) and training research students to research on high-priority topics will stimulate the masters and doctoral level. research in these areas. · Thesis research of postgraduate students FACULTY INCENTIVES . University programs require possibly funded through a competitive adequate salaries, innovative policies relating grant program or a research fund dedicated to faculty consulting, and incentives to faculty to thesis research. for development-oriented research and for mentoring and supervising postgraduate · Strategic research programs focusing on students. When university scientists take particular problems, such as biotechnology second jobs or consulting work to supplement or natural resources management. These programs require long-term funding and are usually inappropriate for funding Box 2.15 Chile: financing university research through a competitive system. 80 In Chile, even though the primary mission of higher education is · Maintaining relevance and effectiveness of training, the budget for agricultural research at the nation's 17 research programs by establishing mecha- universities reached US$4 million in 1995. Funding came from: nisms to expand interaction with farmers. Universities can gain local agricultural · Government grants to universities, including a research fund used to contract staff. knowledge by recruiting students from farm · National competitive research grant programs (CRGPs), backgrounds, integrating students into joint which are a major source of research funding, but provide university-NARI research projects, and funding that is unstable, unfocused, and does not cover expanding research in the rural social overhead costs. sciences and in rural production systems · Government research contracts, mostly for applied and covering farming systems, ecosystems, and adaptive research projects. agro-ecological regions. · Sale of research goods and services, especially contract research. · Research grants from private sector and international sources. LESSONS LEARNED · University income and other sources that provided small Strategic plans, institutional structures for amounts of research funding. research, and project investments can enable Source:Venezian 1993. universities to execute high-quality research, if AGRICULTURE INVESTMENT SOURCEBOOK the universities have an adequate policy frame- Box 2.16 Uganda: building an integrated agricultural work. (see box 2.16). knowledge and information systems CRGPs targeting university scientists are cost- In Uganda, the five-year Agricultural Research and Training effective mechanisms for linking university Project, initiated in 1993, built an integrated system for research capability to national programs. agricultural research and education that includes universities. Assistance with grant proposal preparation Support to the university system covered: might be needed to help universities compete · Training to fill critical gaps in the university faculty. for such funding. · A Continuing Agricultural Education Center to provide demand-driven training for clients. Research infrastructure development should · A program for twinning Makerere University with foreign conform to university research priorities, with universities to strengthen curricula. expansion limited to essential facilities that · Capacity building for diploma-level training at agricultural colleges. can be maintained over time. Investments · Close coordination with universities in developing an should include human resource development effective national agricultural research institute (NARI). through postgraduate training and sabbaticals Source:World Bank Internal Documents. as well as investment in equipment, buildings, and related facilities. pluralistic national technology systems. Project Postgraduate programs provide universities investments (see box 2.17) can: with a cadre of motivated and low-cost student researchers. Client-oriented postgraduate EVALUATE UNIVERSITY CAPACITY TO CONTRIBUTE TO research contributes to the relevance of univer- R&D. Assessments of institutions and their sity programs, links research to teaching and agricultural research capacities and programs has the potential to attract funds from the should categorize universities as to whether private sector, donor projects, and other they deserve broad program support and can sources. Successful postgraduate programs effectively absorb such support; need reform, require an experienced faculty, an adequate but are still appropriate for targeted assistance; physical infrastructure, library and Internet or require major reforms before investments resources, and modest operating budgets. can be justified. Major university investments should also be conditioned on commitments to University programs establishing strategic respond to market and client needs. 81 research alliances with other institutions can strengthen national research programs while ESTABLISH MANDATES AND STRUCTURES . At both the building postgraduate training capacities in national government and university levels, im- universities. Ecuador's competitive grants proving the framework for productive university program financed strategic alliance grants that involvement in research generally requires: enabled universities to establish partnerships with local and foreign institutions to develop Box 2.17 Key investments to develop university research postgraduate training programs and expand capacities core research capability.2 · Infrastructure (human and physical). RECOMMENDATIONS FOR PRACTITIONERS · Postgraduate degree training. Balanced development of efficient and sustain- · Strategic alliances. able technology systems suggests that universi- · Core research support. ties must become important contributors to · Competitive research grants. Source: Authors. 2. See the IAP,"Ecuador: Strategic International Alliances for Capacity Building and Research" MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY · Providing university research programs REFERENCES CITED legitimacy and visibility, helping align Hobbs, H., C. Valverde, E. Indarte, and B. programs with national priorities, and en- Lanfranco. 1998. "The Agricultural Technol- abling them to attract government funding. ogy Development Fund for Contract Re- search: An INIA (Uruguay) Initiative." · University support to effectively carry out Briefing Paper 40. ISNAR, The Hague. research. This often requires a policy state- ment; a strategy outlining priorities and links Venezian, E. 1993. "A Case of University Partici- to users and other programs; incentive systems pation in National Agricultural Research: the that reward mentoring and supervision of Faculty of Agriculture, Catholic University postgraduate students and client-oriented of Chile." In FAO, The Role of Universities in collaborative research; and a small research National Agricultural Research Systems. management unit to facilitate funding, execu- Report of the FAO Expert Consultation, tion, planning, monitoring, and evaluation. March 10­22, 1991. FAO, Rome. · NARI-university partnerships, which include This Note was prepared by Carl Eicher and Gary Alex, joint research projects, joint supervision of based on a World Bank Good Practice Note "Integrating postgraduate students, and joint seminars Universities into National Agricultural Research and Exten- sion Systems," with inputs from the Sustainable Agriculture and annual research reviews. (SASKI)Thematic Team of the World Bank. · Links to clients and stakeholders to ensure that programs respond to client needs. Links can be established with POs and rural NGOs that promote equity in development. · Research publications that disseminate and promote research findings and increase the visibility of university programs. Equal incentives should be provided to locally published, development-oriented research, and to more academic work published internationally. 82 SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. FAO. 1993. "The Role of Universities in Na- tional Agricultural Research Systems." Report of the FAO Expert Consultation, March 10-22, Rome. World Bank. 2002. "Constructing Knowledge Societies: New Challenges for Tertiary Education." World Bank, Washington, D.C.* World Bank. AKIS Sustainable Agriculture. http://www.worldbank.org/akis. AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE pate in the design, testing, and dissemination of appropriate technologies is the objective of widespread experimentation with farmer LOCAL AGRICULTURAL participatory research groups in developing RESEARCH COMMITTEES countries. CIALs were developed to provide farmers and POs with a research service that is Local Agricultural Research Committees (known accountable to its client group, increases the by their Spanish acronym CIALs) are locally- ability of R&E services to reach remote areas, elected groups of farmers who run volunteer and provides feedback to improve the design agricultural technology testing services financed of technology. by local contributions in cash and kind and supplemented by funds from state or NGOs. The CIAL is a farmer-run, volunteer research CIALs enable farmers to express their technol- service that is initiated by and answerable to its ogy demands, and participate in the design, client group. Client groups may be informal or testing, and dissemination of appropriate formally organized groups of farmers motivated technologies. This adaptive research service is to test agricultural innovations (including the accountable to its clients, increases the out- best local practices) when appropriate technolo- reach of technology services to remote areas, gies are lacking or unproven for local condi- and provides feedback to improve technology tions. The client group elects a committee of design. Training facilitators and committees is a farmers chosen for their interest in experimenta- one-off investment that enables a research and tion and willingness to serve. The client group extension program to expand its coverage at can replace committee members who do not low cost, or to reduce the overall cost of put in enough time and elect new ones. Com- maintaining contact with farmer groups. The mittees, ranging in size from four to more than CIAL approach has been adapted successfully 20 members, conduct research on local, priority in eight Latin American countries and is ex- topics. This approach enables farmers to share panding in Africa and Asia. risk and build on local experience when trying out untested agricultural innovations. Development of technology recommendations is costly and time consuming, and mechanisms The committee works with its clients to estab- to ensure feedback to research and extension lish priorities for research topics, consults with (R&E) providers from poor farmers are essen- R&E providers, raises funds, plans experiments, 83 tial, but widely lacking. This results in low rates conducts trials on several farms, and regularly of technology adoption by resource-poor reports results to clients and R&E providers. producers. Even where a market for R&E Initially, the committee organizes a diagnostic services exists, the weak capacity of farmers to process in which all clients participate in express demand is a constraint. However, consultations with other farmers. When priori- resource-poor farmers in tropical countries ties are being established, attention to gender have successfully developed profitable and or ethnic differences is important, and special ecologically sustainable agricultural technolo- interest groups may need or demand a commit- gies on their own. Collaboration between tee of their own. A local or regional facilitator farmers and researchers at an early stage in the encourages client groups to choose a research design and testing of technologies has the theme with good chances of success, and with potential to blend local and nonlocal technical the potential to benefit most of its clients. knowledge and lead to successful innovations. When the client group identifies a research topic, the committee searches for information LOCAL AGRICULTURAL RESEARCH COMMITTEES to establish whether there is really a need for Strengthening the capacity of poor farmers to research. If the committee finds that locally- articulate their research needs and to partici- proven technologies are available, it asks MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY farmers or R&E providers experienced with the whether the committee's priority is research or technology, to provide community-wide train- community development. If it is research, a ing. If committee members are unsure of what small group of expert farmers experiment with works locally, the experiment, will generally innovations on behalf of their client group. If compare multiple, unproven solutions that may the priority is community development, the be indigenous or of external origin. CIAL process may be included in social projects, such as credit schemes. The major costs of establishing a CIAL are incurred during the first year for training and a Effective links to research organizations is key one-off petty cash or inputs' fund for opera- to all CIAL approaches. When farmers are very tions. For example, in Colombia, facilitator poor and there is a high level of cultural training by salaried professionals costs approxi- dependency or risk-avoidance, adaptations as mately US$600 and the start-up funds for CIAL outlined in box 2.19 are useful first steps in operations (the CIAL Fund) range from US$25 establishing effective CIALs. to $500 per CIAL in cash or kind. The facilitator, who may be a professional or a farmer with BENEFITS prior experience in a local committee, assists CIALs have achieved three types of benefits: client groups to establish CIALs, and then more rapid technology adoption; human and progressively hands over responsibility to the social capital formation; and welfare benefits. committee. One facilitator can support 50 or Technology adoption and welfare benefits more CIALs, provided that person can bring accrue to the wider client group; human and some members to regular meetings or has social capital formation benefits accrue mainly transportation to visit them. Training of facilita- though not exclusively to the members of tors and committees is a one-off investment that committees. Farmers and their organizations enables a research and extension program to gain new knowledge and skills plus the capac- expand coverage at a low cost. Training of ity to engage R&E providers in support of local experienced farmers as facilitators drastically experimentation (see box 2.20). reduces costs. The CIAL process has been adapted success- POLICY AND IMPLEMENTATION ISSUES fully to different situations provided that com- FINANCIAL SUSTAINABILITY . CIAL costs depend mittees, facilitators, and client groups keep to primarily on the frequency of visits by facilita- 84 the basic principles outlined in the Recommen- tors and the number of CIALs supported by dations for Practitioners section. Adaptations by each facilitator. This in turn depends on the NGOs, universities, local governments, pro- density of CIALs in a region. Typical levels of ducer organizations, vocational schools, and facilitator-CIAL contact are biweekly for a new experiment stations has resulted in a wide CIAL. After the first experimental cycle the variety of committees (see box 2.18). The main frequency of contact is reduced progressively, difference in committee adaptation depends on and costs typically drop by 50 percent. In Colombia, in 1999, the cost of establishing a CIAL averaged US$670 for the first year, Box 2.18 CIAL development and spread declining to US$400 in the second year and US$200 in the fourth year. The costs of CIAL The CIAL approach to participatory on-farm research was first operations are often partly financed by spon- used by the International Center for Tropical Agriculture in sors who provide experimental inputs and/or 1992. By 2003 over 250 CIALs operate in eight Latin American petty cash (for example, NGOs, local govern- countries. An unknown number of adaptations of the approach exist in East and West Africa and Asia, including China. ment, R&E providers), and will be partially or wholly financed by local farmers' contribu- Source: ISNAR. tions and community-based fundraising by AGRICULTURE INVESTMENT SOURCEBOOK Box 2.19 Alternative approaches used in different situations · Where short-term food security is a priority, begin by evaluating treatments in researchers' trials, and subsequently share risk in farmer-run experimentation (Ecuador, East Africa). · Run a collective production plot using proven technologies together with the CIAL's small experimental plots for untried technologies.The collective production helps compensate committee members for their time and adds to the petty cash fund (Honduras, Colombia). · Test and monitor innovations on farms without establishing formal experiments.This is especially useful with livestock or natural resource management (NRM) practices (East Africa, Southeast Asia) · Elect a large committee. In Northeast Brazil large committees sustained CIALs through periods of seasonal migration. In Honduras, large committees made the human capital development benefits of membership accessible to a broader cross- section of the client group. · Create a petty cash fund by providing the CIAL with experimental inputs in kind and then use profits from trials to fund the committee's activities.This enabled CIALs in Bolivia and Colombia to increase their petty cash fund. · Run the petty cash fund as a revolving credit fund or as a small venture capital fund that makes loans for equipment that is rented out to the client group. · Form a CIAL to provide R&D on new products or processes for small agro-enterprises. Source: Authors. committees (for example, raffles, dances, maintained with an NGO or state research or collective production plots). Once a petty cash extension provider. Mature CIALs can function fund has been established, most committees successfully with as little as three or four keep their fund going, and some have in- contacts per year with their facilitator, but creased their funds over time. The costs of geographically-isolated CIALs do not realize facilitator salaries and training are most com- their full research potential. R&D providers monly borne by sponsors such as NGOs, working with CIALs must commit to regular universities, local government, or public sector contact, respect for farmer research, punctual- R&E providers. ity, accountability, and shared decisionmaking. Support from R&D decisionmakers and links to local government enhance sustainablity (see LESSONS LEARNED box 2.21). In the initial phases, institutions can INSTITUTIONAL SUPPORT . CIALs provide a local overburden CIAL members with incessant adaptive research service that accelerates demands for meetings, but continuing contacts 85 innovation when an active relationship is can motivate participation. Box 2.20 The potential impact of Local Agricultural Research Committees · Strengthened farmer experimentation.An impact study of over 300 households in Colombia found that individual farmers influenced by Local Agricultural Research Committees (CIALs) were involved in over 50 different kinds of experiments on their own. · Improved the quality and relevance of on-farm research. Monitoring shows that 75 percent of CIAL experimental data can be statistically analyzed by scientists, and that other data are meaningful to farmers (CIAT, 1998). · Developed agro-enterprises. CIALs have introduced profitable new crops, post-harvest processes and/or new varieties. · Improved food security. An impact study in Colombia found that communities with CIALs had fewer respondents short of food in the "hungry months," compared to those without. · Increased poor people's access to new technologies. In Colombia, analysis of 15 technologies found that 63 percent of farmers in the poorest strata were adopting between six and 15 CIAL technologies, and were as likely to do so as the better-off strata of farmers.The speed of adoption of new technologies was faster in communities with CIALs and their neighboring communities, than in other communities that relied on traditional R&E. Source: Authors. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY on their success in teaching large numbers of Box 2.21 Bolivia: organizing Local Agricultural Research farmers to adopt proven technologies, they Committees in municipalities undervalue the generation of useful knowledge Sustainability and accountability can be ensured by establishing made available to many by CIALs. Restricting channels whereby Local Agricultural Research Committees CIALs to demonstrating technologies usually (CIALs) set priorities for their research and report back to means their experimentation is not driven by established farmer organizations and local government. In the client group's demand for innovation, but Bolivia, municipalities are required by law to identify and by the facilitator's perception of what is "safe." respond to community demands for services, and rural CIALs play an important role in participatory municipalities must involve farmers in preparing municipal learning by generating new information, but they are development plans and in local boards for economic promo- tion that coordinate development efforts. Colmi Municipality a complement to assisted learning, not a substitute. already has ten CIALs with committee members elected by the In practice, many CIALs engage in both research and farmer organizations or rural syndicates, themselves elected by assisted learning. communities.The CIALs are linked with the municipality through their syndicate's central office, which participates in Colmi's local board for economic promotion and serves as a RECOMMENDATIONS FOR PRACTITIONERS channel for CIALs to influence municipal priorities, request Many features of the CIAL process (such as support, and contribute to municipal projects.This is proving an type of sponsoring organization, who facili- important source of human and social capital. tates, committee size, type of experimentation, Source: Authors. size of petty cash fund) and related investments (see box 2.22) can vary greatly, provided that sponsors, trainers, client groups, committee ORGANIZATIONAL BASE . CIALs work best when members, and facilitators understand and formed inside a client group's informal or formal adhere to the following basic principles: organization (for example, when a community, farmer association or cooperative, women's · Form CIALs by motivating the client group group, parent's association, parish council, or to elect farmers interested in testing agricul- small enterprise elects and oversees the commit- tural innovations and by building on local tee). Establishment of a CIAL inside an R&E experience. Programs need to support organization is a second-best option, as this can farmers in learning how to innovate rather result in loss of direct accountability to clients. than demonstrating technological "fixes." 86 SOCIAL CONSIDERATIONS . CIALs can catalyze commit- · Establish a CIAL research topic priority that ment to collective action and to women's partici- is relevant to the majority of farmers in the pation, but factionalism, conflict, or suspicions client group. within the client group can seriously undermine its support for a committee. Women's participa- · Plan activities that regularly generate and tion in CIALs is often difficult and associated sustain the petty cash fund needed to with the need to gain acceptance. A CIAL must support CIAL operations. regularly report on progress to its client group to ensure accountability of the committee, so that · Expand and rotate committee membership research products belong to the community, not and ensure that committee members provide to the committee or individuals. regular progress reports on experiments to their clients, so that that research products REAL TECHNOLOGY DEVELOPMENT . CIALs are cost- reach the wider community and not just the effective when they build local capacity such as committee members or the sponsor. helping poor people collectively manage untried innovations. If clients, committees, · Include committee experimentation for very facilitators, or R&E providers judge CIALs only poor, risk-averse client groups in social AGRICULTURE INVESTMENT SOURCEBOOK projects with short-term returns to sustain Box 2.22 Potential investments commitment over time and build local capacity. · Training for CIAL facilitators: US$600 per person for a short course plus one year of follow-up support. One · Encourage CIALs to exchange visits and facilitator can support up to 50 mature CIALs. sponsor their own regional meetings to · Start-up funds for CIAL experiments: a one-time, nonre- exchange results. newable investment in a CIAL fund can range from US$25 to 500 in cash or kind. · Average running costs per CIAL in Colombia were · Minimize costs of visiting CIALs by possibly US$670 for the first year, US$400 in the second year, and targeting agro-ecological zones that can be US$200 in the fourth year. reached from an experiment station or Source: Authors. municipal extension office. · Train experienced farmers with prior search Committees, Honduras and Nicara- experience in a CIAL as facilitators to gua. http://www.isnar.cgiar.org/shiip/ reduce costs of facilitation, especially when Honduras-particip.htm. moving into large-scale implementation. This Note was prepared by Jacqueline Ashby of the Centro · Promote attendance of scientists and key Internacional de Agricultura Tropical, Cali, Colombia. R&D decisionmakers at CIAL meetings to ensure their support for CIALs. SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. Ashby, J. A., A. R. Braun, T. Garcia, M. del Pilar Guerrero, L. A. Hernandez, C. A. Quiros, and J. I. Roa. 2001. "Investing in Farmers as Researchers: Experience with Local Agricul- 87 tural Research Committees in Latin America." CIAT, Cali, Colombia.* CIAT. Solutions That Cross Frontiers. http:// www.ciat.cgiar.org/ipra/. REFERENCES CITED CIAT. 1998. Background Information on Farmer Participatory Research: Latin America's Farmer-researchers. http:// www.ciat.cgiar.org/newsroom/ release_17.htm. ISNAR. Case Study: Honduras Participatory Research. Farmer Participation in Conserva- tion and Research Local Agricultural Re- MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY INNOVATIVE ACTIVITY PROFILE WHAT IS BIOTECHNOLOGY? Agricultural biotechnology refers to a wide range of technologies and products that can BIOTECHNOLOGY,BIOSAFETY, improve productivity or quality of crops, AND AGRICULTURAL livestock, fisheries, and forests. The first gen- DEVELOPMENT eration of these technologies, including plant tissue culture, micropropagation, molecular New techniques of biotechnology can stabilize diagnostics of crop and livestock diseases, and yields and improve rural incomes, reduce embryo transfer in livestock, have already been negative environmental impacts, provide adopted in many developing countries. These nutrient-enhanced and better quality food, and are simple to use, often inexpensive, and deliver vaccines and antibodies to improve relatively free of regulatory requirements and health. While most benefits have occurred in public controversy. industrial countries, the techniques have con- siderable potential for sustainable small-farm The next generation of tools and products, systems in developing countries. However, due based on molecular biology, is providing to the potential environmental and health revolutionary advances in genetic knowledge effects and socioeconomic implications, some and the capacity to change DNA. These mo- new technologies are controversial. Private lecular technologies can be either a research sector commercial dominance of biotechnology tool for development of technologies (genetic poses major challenges for access by poor markers, gene mapping) or a technological people. Biotechnology strategies must be innovation for field use, transfering genes country-specific, depending on needs and within and across species to generate scientific capabilities. All countries, however, transgenics (genetically modified organisms, will need the capacity for developing technol- commonly known as GMOs). Molecular ap- ogy policies and strategies, a strong regulatory proaches require advanced skills, research framework, and scientific skills to make use of laboratories, and the capacity to manage appropriate technologies. intellectual property. These requirements may pose a constraint for developing countries. The Agricultural biotechnology is increasingly seen use of transgenic crops also requires regulatory as a valuable tool for addressing production capacity to manage possible environmental and health risks, which have been the subject of 88 and nutritional constraints in developing countries, particularly in commodities impor- considerable debate. tant to poor producers and consumers. This view is supported in the World Banks current The application of molecular biotechnology has rural strategy, Reaching the Rural Poor, which so far been limited to a small number of input commits the Bank to helping developing traits, which are mostly of interest to commercial countries assess, and safely use new technolo- farmers in temperate countries. This research gies. However, continuing controversy and has been carried out in the private sector by debate over possible adverse health and large life science companies, which have very environmental impacts, and ethical and legal little incentive to invest in adapting this technol- issues relating to IPRs has slowed adoption in ogy to the needs of tropical countries. For the developing countries. To benefit from rapid full benefits of biotechnology to reach poor global advances in the biological sciences, farmers and consumers in developing countries, developing countries will have to invest national and international public sector institu- public funds in products that are not of tions will have to target investments to enable commercial interest to the private sector, but their researchers to gain access to proprietary are of high priority to their poor producers technologies, resulting from private sector and consumers. research. Developing country scientists will need to be able to apply these innovations to AGRICULTURE INVESTMENT SOURCEBOOK national germ plasm, and develop capacity to Box 2.23 Kenya: benefits of biotechnology for small-scale do biotechnology research. Some benefits can banana producers be achieved by increasing the precision and speed of conventional breeding, whereas others Bananas are an important crop for 20 million resource-poor can only be achieved through transgenic crops. farmers in East Africa, but pests and diseases cause major production and quality problems. In 1996 the International Service for the Acquisition of Agri-Biotech Applications, the BENEFITS Kenya Agricultural Research Institute, and Genetic Technologies Modern biotechnology tools have the potential to Ltd. initiated a joint effort to produce disease-free planting significantly raise agricultural productivity in a materials by tissue culture. Initially the tissue culture plantlets were imported from South Africa, but now both the institute more environmentally-friendly manner, supply and Genetic Technologies have developed their capacity for cheaper and more nutritious food, and contribute banana micropropagation and distribution of plantlets. Net to poverty alleviation.3 Many of the first genera- income of the participating farmers has increased by 35 tion of biotechnologies are relatively easy to percent.The project is scaling up to establish a self-sustaining apply, but still offer substantial benefits such as system of production, distribution, and utilization of tissue higher and more stable yields due to increased culture banana plantlets. More varieties will be offered and the tolerance to diseases and pests (see box 2.23). project will be extended to new areas within Kenya and in the Examples include virus-resistant sweet potatoes in East Africa region. Kenya, insect-resistant maize in East Africa, insect- Source:Wambugu and Romano 2001; Persley and George 1999 resistant cotton in China, and marker-assisted selection for sleeping sickness in African cattle. market in the United States and, as increased numbers of transgenic products were field- Input costs may also be lower as resistance to tested and commercialized, questions were insect pest and disease is incorporated into raised about the safety of these products. As crops and animals, reducing the need for the development of molecular biotechnology is externally applied pesticides. For example, in relatively recent, there is yet no model for a Mexico, pesticide use on cotton fell by more single best approach to deal with safety issues. than 80 percent, from an average of nearly 14 kg/ha of active ingredient in the 1980s to about Risks associated with GMOs in agriculture 2 kg/ha in 2002, as a result of using the Bacil- generally are in two categories: food safety lus thuringiensis (Bt) cotton variety resistant to and environmental safety. Food safety risks bollworm (Traxler et al. 2003). The reduction in include the potential increase in allergenicity 89 pesticide use has significant environmental and of GMO food products and the potential health benefits, and the introduction of herbi- cide-resistant crops can be used in minimum- tillage systems that reduce soil degradation and Box 2.24 China: Bt cotton erosion (see box 2.24). There is also potential China is the world's largest producer and consumer of cotton. to improve food quality (for example, "golden In 2001, China produced 5.3 million metric tons (25 percent of rice," with high vitamin A content), and to world production). About 13 million small farmers, usually develop healthier animal and plant products farming less than 0.5 hectares each, grow cotton. Adoption of (leaner meats, improved fatty acid profiles in Bt cotton progressed quickly from its introduction in 1997 to oil crops, and less fungal toxins in food crops). 1.5 million hectares in 2001 (31 percent of total area under cotton) with four to five million farmers benefiting from the new technology.The benefits have come through yield increases of up to 10 percent, reduction by one-half to two-thirds in BIOSAFETY FRAMEWORKS volume of insecticides used, reduced insecticide poisonings, and Application of genetic engineering to crop and gains in income of approximately US$500/hectare. Farmers livestock improvement is relatively recent. In adopting new technologies increased incomes despite the fall in 1994, the first transgenic variety reached the cotton prices. Source: James 2002. 3. See the IAP,"India: Focus on Biotechnology" MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY increase in toxins in these products. Environ- external expertise and information and harmo- mental risks include: the possibility of gene nizing risk assessment principles, information flow to other cultivars of the same species or requirements, and standards of assessment on to related weed species, with the risk of a regional basis. This can help prevent conflicts developing aggressive weeds that are resistant of interest in small countries where developers to diseases, pests, and herbicides that could of technology serve as risk assessors. Harmo- potentially upset the ecosystem balance; the nizing biosafety standards requires adoption of possible effect on nontarget organisms from common values and objectives; shared interests crops with resistance traits operating through and concerns; the need to overcome differ- insecticidal protein expression; and the ences and to avoid disputes; the need to potential displacement of traditional cultivars cooperate with other interests; and the need to by a small number of transgenic cultivars that simplify procedures. In the absence of some or effectively reduce the biodiversity typically all of these factors, chances of effective harmo- found in small farmers' fields. nization are limited. Biosafety frameworks are required to assess and manage such risks. They typically include POLICY AND IMPLEMENTATION ISSUES five key elements: national policies; national ECOLOGICAL AND FOOD SAFETY RISKS. Possible risks inventory and evaluation; knowledge, skills and from using biotechnology tools and techniques capacity; regulations governing risk assessment relate to environmental and food safety. The and risk management; and systems to monitor, likelihood of risks, and appropriate risk man- inspect, and implement regulations. Ideally, the agement methods will contribute to risk assess- evolution of a national biosafety system begins ment regulations and guidelines governing with a national policy that is the basis for biosafety. Risk and risk management strategies legislation and/or regulations, leading to design are likely to be case-specific, depending on the and implementation of the systems necessary to trait, location, and management of the crop. undertake risk analysis, inspection, monitoring, and enforcement. A national assessment of COSTS AND CAPACITY. Molecular biotechnology existing regulatory, scientific, technical, eco- research can require substantial investments for nomic, and social capacity is relevant to the the necessary biosafety framework and labora- policy and implementation processes. Transpar- tories, for training scientists who must remain ency and public participation are essential to current in the field, and for the operating costs 90 build public trust in institutions, and in the risk for research. Consequently, a firm commitment assessment and risk management procedures in that ensures sustainable financing is needed a national biosafety system. before investing in biotechnology. Except for a few countries with an extensive or INTELLECTUAL PROPERTY. Intellectual property growing domestic biotechnology sector, devel- disputes involve genes from developing coun- opment of a comprehensive national capacity tries being used by private sector companies in for a biosafety system is not likely to be neces- developed countries. Access by poor people to sary or feasible. Pragmatic, cost-effective new technologies protected by patents held by solutions to the problem of establishing regula- private companies, the major developers of tory systems will often involve combining new technology, is another area of controversy. responsibility for risk assessment and risk Developing countries need to develop the management in one agency, and drawing on technical and legal capacity for establishing IPR existing expertise in the private sector and laws, for negotiating international and commer- internationally agreed norms. Countries with a cial IPR agreements, and for patenting, where it small science community can implement is in the interest of the poor, inventions devel- effective biosafety systems by capitalizing on oped in their public research organizations. AGRICULTURE INVESTMENT SOURCEBOOK INTERNATIONAL TRADE . Public controversy associ- case-by-case basis reflecting traits and the ated with consumer concerns over transgenic economic and ecological situation. crops may produce uncertainty in the markets and difficult policy issues for those countries · If the benefits of biotechnology in poor wanting to build biotechnology capacity while countries are to reach farmers and consum- exporting to regions which do not accept GMO ers, national and international public sector food products, such as Europe. Some develop- groups will have to support research, ing countries may have to decide whether to access to proprietary technologies and to give up opportunities to reduce food costs the development of appropriate regulatory through transgenics or give up their ability to frameworks for public and private research export to European markets. and technology transfer. LESSONS LEARNED RECOMMENDATIONS FOR PRACTITIONERS Current biotechnology investments under Bank In many countries, investments in applied and projects focus on strengthening public sector adaptive research on the use and application of research organizations to serve smallholder noncontroversial biotechnologies will be farmers, and are quite modest when compared appropriate, targeting plant tissue culture, to large investments by private companies micropropagation, molecular diagnostics of focused on products for commercial agricul- crop and livestock diseases, and (possibly) ture. Key lessons are that: embryo transfer in livestock. Public investment in biotechnology research on and/or evaluation · While potential benefits from applying new of GMOs may be appropriate where this is tools to appropriate productivity and clearly targeted to Bank and country objectives, quality traits justify strong support for especially poverty reduction (see box 2.25). biotechnology, it is important that the Such investments should: public sector remains impartial and ensures that potential risks are considered, under- · Be based on country assessments to iden- stood, and addressed before proceeding tify opportunities and limitations on bio- with any biotechnology investment. technology investments. · Investment in biotechnology needs to be 91 driven by its ability to solve agricultural Box 2.25 Potential investments problems, and priority for such funding should be within the overall national Investment in facilities, training, and technical assistance is needed to: research strategy that assesses tradeoffs with, and complementarities from other · Develop country strategies and priorities through areas of research. consultations with end-users of technologies. · Develop capacity for research on application of first · Public dialogue is very important and most generation, noncontroversial biotechnologies. · Strengthen national biotechnology research capabilities. countries have underinvested in this prior · Support strategic alliances, both with the private sector to undertaking research and testing on and with advanced research organizations. GMOs. This lack of dialogue contributes to · Develop capacity for both food and biosafety risk controversies and slows the release and assessment. uptake of valuable technologies. · Establish appropriate biosafety and food safety regulatory frameworks and enforcement mechanisms. · No broad generalizations can be made · Address public concerns, through information availability, and public dialogue and consultations. about the risks of GMOs, and evaluation and decision-making must be done on a Source: Authors. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY · Support capacity building for biotechnology Persley, G. J., and Pamela G., eds. 1999. Ba- research within the framework of a well- nana, Breeding, and Biotechnology: Com- articulated national policy and strategy. modity Advances through Banana Improve- ment Project Research, 1994-1998. Banana · Target high priority problems that are best Improvement Project Report 2. Washington, solved through biotechnology, rather than D.C.: World Bank. conventional research methods. Traxler, G., S. Godoy-Avila, J. Falck-Zepeda, · Give prior consideration to costs and and J. Espinoza-Arellano. 2003. "Transgenic tradeoffs in generating technologies locally, Cotton in Mexico: Economic and Environ- rather than drawing on regional and inter- mental Impacts." In N. Kalaitzandonakes, national collaboration to develop and/or ed., Economic and Environmental Impacts import appropriate tools and technologies. of First Generation Biotechnologies. New York: Kluwer Academic. · Develop a sound biosafety framework with its regulatory environment and monitoring Wambugu, F. M., and M. K. Romano. 2001. The capacity, prior to undertaking biotechnol- Benefits of Biotechnology for Small-Scale ogy research. This framework may be able Banana Producers in Kenya. ISAAA Briefs to draw on regional capacity to evaluate 22. Ithaca, N.Y.: ISAAA. and manage risks and benefits. This capac- ity needs to also be reviewed before re- This Note was prepared by Eija Pehu with inputs from the search funding. Sustainable Agriculture (SASKI) Thematic Team of the World Bank. SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. Food and Agriculture Organization of the United Nations. http://www.fao.org. 92 International Food Policy Research Institute. http://www.ifpri.org. International Service for the Acquisition of Agri- biotech Applications. http://www.isaaa.org. International Service for National Agricultural Research. Agricultural Biotechnology; Research, Policy, Management and Service. http://www.isnar.cgiar.org/ibs.htm. REFERENCES CITED James, Clive. 2001. Global Review of Commer- cialized Transgenic Crops: 2001. ISAAA Briefs 24: Preview. Ithaca, N.Y.: ISAAA. AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE system. This was to be accomplished in four ways by: stimulating development of a more integrated and diversified National Agricultural BRAZIL: SPILL-INS FROM Research System, with greater participation of FOREIGN RESEARCH AND the private sector; increasing the role of clients DEVELOPMENT in defining research and technology transfer LABORATORIES priorities; refocusing public sector research on public goods, such as research on family farms, Brazil's agricultural sector has been an impor- natural resource management, and upstream tant source of economic growth. Today the technology activities not attractive to the private sector faces the multiple challenges of increas- sector; helping EMBRAPA to address issues of ing productivity while addressing pressing decentralization and diversification of the re- poverty, unbalanced regional growth, and search system; and facilitating increased scientific natural resource constraints. Agricultural re- spill-ins from advanced research institutes. search is important for increasing productivity and reducing rural poverty. Nearly two-thirds of project funding allocated to a CRGP acted as a catalyst for the long-term What's innovative? Collaborative linkage programs transition of the research system toward a with industrial countries,involving placement of mid- diversified system of agricultural research and career scientists in foreign research institutions to technology transfer. A committee, with repre- capitalize on advanced research. sentatives from various public, civic, and private stakeholders including farmer groups, Brazil has a broad agricultural research system. selects the best research proposals. In the mid 1990s, the national research agency Empresa Brasiliera de Pesquisas Agropecuarias A companion institutional capacity-building (EMBRAPA) had 2,064 researchers and an program aims to increase the capacity of institu- extensive infrastructure. State (province) re- tions to bid for grants, and includes support for search systems had an additional 2,395 re- research management improvements, training, searchers, and university teaching and research special studies, public-private partnerships, and faculty numbered over 4,000. However, this international collaborative research programs. capacity was underutilized and lacked ad- The international collaborative linkages pro- equate operating funding and linkages between gram includes a program for "EMBRAPA's 93 institutions. As in many other developing Foreign R&D Lab," referred to as LABEX. countries, the need to include private sector research, to increase competition, and to make Under the LABEX program, promising Brazilian research demand-driven and responsive to senior scientists in mid career are assigned to farmer needs, was recognized. There was a research programs in advanced research institu- need for strengthening domestic capacity by tions in industrial countries. These scientists capitalizing on research resources outside the observe the latest scientific developments in public sector, and encouraging technology and their field, develop joint programs for future scientific spill-ins (or activities) from advanced collaboration, and facilitate interaction between research institutes. research teams in areas relevant to the Brazilian agro-livestock sector. LABEX was initiated as a cooperative program between EMBRAPA and PROJECT OBJECTIVES AND DESCRIPTION the Agricultural Research Service of the United In 1997, the Agricultural Technology Develop- States Department of Agriculture (USDA). The ment Project led by EMBRAPA was initiated to LABEX program operates in the United States increase the efficiency and sustainability of and France, and is under analysis for collabora- resources in the Brazilian agricultural research tion in Asia, probably with Japan. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY BENEFITS AND IMPACTS investment; and develops integrated research The projects competitive grants component teams around specific projects. resulted in establishing relationships between EMBRAPA and the wider scientific community. About 258 diverse institutions are full participants, LESSONS LEARNED AND ISSUES FORWIDER and another 400 are collaborating on research APPLICABILITY projects. EMBRAPA has now adopted the com- Brazil has an extensive and well-developed petitive system for all its research subprojects, agricultural research capacity. Rapid advances including the Bank-supported project. in science, and limited research funding, even in the best of circumstances, make it essential The LABEX program is innovative in facilitating to avoid duplication of research effort and to technology spill-ins. LABEX-USA, the first such access new technologies and scientific knowl- collaboration in the Americas, established a edge in the most cost-effective way. This "virtual laboratory" concept. Focus areas in this requires international exchanges and linkages. partnership are: Natural Resource Management (NRM) in Amazônia; the Cooperative Program in In the past, bilateral grant aid provided support the Animal Genome; International Cooperation for international training, collaborative research, and Sustainable Agriculture in the Insect Genome; and institutional development. In most countries, and Management of Swine Effluents in the State this has declined, leading to a growing isolation of Santa Catarina. LABEX-USA has already made of research scientists. EMBRAPA's LABEX pro- significant contributions including: sequencing gram seeks to leverage EMBRAPA resources by the genome of the bacteria responsible for Pierce developing collaborative research, education, disease in California grapevines; experiments in training, and outreach efforts in areas of mutual precision-measurement of climatic variations to interest with international research institutions. determine soil electricity conductivity and stresses This strategy is likely to be relevant to many other in nitrogen, phosphorus, and water; and studies countries, especially those with more limited in intellectual property and biotechnology de- research and educational capabilities than Brazil. signed to establish modalities for more open use of patented/protected processes. PROJECT COUNTRY: BRAZIL The LABEX-France model involves research Project Name Agricultural Technology Develop- partnerships with Agropolis in Montpellier, 94 ment Project increasing the capacity of EMBRAPA to find new technologies and opportunities for coop- Project ID P043873 eration with the European public and private Project Cost US$120 million sectors in agriculture. Priority areas for LABEX- France are biotechnology and advanced biol- Dates FY1997 ­ FY 2005 ogy, agroindustrial technology, and sustainable Contact Point Raimundo N. Caminha management of natural resources. A Brazilian The World Bank, Edificio SUDENE, researcher from each focus area is located in Sala 13S-021, Cidade Universitaria, France, developing research activities appli- 50670-900 Recife, PE, Brazil cable to Brazilian concerns, and locating new Email: Rcaminha@worldbank.org technologies and opportunities for cooperation. The physical infrastructure available in LABEX- France collaboration provides several advan- tages over traditional forms of research coop- eration as it reduces costs of conducting re- search; allows activities to be initiated or closed without direct overheads and infrastructure AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE · Creation of a competitive fund in which resources are assigned to proposals re- sponding to needs of small rural producers. COLOMBIA:DECENTRALIZED, DEMAND-DRIVEN, · Institutional development, aimed primarily COMPETITIVETECHNOLOGY at building local institutional mechanisms to GENERATION allow stakeholders, particularly small producers, to participate in addressing By the early 1990s, the institutional model of the problems of agricultural system productivity traditional public system of agricultural research and competitiveness. and extension in many Latin American countries had declined in its effectiveness. While working For assigning funds, the competitive fund used fairly well in the past in delivering technology four criteria: the use of a systems approach, for major commodities, the model now faced addressing sustainability, participation of end- new challenges to which it was unable to users in technology development, and building respond. Challenges included the development farmer capacity. of sustainable production systems, resource conservation, processing, and markets and Implementation was decentralized to five exports. In part, problems were due to an overly regions where local "nodes" were established centralized, highly bureaucratic research system and linked into regional "networks" to coordi- that was not well linked to its clients. nate research activities. The nodes are informal groups open to research institutions, farmer What's innovative? Decentralized decision-making groups, NGOs, private sector, and officials of facilitating smallholder participation in a transparent departmental secretariats of agriculture. A total process for priority setting,and the awarding of com- of 340 organizations have participated in the petitive research grants. nodes, and an additional 160 in thematic networks that operate parallel to the nodes. In the early 1990s, the Government of Colom- Nodes develop lists of priority research issues bia committed itself to decentralizing technol- and project profiles, and at the network level ogy development and transfer in order to bring consolidate these for the region. These priori- applied research and extension (R&E) closer to ties are submitted to the PRONATTA Regional the priority problems of target beneficiaries, Coordination Unit. 95 who would participate in characterizing, priori- tizing, and solving their problems. Competitive project selection for grants is done largely at the regional level. Calls-for-proposals are distributed widely, and proposals screened PROJECT OBJECTIVES AND DESCRIPTION for eligibility by the PRONATTA's coordination In 1995, the National Agricultural Technology unit. Regional technical panels, using priorities Development Project (PRONATTA) was de- established by the regional networks, evaluate signed with World Bank support to assist this the proposals, which are ranked by priority and decentralization process, by offering funding submitted to the PRONATTA central office for for regional research funding and institution funding within the limits of available funds. building. The project's four key objectives were to: promote a pluralistic technology system; The program has maintained high-quality support demand-driven and decentralized standards for award of grants. For the six calls- approaches; diversify financing through for-proposals up to the year 2003, rates of cofinancing by users and research providers; approval of proposals ranged from 13 to 22 and provide incentives for reforming public percent. Some 616 grants were awarded out of R&D. Two program components involved: 3,786 proposals submitted. MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY BENEFITS AND IMPACTS into the national research system, thus Within two years, the competitive fund ex- building a diverse research system with panded rapidly to cover all five regions of varied sources of funding. Colombia and has funded over 600 projects at an average cost of US$50,000. The program has · Decentralized execution of a competitive been widely-recognized for its transparent grants program is key to substantively approach to the awarding of grants and for involving local people in an applied and having funded high-quality, relevant research. adaptive research program. Of all projects funded by PRONATTA, 96 percent are rated satisfactory. · Local institutional capacity building for client groups, local government, and A total of 179 implementing agencies have potential service providers is important for been involved in project execution. The Co- promoting competition. Representative lombian Institute for Agricultural Research has involvement of all sections of farming received 39 percent of the grants; NGOsæ11 groups is not a simple task, and depends percent; universitiesænine percent; producer on community dynamics. Effective involve- associationsæsix percent; other public ment requires long-term investment in institutionsæfour percent; other agenciesæfive institutional development and community percent; and alliances between different participation. institutionsæ26 percent. Projects similar to the PRONATTA program are PRONATTA research projects have demonstrated being implemented in Peru, Ecuador, Nicara- their impacts with higher productivity, and gua, Brazil, Mexico, and some countries in adoption of sustainable management practices Europe and Central Asia. among small producers, especially through reduced use of agricultural chemicals and improved soil management practices. About PROJECT COUNTRY: COLOMBIA 153,000 beneficiaries have adopted technologies Project Name Agricultural Technology Develop- introduced by PRONATTA. A recent impact ment Project (Components: evaluation of completed projects found that the Research vast majority are producing, or are likely to Sub-Projects; Institutional produce, significant short- to medium-term Development) 96 benefits, mostly for small-scale producers. Project ID P006880 Benefits far exceed the cost of the investments. Project Component Cost Research Sub-Projects: US$21.0 million LESSONS LEARNED AND ISSUES FORWIDER Institutional Development: APPLICABILITY US$1.1 million Competitive research grant program design should emphasize transparency in operation of Dates FY 1996 ­ FY 2004 the grant programs; incorporate farmers and Contact Point Matthew A. McMahon other beneficiaries in the process of priority The World Bank, 1818 H Street, setting, evaluation, and selection of projects; NW, Washington D.C. 20433 establish sound monitoring and evaluation Telephone: (202) 473-8586; systems; and develop mechanisms to enhance portfolio coherence. Major lessons learned from the PRONATTA experience are that: · A competitive fund can draw a wide variety of research and extension service providers AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE commitment to cofinancing a substantial and sustainable program in identified priority areas for research. Strategic Alliance Grants (SAGs) ECUADOR: STRATEGIC were also authorized to improve higher educa- INTERNATIONAL ALLIANCES tion (masters level) in agriculture. Strategic FOR CAPACITY BUILDING AND alliance grants were larger than research project RESEARCH grants (average US$321,000 versus US$62,000). Participating institution cofinancing contributions By the mid 1990s, Ecuador's agricultural re- averaged 45 percent of total program costs. search system, based principally on a public sector research institute, faced interrelated The SAG Program was designed to facilitate problems of low productivity, a funding crisis, access to relevant technologies and technical and attrition of scientists. At the same time expertise available internationally. The technol- technological and management innovation was ogy spill-ins resulting from this program repre- needed to improve productivity and competi- sent a cost-effective means of improving the tiveness of its important agricultural sector. technology base for Ecuador's agriculture. The Modernization of production systems and competitive selection procedure requires sector institutions were essential if the sector evidence of institutional commitment to long- were to compete in regional and global mar- term work in the program area. This also kets. As a result, the government undertook a allowed Ecuadorian institutions to set their own program of institutional reform, with the objec- priorities for program development, and to tive of strengthening research capacity in a select their own partners for alliances. variety of public and private organizations, increasing efficiency of research, and improv- ing linkages to clients. BENEFITS AND IMPACTS The SAGs financed six alliances for postgradu- What's innovative? Competitive financing of grants ate program development in agricultural sub- for strategic alliance with international research or- jects. Six Ecuadorian universities participated as ganizations to strengthen domestic capacity for re- lead institutions and developed alliances with search and education. eight foreign universities, six international research centers, four local universities, and four other institutions. 97 PROJECT OBJECTIVES AND DESCRIPTION The Agricultural Research Project had three Seven SAGs for agricultural research financed major objectives: to introduce a competitive partnership development for three Ecuadorian research grants program (CRGP), to develop universities, the public research institute (with partnerships with international science institu- two research alliances), an NGO, and a pro- tions, and to strengthen national research ducer group. Research themes included fruit institutions. The government contracted a processing, regional agribusiness development, private firm to manage the CRGP within policy soils, production systems, biotechnology, guidelines established by the government. medicinal plants, and soil salinity management. Alliances involved six foreign universities, four Competitive grants for strategic partnership international research centers, three local alliances with international research organiza- universities, and ten other institutions, includ- tions were financed in parallel with grants for ing various client groups. individual research activities. Both followed the same competitive procedures and targeted The strategic alliances have allowed local development of local institutional capacity for organizations to draw on resources and techni- research in key thematic areas. Institutions cal expertise from international centers of submitting proposals had to demonstrate a excellence, and encouraged long-term relation- MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY ships with partner research and educational institutions and with client groups. This has proven effective in developing local capacity and providing efficient access to spill-ins of scientific knowledge and the latest technologies. Competitive selection procedures helped to identify institutions with sufficient capacity and an interest and commitment to developing as a center of excellence for a specific thematic issue. Adding education programs to the SAGs provided for longer-term strategic capacity development for the country. LESSONS LEARNED AND ISSUES FORWIDER APPLICABILITY Financing for development of research capacity is likely to be needed in most countries where CRGPs are being introduced. Such capacity building can be financed through core funding for a research agency, though, as in the case of Ecuador, competitive procedures may be useful in identifying institutions with commitment to a particular field of research and a core capacity on which to build. This latter approach has been shown to be feasible even in a small research community such as Ecuador. Competitive selection of projects to be financed also allows for participating institutions to provide cofinancing, thus increasing total 98 funding available for research and strengthen- ing the overall system. PROJECT COUNTRY: ECUADOR Project Name Agricultural Research Project (Competitive Grants Component) Project ID P007131 Project Component Cost US$16.7 million Dates FY1998 ­ FY 2004 Contact Point Matthew A.McMahon The World Bank, 1818 H Street, NW,Washington D.C. 20433 Telephone: (202) 473-8586; Email: Mmcmahon@worldbank.org AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE being commodity-and-budget driven to one that was disciplinary-and-demand driven. The process used for developing scientific capacity included: INDIA: FOCUS ON BIOTECHNOLOGY · Establishing teams of excellence. Despite food grain self-sufficiency, India faces · Training of scientists. continuing challenges in sustaining agricultural growth rates. Post green revolution develop- · Funding research through competitive ments have brought into sharp focus concerns grants which were open to public, private, relating to productivity, sustainability, and and community organizations. environmental protection. Developments in biotechnology offer great scope for improve- Teams or centers of excellence, consisting of a ments in crops, livestock, and aquaculture. prominent individual scientist or a group of Development of transgenic crops with in- scientists within existing institutions, are pro- creased yields and improved nutritional quali- vided with administrative and financial au- ties, and development of diagnostic kits for tonomy to facilitate contracting and collabora- plant and animal diseases, are some areas with tion with a range of partners. This approach was considerable potential. designed to draw in new ideas and disseminate these, and to pilot new forms of decentralized What's innovative? Development of domestic com- management of research units/activities. Be- petitiveness in biotechnology research through fo- cause of rapid developments in science, cused training of research staff,organized into"Teams strengthening international linkages is important of Excellence" with control over resources through to improve the quality of science and the the competitive grant funding process. capabilities of scientists. Funds allocated under this subcomponent promote links with institu- Consequently building domestic capacity and tions having complementary interests/expertise. advancing research in biotechnology is critical and use of research providers, not part of the Within the NATP project, biotechnology invest- national agricultural research system, is consid- ments use tools of modern science to improve ered necessary in order to improve the out- crop, livestock, and fisheries productivity as the comes of these activities. At the same time, research program seeks to develop transgenic 99 with the rapid pace of international research, crops with inbuilt biotic and abiotic resistance links to international researchers is necessary. and to reduce the use of pesticides. The project also aims to develop diagnostic kits for early disease detection in animals and aquaculture; to PROJECT OBJECTIVES AND DESCRIPTION develop vaccines for better health management The overall objectives of the National Agricultural in animals; and to use biotechnology tools for Technology Project were to: improve the effi- processing and adding value to crops by in- ciency of the Indian Council of Agricultural Re- creasing the shelf life of fruits and vegetables. search (ICAR) organization and management systems; enhance the performance and effective- The project established a Biotechnology Advi- ness of priority research programs and of scientists sory Group (BAG) composed of scientists from in responding to the technological needs of public and private agencies to provide addi- farmers; and develop models that improve the tional views in establishing research and effectiveness and financial sustainability of technol- training priorities. The BAG group was de- ogy dissemination with greater accountability to, signed to "brainstorm" various issues related to and participation by, the farming communities. The biotechnology, guide ICAR, and review propos- project sought to change the research agenda from als submitted both through the sponsored and MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY competitive route. The project team considered LESSONS LEARNED AND ISSUES FORWIDER it important to establish such an advisory APPLICABILITY group, because ICAR institutions are the weak- The progress on biotechnology research and its est amongst various agencies involved in initial results illustrate that: biotechnology research, such as the Council for Scientific and Industrial Research, universities, · Research programs focused on key prob- and the private sector. During the period 1998- lems, and subject to rigorous and transparent 2003 the project: monitoring, can yield important dividends. · Established teams of excellence in the area · Building in-house competence through of plant biotechnology, viral biotechnology, human resource development and physical and animal biotechnology. infrastructure can result in rapid progress and quality research outputs. · Trained 200 scientists annually in state-of- the-art knowledge on crop and animal · Competitive research grants, awarded biotechnology. through a transparent selection process and followed up by good monitoring, · Developed transgenic rice, cotton, mustard, evaluation, and impact/outcome assess- muskmelon, potato, and pigeonpea. ment, are an effective mechanism for financing high-quality research work, · Used competitive grants to fund high- undertaken by multidisciplinary teams quality research in biotechnology. from a range of institutions. · Established management systems to pro- · Competitive grants can be useful in provid- vide for rigorous monitoring and evalua- ing research support to more young scien- tion, including progress on execution of tists and to female scientists. research activities. In view of the major successes under the program, ICAR is developing major biotechnol- BENEFITS AND IMPACTS ogy programs based on a Competitive Research There has been significant progress in developing Grants Scheme. Program management empha- 100 capabilities for plant transgenic research with major sizes transparency, quality evaluation, and successes with transgenic rice and cotton. bottom-up approaches. Transgenic rice is already at the fourth generation stage, and field-testing will take place in 2004. Transgenic rice and cotton carry the Bacillus PROJECT COUNTRY INDIA thuringiensis (Bt) gene that mediates resistance Project Name National Agricultural Technology against insects. In addition, two genes (Lr 19 and Lr Project 28) were tagged for the first time using molecular Project ID P010561 markers, and have been combined in one genotype providing strong resistance to leaf rust disease in Project Cost US$249.0 million wheat. Another major achievement has been the Dates FY 1999 ­ FY 2004 characterization of viral genomes of plant and animal viruses, enabling the development of plants Contact Point Paul Singh Sidhu The World Bank, 70 Lodi Estate, with in-built resistance to insects and viruses, and New Delhi 110 003, India improved viral detection methods in livestock and Email: Psidhu@Worldbank.org aquaculture. Development of diagnostic kits will help detect plant viruses in citrus, potato, and banana, as well as diseases of livestock. AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE research as one component within a broader forestry operation, or on forestry research within a broader research operation. FREEP INDIA: REVITALIZING specifically focused on improving institutional INSTITUTIONAL CAPACITY IN capacity to conduct forestry research, educa- FORESTRY RESEARCH tion, and extension, and to build this capacity in the national research system. The Indian Council of Forest Research and Exten- sion (ICFRE) has been conducting forestry research BENEFITS AND IMPACTS in India since the colonial era. ICFRE's research The project achieved its targets by improving activities lacked the scientific and institutional the capacity of ICFRE to plan, prioritize, and mechanisms for ensuring scientific rigor, research carry out forest research. Specific targets priorities, for client orientation, and for using achieved included: research results. Management systems for staff, research activities, finances, reference libraries, and · After extensive consultation with stakehold- other facilities needed significant upgrading. For ers to identify priorities, ICFRE developed research, systems were needed to ensure that and is now implementing a National Forest research addressed specific technical concerns, Research Plan. provided multidisciplinary perspectives, and reflected national priorities and regional needs. · Research Advisory Groups, comprising multidisciplinary experts and clients, and What's innovative? A stand-alone project focused chief scientific advisors, review research on institutional development of a key forestry re- projects to ensure their scientific quality and search organization by addressing core issues of or- their relevance to user needs. Increased ganizational weaknesses and basic institutional man- computer literacy and improved facilities agement rather than specific technical tasks. (library, modern nurseries, research equip- ment) help modernize research. PROJECT OBJECTIVES AND DESCRIPTION The main objective of Forestry Research Education · An information management system and and Extension Project (FREEP) was to improve the human resource development plan facilitate capacity and quality of forestry research. Other program budgeting and improved staff components included biodiversity conservation management. 101 and government forest policy analysis and devel- opment. Specific objectives related to: · Improved planting stock programs (in all states), small grants programs, technology · Strengthening the capacity of national, licensing, extension activities and materials, regional and state institutions to conduct and curricula reforms have dramatically priority forestry research, including planting increased ICFRE's client outreach. stock improvement programs, through improvements to institutional management · The project has been quite successful in and administration programs. developing the "forestry knowledge and information system" but its intergration into · Improving the system of forestry education the broader AKIS remains uncertain. in research and academic institutions. · Improving the dissemination of research LESSONS LEARNED AND ISSUES FORWIDER findings to users of the information. APPLICABILITY This successful approach to institutional capac- FREEP represented a successful departure from ity development in forestry research provides past forestry projects in that it did not focus on lessons that can be applied beyond the forestry MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY sector and agriculture to other institutional revitalization programs as it: · Focused on specific activities critical to sustainable change (for example, implemen- tation of a sound management information system, arrangements to increase interactions with clients, external peer review mecha- nisms, and technical oversight). · Addressed directly core organizational weaknesses within institutions and brought about institutional change within the relatively short time frame of one project. · Focused on basic institutional management issues, such as finance, staffing, and admin- istration, rather than on specific technical tasks or functions of an institution, for example, specific research. · Coordinated with broader agricultural research and information programs and institutions to give coherence to technical services for rural areas, and to seek econo- mies of scale in program operations. These policies and institutional mechanisms need to be mutually supportive in order to avoid conflicts and to enhance sustainability of technical services. 102 PROJECT COUNTRY: INDIA Project Name Forestry Research Education and Extension Project (Components: Research Management; Research Program Support) Project ID P010448 Project Component Cost US$48.7 million Dates FY 1995 ­ FY 2002 Contact Point Jessica Mott The World Bank, 1818 H Street, NW,Washington, D.C. 20433 Telephone: (202) 458-5607; Email: JMott@worldbank.org AGRICULTURE INVESTMENT SOURCEBOOK INNOVATIVE ACTIVITY PROFILE · An alternative to "institutional" or core funding for research operating costs. SENEGAL: MAKING RESEARCH · More effective utilization of scarce human DEMAND DRIVEN and physical resources for research. Evaluation of the Second Agricultural Research The project established the National Agricul- Project, completed in 1996, highlighted poor tural Research Fund (NARF), a legally indepen- performance of the Senegalese Research dent entity that separates its research funding Institution - ISRA (Institut Sénégalais de function from the execution function, and Recherches Agricoles). Despite considerable enables qualified entities, both public and investment since the mid 1980s, with two private, to access funds for research. Parallel successive Bank and two successive USAID- core funding provides ISRA and ITA with funds funded research projects, ISRA was still not for infrastructure, training, and management responding to farmers' needs. Management strengthening needs. reforms, including incentive systems to reward performance and financial management im- NARF finances research proposals submitted provements, remained pending. Investments in through two mechanisms: researcher-devel- important subsectors of postharvest technology oped proposals related to ISRA's or ITA's and agroprocessing had been neglected be- strategic plans, and responses to calls-for- cause they were the responsibility of a different proposals issued by NARF on themes identi- research institute, the Food Technology Re- fied by end-users. The two types of propos- search Institute (ITA). als undergo the same two-tier screening procedure: first, by a scientific and technical What's innovative? A new funding mechanism that committee of 15 scientific resource persons provides for core institutional capacity building in (six from outside Senegal) that screens parallel with a competitive research fund with sepa- proposals for scientific quality; and then by a rate funds for farmer-proposed and researcher-pro- management committee with a majority of posed projects, so as to develop demand orienta- producer organization and private sector tion in research. representatives. Once a proposal is approved, NARF signs a contract with the lead research institution. 103 PROJECT OBJECTIVES AND DESCRIPTION The Agricultural Services and Producer Organi- zation Project is a shift in approach from BENEFITS AND IMPACTS support only for supply of services to support The two separate funding mechanisms of core for both supply of and demand for services. funding of research institutes and NARF- Without strong demand from end-users, public contracted research, guarantee that institutional research institutions were unlikely to make development continues, while funding for essential, but difficult, reforms to improve operating costs goes directly to research teams responsiveness of research to clients. The working on projects relevant for the users, and project sought to strengthen producer organiza- for which teams are accountable for results. tion (PO) capacity to become effective research Projects are screened rigorously. Only 26 of the partners, and establish mechanisms to make first 79 research proposals were approved. research institutions accountable to clients. The Projects promote collaboration between organi- project design recognized the need for: zations with research capacity (85 percent of projects); with international organizations (12 · Capacity building for two research institutes percent); and with development agencies, such (ISRA and ITA). as POs, NGOs, or others (58 percent). Overall, MODULE 2: INVESTMENTS IN AGRICULTURAL SCIENCE AND TECHNOLOGY 38 different institutions have received funding both to immediate producer concerns and to under the 26 projects. opportunities identified by scientists. Under new funding arrangements, the Ministry The generation of sufficient proposals of good of Finance agreed that government funding quality and relevance is a function of the must cover research institute fixed costs, which research capacity of the country's human can no longer be financed by International resources, hence the importance of core fund- Development Assistance funds. This lead the ing for capacity building in parallel with a Government to recognize that it could no competitive fund. longer afford to support ISRA's extensive research infrastructure, and that closing redun- Research partnerships with strong interna- dant facilities was inevitable. tional research organizations also enhance quality of research, but governments often The program's success is qualified by the fact object to use of loan funds to finance foreign that in its initial stage, no proposals were researchers. Complementary bilateral grant accepted for research on products likely to be funding can therefore be important to finance significant for future exports (horticulture and collaboration of researchers from advanced fisheries), for basic food crops (rice), or for research institutions. future technological breakthroughs (biotechnol- ogy). The Fund is therefore considering nar- PROJECT COUNTRY: SENEGAL rowing the scope for future grants to priority topics as defined by a group of experts from Project Name Agricultural Services and Producer within the national agricultural research system. Organizations (Components: NARF, ISRA, ITA) Project ID P002367 LESSONS LEARNED AND ISSUES FORWIDER Project Component Cost APPLICABILITY US$13.2 million Sustainability of a competitive research fund mechanism depends on a manager's ability to Dates FY 2000 ­ FY 2005 attract funding from other donors. For this Contact Point Marie-Hélène Collion reason, one performance indicator for the The World Bank, 1818 H Street, project is the number of other donors that the 104 NW,Washington D.C. 20433 Fund attracts. Telephone: (202) 473-4994; Email: mcollion@worldbank.org Research funds should be managed indepen- dently of research-implementing organizations, because of the conflicts of interest. Locating funds outside government ministries allows for more flexible management. Establishing a management committee with a majority of users' representatives, responsible for the program, produces a very different dynamic than when government officials are a majority on the governing body. Having two channels for researcher-proposed and user-requested research proposals provides flexibility and allows a program to respond AGRICULTURE INVESTMENT SOURCEBOOK 3 INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS 105 G lobally, ministries of agriculture, universities, and the private sector employ more than 600,000 extension agents (Swanson, Farmer, and Bahal 1990). In the past, extension services, largely public, were equated with the transfer of agricultural production technology in pre-deter- mined "packages". Extension systems are now understood to be much broader and more diverse, including public and private sector and civil society institutions that provide a broad range of services (advisory, technology transfer, training, promotional, and information) on a wide variety of subjects (agriculture, marketing, social organization, health and education) needed by rural people to better manage their agricultural systems and livelihoods.This module seeks to summarize principles and good practice for investments in building effective and sustainable extension systems. RATIONALE FOR INVESTMENT The success of rural development programs depends largely on decisions by rural people on questions such as what to grow, where to sell, how to maintain soil fertility, and how to manage common grazing areas. Most clients of extension are farmers, grams. Many farmers want to stop farming (or both women and men, but many other rural because of lack of competitiveness will be people who are not economically active in forced to) and will seek information, educa- farming also rely on extension and information tion, and alternative skills to prepare them for services to inform and influence rural house- new employment. hold decisions. Extension services make significant contributions Past returns to extension investment have been to environmental protection and sustainable valuable but often high (see box 3.1). Future management of natural resources by promoting increases in agricultural production and rural conservation of land, water, and forests; conser- income must come from intensification, rather vation of biodiversity; pesticide safety and than "extensification" of agriculture. Knowledge residue minimization; livestock waste manage- and related information, skills, technologies, ment; and water quality preservation and water- and attitudes will play a key role in the sustain- shed protection. The client base for environmen- able intensification of agriculture and the tally oriented extension goes beyond the small- success of other rural investments. New tech- scale farmer because the varied activities of rural nologies and markets offer rural households residents, such as hunting, disposal of waste new opportunities, but they require better materials, harvest of fuel wood, and other access to information. Globalization and the products, affect the environment. need to trade in a global environment requires farmers and other rural people to become more competitive by acquiring more knowledge to PAST INVESTMENT ACTIVITY base decisions on and new skills to implement Public extension expenditures grew rapidly in those decisions. the 1970s and were estimated at US$6 billion globally for 1988 (Swanson, Farmer, and Bahal Although agriculture remains critically impor- 1990). Since then, structural adjustment pro- tant for their economic well-being, rural grams, public sector retrenchment, and reallo- people need other options and expect more cation of expenditures suggest that there may information than in the past, including infor- have been a substantial decrease in funding for mation on health care and nutrition, consumer extension; however, total funding often remains products, and government and other pro- high (up to 2 percent of agricultural GDP). In some countries the extension service is one of 106 the largest agencies in the government. Box 3.1 Returns to investment in extension and information services Since 1981, the World Bank has provided US$3 billion in direct support for extension, while Evaluations have often criticized extension for low efficiency and mobilizing another US$2.5 billion from govern- lack of equity in service provision, but report relatively high cost/ ments, beneficiaries, and other sources (see benefit ratios (Perraton et al. 1983). Rates of return on extension figure 3.1). This Bank financing has fostered investments in developing countries have generally ranged from 5 percent to more than 50 percent (Evenson 1997).A recent recognition of the importance of extension and metastudy of 289 studies of economic returns to agricultural has shaped development of many national research and extension found median rates of return of 58 extension systems. percent for extension investments, 49 percent for research investments, and 36 percent for investments in research and In the past, the World Bank was often associated extension combined (Alston et al. 2000). But methodological with Training-and-Visit (T&V) extension, a problems are daunting and rates of return are highly variable for system popularized in the 1970s and 1980s to even the same program, such that there is a considerable need address severe management deficiencies in for additional evaluation of extension impacts. existing extension services. T&V proved effec- Source: Gautam 2000; Feder, Murgai, and Quizon 2003. tive in specific circumstances in which standard- AGRICULTURE INVESTMENT SOURCEBOOK FIGURE 3.1 TRENDS INWORLD BANK LENDING FOR EXTENSION PROGRAMS, FY83-FY02 Source:World Bank Internal Documents. ized technology packages could be introduced countries and concluded that temporary, over large, relatively homogeneous areas. But targeted programs may provide a better return T&V did not resolve problems of sustainability on investment. It also revealed a limited capac- or address the needs of diverse rainfed systems ity of most borrowers and of Bank staff to and was widely considered a failure. undertake the necessary analysis for the design of extension systems. The World Bank Operations Evaluation Depart- ment (OED) review of Bank support to exten- By the early 1990s, the World Bank recognized sion services found that extension projects the need for new approaches to extension produced considerable benefits. The results of investments, including a larger role for the the OED review also noted concern over private sector, nongovernmental organizations 107 sustainability because three out of four projects (NGOs), and producer organizations, as well as were rated "uncertain" in terms of likely a more inclusive approach to women, indig- sustainability (Purcell and Anderson 1997). The enous peoples, and poor people (Cleaver 1993; OED study emphasized that no single exten- Ameur 1994; Antholt 1994). sion model is universally relevant, and situa- tion-specific models need to be developed KEY ISSUES FOR INVESTMENT based on general principles and analyses of Future investments must avoid past mistakes specific farming systems and social conditions. and seek more sustainable institutional arrange- The study found widespread problems with ments for providing knowledge and informa- inadequate funding for recurrent costs, insuffi- tion services to rural people. The emerging cient technology, poor links to research, limited view is that the farmer is a responsible entre- farmer participation, and a top-down mentality. preneur, managing complex, agricultural and Extension staff quality was a major constraint off-farm activities to maximize well-being and staff training programs were inadequate to within many constraints. The farmer is a key correct deficiencies. The OED study suggested source of innovation--a concept reflected in a that investment in state-run, staff-intensive simple knowledge triangle (see figure 3.2). Key extension services is inappropriate for many to the concept of the agricultural knowledge MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS triangle is the realization that improving rural weaknesses, and motivations. This framework productivity, social equity, and competitiveness underlies the guiding principles for investment in requires effective and efficient agricultural extension and information systems (see box 3.2) knowledge and information systems (AKISs) that (FAO/World Bank 2000). "link people and institutions to promote mutual learning and generate, share, and utilize agricul- ture-related technology, knowledge, and infor- FUTURE DIRECTIONS FOR LENDING mation" (FAO/World Bank 2000). Such a system Future investments must recognize a diversity of integrates farmers, agricultural educators, re- clients and client needs, and varied approaches searchers, and extension workers to harness for technology transfer, advisory services, facili- knowledge and information from various sources tation, educational, and information services. for better farming and improved livelihoods. Making services more responsive to clients will entail focusing more on human and social Providing diverse extension and information capital development, as well as on giving the services to rural people necessitates a diversity farmer more influence over the extension of public and private service providers on agenda and the way in which services are both the supply and demand side of the delivered. To develop extension systems that are extension services market. How this market consistent with FAO/World Bank principles for functions depends on the institutional and effective AKISs, investments are needed to better policy environment for innovation and by the define public sector roles, enhance financial quality of services provided. The diversity in sustainability, strengthen ability of clients to extension service suppliers reflects also the express demand for services, support extension diversity in types of information and cost of system reforms, improve quality of services, providing information. Radio and television, address key poverty and environmental issues, input suppliers, agribusinesses, newspapers, and exploit potential of mass media and com- neighbors, public extension agents, religious munications technologies. organizations, bankers, NGOs, and other agencies each have their own strengths, DEFINING PUBLIC AND PRIVATE SECTOR ROLES. Private market mechanisms often fail to provide a socially optimum level of extension services for FIGURE 3.2 ARGRICULTURAL KNOWLEDGE two reasons. First, the demand from small-scale TRIANGLE farmers may not be expressed well because of 108 the farmers' failure to recognize benefits from alternative production and marketing options; Research because farmers have limited purchasing power; or because they are not organized to access services. Second, supply is constrained because there may be few individuals or institutions capable of providing technical services or limited opportunity for private firms to appropriate benefits by charging for provi- sion of information. The characteristics of Farmers specific services influence whether these are best supplied by the private, voluntary, or public sectors--different extension service needs are best fulfilled by different agencies. Extension services can be categorized by Education Extension differences in excludability (the degree to which farmers who do not pay for a service Source: FAO/World Bank 2000. can be excluded from its benefits) and rivalry AGRICULTURE INVESTMENT SOURCEBOOK Box 3.2 Guiding principles for public investment in extension systems Defined role for the public sector: Made within a sound policy framework that provides a conducive environment for investments to achieve desired impacts. · Based on clear national strategies that articulate a long-term vision and national policies, plans, and objectives for extension investments. · Economically efficient with benefits and expected outcomes that justify the investment. · Equitable with appropriate services available to the poor and minority groups and with a keen recognition that farmers and herders are both male and female. Strengthened demand for services: · Demand-driven, responding to farmer needs and interests and involving clients in program governance, priority setting, and evaluation, often by working through and strengthening producer organizations. · Participatory, drawing on and empowering local people to solve problems and mobilize local resources. · Based on subsidiarity with responsibilities devolved to the lowest possible level of government and consistent with organizational competency, comparative advantage, and efficient use of funds. Improved quality of services: · Accountable for the use of funds and for results with incentive structures that ensure assignment of qualified staff who are given adequate support and held responsible for providing services to clients. · Relevant to the needs and resource constraints of different categories of clients, balancing objectives of profitability, productivity, and sustainability, and drawing on effective training and links to research and other sources of innovation. · Pluralistic, involving a range of institutions with different comparative advantages; often separating financing and service delivery to broaden the range of service providers, raise operational efficiency, and make service providers more account- able for performance and results. · Well-monitored and evaluated to ensure a results orientation, account for impacts on human, social, and environmental capital, and demonstrate cost effectiveness. Based on a sustainable system: · Develop human and social capital necessary for clients and local institutions to foster continuous learning and problem solving. · Cost-shared by major stakeholders. · Develop political support from stakeholders as a basis for securing future financing. Source: FAO/World Bank 2000. 109 (the extent to which one farmer's use of a to finance on their own. The most important service reduces its availability to others). While positive externalities associated with extension there is frequently a mix of public and private and information services are productivity elements in any specific extension service, spillovers, positive environmental and health some common services can be broadly classi- (human, livestock, and crop) impacts of appro- fied, as reflected in examples in table 3.1. priate technology use, and poverty reduction. Public financing is often important for coordi- Public and private sector roles frequently nation (often indirect) of extension activities, overlap, providing justification for public- regulation and provision of unbiased technical private partnerships. If families or firms benefit recommendations, disaster response and from services, they should pay; if communities poverty-oriented programs, training and devel- benefit, community groups or local government opment communications programs in which should pay; and if the region benefits, the economies of scale/scope exist, and promotion province or state should pay. The public sector of the rural extension and information system should finance extension services that generate as a whole. In general, the share of public important benefits for society as a whole, but sector in the funding of extension services will which extension clients are unlikely or unable decline with the transition to commercial MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS Table 3.1 Economic characteristics and delivery mechanisms for different extension services Major delivery Main financing Main type mechanisms mechanism Service of good Public Privatea Public Privatea Farm advisory services (generic) Public Yes Yes if Yes No contracted Farm advisory services Private Yes Yes, Yes for Yes, (farm-specific) preferred small preferred farmers and with cofinancing Farmer training Toll Yes Yes Yes Yes Integrated pest management advice Public Yes Yes, if Yes No contracted Market price info. (individualized Toll No Yes No Yes services) Market price information services Public Yes Yes, (mass media) preferred Yes Yes Environmental conservation Public Yes Yes, if information services contracted Yes No Irrigation water management advice Common pool Yes Yes, farmer Yes Yes, if organization cofinanced preferred Farmer organization development Common pool Yes Yes Yes Yes assistance 110 Advice on control of major Public Yes No Yes No contagious diseases Product quality certification for Private Yes Yes No Yes, export markets preferred Note:The term "private" includes farmer organizations. Source: Authors. agriculture. For low income countries, public In reality, most information services are pro- funding and other roles of the public sector vided outside of government, and extension may continue to be critical for many years. systems need to be designed with the under- standing that they will be cost effective "only if PROMOTING PRIVATE SECTOR SERVICES . The private the public role is defined to complement what goods element of many extension services has the private sector can and will deliver" (Beynon raised interest in privatizing extension services. et al. 1998). Public sector programs should AGRICULTURE INVESTMENT SOURCEBOOK avoid competing with private extension ser- goods knowledge for smallholders, as well as vices and should provide technical support to support for development of a pluralistic exten- private providers, develop public-private partnerships sion system and extension services market.2 for service delivery, share information, coordinate activities with private service providers, establish DEVELOPING SUSTAINABLE FINANCING MECHANISMS . Cost mechanisms for accreditation of private advisory recovery is important to expand resources services, and establish financing mechanisms to available for extension and to ensure that cofinance private service delivery.1 clients value the services being provided. Key to this are: CONTRACTING FOR EXTENSION SERVICES . There is growing recognition that, even in situations in · Introducing cost-sharing mechanisms. which public financing of extension is justified, Various cofinancing arrangements are private service delivery is often the more possible, including financing under a efficient way to serve clients. Contracting producer-controlled levy on agricultural strategies for extension services take many products, fee-for-service arrangements, approaches to the division of responsibilities cost-sharing for a total program, or for financing, procurement, and delivery of cofinancing by a producer organization. services, though most reforms involve public Although large producers might be able to funding for private service delivery (Rivera, fully fund costs of extension services, most Zijp, and Alex 2000). Contracting promotes commercial farmers will drop out of pro- institutional pluralism, accountability to clients, grams if their share of costs exceeds 50 and efficiency in operations. Contracting percent to 65 percent of the total. For directly by farmers introduces fundamental small-scale farmers in developing countries, changes in relationships (see figure 3.3). Public a cost-recovery rate of 10 percent to 20 financing of contracted extension and informa- percent is a reasonable initial target. tion services represents an investment in public FIGURE 3.3 ALTERNATIVE FINANCING MECHANISMA FOR EXTENSION SERVICES Traditional financing systems--extension New financing systems--extension accountable to financier accountable to financier 111 Users and/or clients Users and/or clients Services Services Accountability $$ Extension organization $$ Extension organization Accountability $$ Sources of public finance Sources of public finance 1. See the IAP,"Estonia:Transition to Private Extension Advisory Services" 2. See the AIN,"Contracting Extension Services" MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS · "Downsizing" public extension agencies. to develop skills in problem analysis, This is a difficult but an inescapable issue problem solving, and management. Partici- that many public extension agencies will patory methods are inclusive and foster face. Situations in which public funding equal access to extension services and and operating procedures do not allow resources for women and ethnic minorities. existing staff to be used effectively and They merge with participatory technology profitably, it is preferable to reduce the development, which taps indigenous number of government staff. This might knowledge especially relevant to sustain- involve transfers to decentralized govern- able agriculture.3 ment units (but only if the staff can be used effectively there), early retirements · Increasing accountability to clients. Increas- with redundancy payments, or other ing user influence over extension services is arrangements, such as secondments to or an element of the most recent extension contracting by NGOs and other develop- reforms. Placing client representatives on ment programs. Undertaking new exten- advisory and management boards, involving sion initiatives without addressing existing farmers in setting program priorities, evalu- problems of overstaffing undermines the ating participation of staff and programs, chances for program sustainability. and giving authority to farmers to approve work plans all help make extension services · Accessing other sources of funding. Diversi- more responsive to farmers. Through fying the funding base enhances financial demand-driven funding programs, the sustainability of public extension programs. greatest accountability comes when farmers Sources might include environmental are given authority to set the agenda, select groups (ministries of environment, NGOs, service providers, and hire and fire exten- and environmental services beneficiaries); sion staff. These programs typically use special interest groups (women's organiza- mechanisms that enable client groups to tions, youth, and expatriate communities); propose development activities. Once the humanitarian NGOs; and others. activity is approved, financing or other resources are transferred to the client group, STRENGTHENING THE DEMAND FOR SERVICES . Future which is then responsible for implementing investments in extension must emphasize the approved project with extension provid- development of capacity for clients to express ers accountable to the client groups. 112 their demand for services, increase their influ- ence over or active participation in programs, · Working with client organizations. Client and enhance their ability to finance services. groups of various types make extension Investments can introduce inclusive participa- services more accessible to small-scale tory approaches, accountability mechanisms, farmers by providing economies of scale in and strengthen producer organizations. service delivery and a mechanism for producers to express their demands for · Increasing client participation. Participatory services. Working with client groups may extension intensifies and improves interac- enable extension programs to reach more tion between farmers and extension agents, farmers and rural households (increasing recognizing that innovation requires deci- efficiency), facilitate participation in exten- sions by the farmer to change practices. In sion activities (increasing effectiveness), such programs, extension agents increas- and develop human resources and social ingly serve as facilitators, assisting farmers capital (increasing equity). The client group 3. See the IAP,"India: Participatory and Decentralized Agricultural Technology Transfer" AGRICULTURE INVESTMENT SOURCEBOOK role may entail receiving services for Box 3.3 Development of national extension strategies organizational strengthening (client), facilitating delivery of services (partner), The 1994 evaluation of World Bank support to extension providing services to members (executing emphasized the importance of basing extension investments on agency), or financing services (financier). a sound strategy for a national extension system (Purcell and Roles and potential differ markedly be- Anderson 1997). Such a strategy requires, among other things, tween small informal extension contact thorough analysis of: groups and formal commercial organiza- · Farming systems and production and social conditions. tions. Producer organizations are a main · Available technologies and management innovations that focus for agricultural extension, but can increase productivity, including the productivity of women's and other community groups are research and other programs to provide future innova- also important partners. Investments are tions. · Market and economic trends for key commodities. needed to strengthen client group capaci- · Government commitment for funding and human ties and develop mechanisms for their resources for extension. effective involvement in extension and A national extension strategy should: advisory services. · Prioritize target groups and areas and plan differential REFORMING GOVERNMENT EXTENSION SERVICES. Govern- program approaches appropriate to their needs and ments retain a key role in guiding the evolu- opportunities. · Integrate public and private sector activities and traditional tion of the extension system as a whole. Public and modern communications technologies. extension services remain important for exten- · Plan activities at a level of sophistication and intensity sion coordination even when most services are supportable with available human resources. privatized or decentralized. Organizational · Maximize cost recovery and farmer ownership of arrangements will vary by country, and exten- extension programs. sion will be based in a department within the · Ensure that technology generation/adaptation and ministry of agriculture, in an autonomous information support services are in place. institute, or combined with a research organi- · Incorporate plans for staff training in technical, economic, social, and communications skills. zation. Support is often needed for reforms to · Accept that extension program formats are not perma- promote a pluralistic system, establish a coher- nent but must change in response to circumstances. ent national strategy, manage for results, and · Incorporate comprehensive monitoring and evaluation decentralize extension program responsibili- (M&E) systems. ties. An important first step for program reform Source: Purcell and Anderson 1997. 113 and new investments is the development of a national strategy for extension through broad consultation with stakeholders (see box 3.3). cofinancing, enhances the response to local Mechanisms for regular consultations and problems and opportunities, increases exchange of information among service pro- accountability to clients, and increases viders must take place frequently at both program efficiency. But these reforms are national and local levels and depend on using not easy. A comprehensive strategy for the convening power of a government agency. decentralizing extension services must ensure service quality, develop capacities · Decentralizing extension program. Decen- needed at all levels in the system, and tralization reforms being implemented in provide clear definition of the respective many countries offer opportunities for roles and responsibilities of local and fundamental changes in the way in which national governments and user groups. rural extension services are provided. Transferring program governance, adminis- · Managing for results. Public extension tration, and management to the local level agencies need to improve their focus on facilitates user participation and objectives and manage for results. This MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS requires clear objectives and effective curricula for university programs can systems for monitoring and evaluating provide a base for training the future individual and program performance. generation of extension agents. Incentive systems must be aligned with institutional objectives to reward individuals · Improving development communications and programs that produce results in terms support. Not enough attention has been of overall social objectives. given to packaging information and training materials through brochures, radio and TV IMPROVING THE QUALITY OF SERVICES . While all of the programs, posters, demonstration materials, above reforms aim to improve the relevance videos, and technical reports that help and quality of extension services, additional convey information and knowledge to investment is essential to improve the capacity farmers and extension workers, including of service providers to deliver advice and input suppliers, financial services agency information to farmers. Quality of extension staff, and NGO staff. services depends on a range of technical and support services which must often be provided · Establishing quality control systems. Quality through public funding agencies even to control becomes increasingly important and private extension providers. Key areas include: difficult with the move to multiple service providers. Standards can vary within decen- · Improving technical support, such as tralized programs and between different research-extension linkages. Linking service providers, who, as with input suppliers, providers to sources of innovation and could have vested interests contrary to technical support, including national those of the farmer. At a minimum, publicly research programs, is essential if they are funded services should provide a source of to have technically sound advice to offer unbiased information for farmers. Controls clients. Technical support generally requires on private extension and information some in-house technical specialists (if the services are difficult to enforce and prob- service provider is large enough) in addi- lems are probably best handled on an a tion to effective linkages to other programs. case-by-case basis. Accreditation programs Extension programs should be structured so and registries of qualified service providers that farmers, agribusinesses, and various are useful in many cases and can be main- extension providers can develop demand- tained by government or an appropriate 114 driven linkages with researchers, private private sector group. firms, and universities to access relevant technical support as needed. SUPPORTING THE MILLENNIUM DEVELOPMENT GOALS (MDGS). Increased extension support is needed · Strengthening training of extension agents. to achieve the MDGs, especially as they relate Training is a critical need and often inad- to poverty reduction, gender equality, and equately provided in extension programs. environmental conservation. Improvements are needed in both pre- service (university) and in-service training · Poverty targeting of investments. Poverty for extension agents. Training programs reduction and environmental objectives need to emphasize new extension concepts are often best met through extension and methodologies, as well as expand investments that increase overall agricul- attention to marketing, management, tural productivity growth that generates environmental issues, and the development employment opportunities and reduces of farmer and other client organizations. food costs. In most cases, additional For sustainable and long-term development, poverty-targeted interventions (such as by investment in practical and well-rounded geographic, commodity, or production AGRICULTURE INVESTMENT SOURCEBOOK systems) will be needed to reach poor watershed management, biodiversity con- people, women, and indigenous and servation, and reforestation. General educa- minority groups. Poverty targeting requires tion campaigns are also required to raise priority setting for allocation of public public awareness of environmental issues. resources, designing and evaluating pro- Because some environmental impacts are grams to meet different client needs with long-term and benefits often accrue down- emphasis on empowering the rural poor, stream, user financing of such programs is building individual and institutional capac- not usually a feasible option. ity, and developing demand for services where there has been little in the past. EXPANDING USE OF MASS MEDIA AND COMMUNICATIONS Services frequently need to address social TECHNOLOGIES . The mass media has been and organizational constraints to innova- underutilized by extension, and new commu- tion, facilitating rural financial services, nications technologies now offer opportuni- obtaining secure land tenure, improving ties to deliver a richer array of valuable management of community resources, and information of value to farmers and rural focusing on issues formerly considered households. Development communications outside the ambit of extension, such as and mass media like radio and print media HIV/AIDS education, and access to health, have long been a part of extension systems education, and social programs. but have generally not received adequate attention or financing. New information and · Promoting gender equity. There is an communications technologies (ICTs) can increasingly better understanding and make production of mass media and devel- appreciation of the roles, rights, and re- opment communications products more sponsibilities of both men and women in efficient and can provide higher-quality agricultural production and of the greater products that are more effective in delivering constraints faced by women. Many ex- information messages and transmitting amples of extension programs designed knowledge. Many benefits from new ICTs, with a gender focus now exist, and the such as Internet, computer systems, and gender message has been widely dissemi- telecommunications, will come from linking nated; however, greater attention still needs these to traditional communications media. to be given to gender analysis, gender- This would enable radio broadcasters, for sensitivity training, the targeting of women example, to access global sources of informa- 115 farmers, increasing the number of women tion in preparing programs. extension staff, and gender-sensitive M&E. The advances in telecommunications and · Promoting environmental conservation. information technologies also provide exten- Intensification of production systems (for sion systems with opportunities to deliver example, increased use of agrochemicals, information services in new ways (FAO 2000). land use changes, shorter fallow periods) Rural telecenters, cellular phones, and com- requires extension systems to introduce puter software provide new sources of infor- measures to mitigate environmental degra- mation for extension agents and farmers in dation. All extension programs should ways that allow for interactive two-way com- incorporate promotional activities for munications. Private service delivery, cost environmental conservation and sustainable recovery, and "wholesaling" of information-- management of natural resources. Focused providing it to intermediaries (NGOs, private extension programs, often working with sector, press, and others) which will use it to and through community groups, should provide services to farmers--are important promote collective action for natural re- strategies for expanding use of ICTs in rural source conservation activities, such as extension systems. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS SCALING UP INVESTMENTS SELECTED READINGS Scaling up extension investments should be Asterisk (*) at the end of a reference indicates done within the context of widely shared that it is available on the Web. See Appendix 1 national extension strategies. Piloting new for a full list of Websites. approaches will often be necessary to develop local capacity and an understanding of exten- Alex, G., W. Zijp, and D. Byerlee. 2002. "Rural sion reforms. Building new institutional Extension and Advisory Services: New arrangements and developing sustainable Directions." Rural Development Strategy extension systems requires a long-term per- Background Paper 9. World Bank, Washing- spective and continuity in institutional and ton, D.C.* program development. When introducing reforms, such as the contracting out of service FAO. 2000. "The Role of Information and provision, evaluation of different country Communications Technologies in Rural experiences should be an integral part of the Development and Food Security." Work- planning and scaling up process. shop Report. FAO, Rome.* Despite the trend toward greater Bank lending Feder, G., A. Willett, and W. Zijp. 1999. "Agri- under Poverty Reduction Support Credits cultural Extension: Generic Challenges and (PRSCs) and sectorwide approaches, extension Some Ingredients for Solutions." Policy investments for long-term institutional devel- Research Working Paper 2129. World Bank, opment will need to rely on specialized AKIS Washington, D.C.* projects to build institutional capacity and address system issues in a comprehensive Neuchatel Group. 1999. "Common Framework way. Funding of extension programs may on Agricultural Extension." Neuchatel increasingly rely on community-driven devel- Group, Switzerland.* opment (CDD) programs that allocate re- sources to communities and local groups to Neuchatel Group. 2002. "Common Framework address their own development priorities. on Financing Agricultural and Rural Exten- Although such groups initially tend to place sion." Neuchatel Group, Switzerland.* priority on small-scale infrastructure, extension services are necessary to assist communities Rivera, W. M. 2001. "Agricultural and Rural plan, implement, and maintain investments Extension Worldwide: Options for Institu- 116 oriented to income generation for sustainable tional Reform in the Developing Countries." poverty reduction. FAO, Rome.* The following series of Agricultural World Bank. 2002. "Extension and Rural Devel- Investment Notes (AINs) provide additional opment: Converging Views for Institutional guidelines to good practice in selected areas Approaches?" Workshop Summary, World of extension system reform and Bank, Washington, D.C.* development. Priority topics for future work in defining good practice in this area include steps to reform public extension agencies, REFERENCES CITED the establishment of cofinancing and cost- Alex, G., W. Zijp, and D. Byerlee. 2002. "Rural sharing arrangements for extension, Extension and Advisory Services: New Direc- promotion of farmer-to-farmer extension tions." Rural Development Strategy Background services, the development of effective Paper 9. World Bank, Washington, D.C. research-extension linkages, transitional arrangements for public extension, and Alston, J. M., C. Chan-Kang, M. C. Marra, P. G. environmental extension services. Pardey, and T.J. Wyatt. 2000. A Meta- AGRICULTURE INVESTMENT SOURCEBOOK Analysis of Rates of Return to Agricultural Gautam, M. 2000. Agricultural Extension: The R&D: Ex Pede Herculem? Research Report Kenya Experience: An Impact Evaluation. 113. Washington, D.C.: IFPRI. World Bank Operations Evaluation Study. Washington, D.C.: World Bank. Ameur, C. 1994. "Agricultural Extension: A Step Beyond the Next Step." Technical Paper Perraton, H., D. T. Jamison, J. Jenkins, F. Orivel, 247. World Bank, Washington, D.C. and L. Wolft. 1983. "Basic Education and Agricultural Extension: Costs, Effects, and Antholt, C. 1994. "Getting Ready for the Alternatives." Staff Working Paper 564. Twenty-First Century: Technical Change World Bank, Washington, D.C. and Institutional Modernization in Agricul- ture." Technical Paper 217. World Bank, Purcell, D. L., and J. R. Anderson. 1997. Agri- Washington, D.C. cultural Research and Extension: Achieve- ments and Problems in National Systems. Beynon, J., S. Akroyd, A. Duncan, and S. Jones. World Bank Operations Evaluations Study. Washington, D.C.: World Bank. 1998. Financing the Future: Options for Agricultural Research and Extension in Rivera, W. M., W. Zijp, and G. Alex. 2000. Sub-Saharan Africa. Oxford: Oxford Policy "Contracting for Extension: Review of Management. Emerging Practice." AKIS Good Practice Note. AKIS Thematic Team. World Bank, Cleaver, K. 1993. "A Strategy to Develop Agri- Washington, D.C. culture in Sub-Saharan Africa and a Focus for the World Bank." Technical Paper 203. Swanson, B. E., B. J. Farmer, and R. Bahal. World Bank, Washington, D.C. 1990. "The Current Status of Agricultural Extension Worldwide." In B. E. Swanson, Evenson, R. 1997. "The Economic Contributions ed., Report of the Global Consultation on of Agricultural Extension to Agricultural and Agricultural Extension. FAO, Rome. Rural Development." In B. E. Swanson, R. P. Bentz, and A. J. Sofranko, eds., Improv- World Bank. 2002. "Extension and Rural Devel- ing Agricultural Extension: A Reference opment: Converging Views for Institutional Manual. Rome: FAO. Approaches?" Workshop Summary. World 117 Bank, Washington, D.C. FAO. 2000. "The Role of Information and Communication Technologies in Rural This Overview was prepared by Gary Alex with inputs from Development and Food Security." Work- the Sustainable Agriculture (SASKI) Thematic Team of the shop Report. FAO, Rome. Bank. Peer review comments were provided by David Nielson, Aleksandar Nacev, Matthias Grueninger, Jock Anderson,William Rivera, and Mary Hill Rojas. FAO/World Bank. 2000. "Agricultural Knowl- edge and Information Systems for Rural Development: Strategic Vision and Guiding Principles." AKIS Thematic Team. World Bank, Washington, D.C. Feder, G., R. Murgai, and J. B. Quizon. 2003. "Sending Farmers Back to School: The Impact of Farmer Field Schools in Indone- sia." Policy Research Working Paper 3022. World Bank, Washington, D.C. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS AGRICULTURE INVESTMENT NOTE to clients, lack of financial sustainability, and poor links to sources of new technology (Feder, Willett, and Zijp 1999). Many systems CONTRACTING EXTENSION were unable to respond to changing priorities, SERVICES needs, and opportunities due in part to the lack of incentives and flexibility within public With the recognition of the limitations of public agencies for the efficient delivery of quality agencies in efficient and effective delivery of services to widely dispersed rural people. public services, a trend has developed toward increasing separation of functions of financing Although the public sector will continue to and delivery of public services. Governments finance (at least an important share of) the costs typically must continue to finance many rural of extension programs, the increasing diversity extension services, but provision of services is of extension service providers will mean that more commonly contracted to private advisory delivery of services will often be contracted out service firms, NGOs, universities, producer rather than provided by civil servants (see box organizations, and other groups. Alternative 3.4). Potential providers could include combina- arrangements assign procurement responsibility tions of the private sector, NGOs, farmers' to central or local government or to clients associations, universities, and other entities with themselves. Competitive procedures can im- the capacity to provide the services. Contracting prove quality of services, make providers more out extension services makes it possible to take accountable for results, and improve efficiency. advantage of all of the talent and experience Contracting allows for specialization and existing in the field but does not eliminate a selection of service providers according to their government role which, in addition to funding, individual competitive advantage. ensures quality assurance, oversight, and provi- sion of training and information to contracted Many countries established public extension services providers. services in the 1960s and 1970s to promote agricultural sector productivity and rural devel- Contracting systems that separate responsibili- opment. These public extension agencies often ties for financing, procuring, and delivering produced positive results in early years but extension services rely on diverse contractual soon encountered a range of common prob- arrangements that underlie four types of con- lems, including difficulty in measuring impacts, tracting: private funding for private services, 118 lack of political support, lack of accountability public funding of publicly provided services, Box 3.4 Chile: evolution of contracted extension services Chile's extension system, based on contracting private service providers, has evolved since its introduction in 1978. Evalua- tions report positive results from contracted services, and there is no support for return to a system of government service provision. Until 1983, the Entrepreneur Technical Assistance Program provided vouchers for farmers with potential for commercial development to use in purchasing extension services. Problems with this system resulted in a series of reforms that have made the program more demand-driven, with farmer organizations proposing defined projects for commercializa- tion and modernization of small-farm agriculture. Chile's experience indicates the need for contracted extension programs to evolve over time and to: · Design different programs to serve different categories of farmers and different program objectives. · Decentralize program design and contracting to regional and municipal (district) levels to expand participation of farmers. · Expand market orientation and marketing services within programs. · Provide good technical support services and training to contracted extension agents. · Establish good evaluation and monitoring systems at the national level. Source: Beynon et al. 1998; Cox and Ortega, forthcoming. AGRICULTURE INVESTMENT SOURCEBOOK private funding for public service provision, Box 3.5 Outsourcing extension services and public funding of private service provision (outsourcing) (Rivera, Zijp, and Alex 2000). Of Advantages these, public funding of private service provi- sion is the most common strategy for reform. In · Reduces permanent staff requirements and allows deployment of resources to high-priority areas. such systems, the state usually retains responsi- · Allows for accessing providers with special skills to provide bility for establishing criteria for use of funds, specific services. quality control, and M&E, while private entities · Promotes partnerships and working relationships with provide services, define specific objectives for other providers. each locality, train extension staff, develop · Enhances flexibility in responding to special needs of appropriate extension methods, and conduct diverse clientele. M&E studies. · Tests innovative and higher risk "new" systems. · Increases provider accountability and forces more attention to financial management. Public contracting of private extension service delivery can involve national agency contract- Disadvantages ing (for example, Venezuela and Chile), local · Institutional memory may be lost; some private providers government contracting, and grants to client may not pass on new skills and lessons learned. organizations to contract services (for example, · Increases the need for skills of contract negotiation, Uganda). Contracted extension services are supervision, and monitoring performance. · High initial costs (if not offset by staff reductions). likely to spread as agriculture becomes more commercialized and competitive and as public Source: Rivera, Zijp, and Alex 2000. budgets for agricultural extension services demand greater accountability. draw on the best available expertise to provide services to farmers. Competition among potential BENEFITS providers keeps costs down and establishes a Government contracting recognizes that, even market for extension services that should be situations in which public financing of exten- sustainable as public funding is withdrawn. sion is justified, private service delivery is often more efficient in serving clients. Contracting defines responsibilities and encourages clarity POLICY AND IMPLEMENTATION ISSUES in objectives and outputs. In addition, it ex- PROCUREMENT AGENT . Contracting mechanisms can ploits the comparative advantages of different involve different agents in procuring services, 119 institutions and, consequently, improves variety such as central, regional, or local governments. and quality of services. Contracting also pro- For example, Bangladesh experimented with a vides opportunities for the development of the series of partnership funds for services as part of private sector in rural areas and offers other its extension innovation and reform process (see potential benefits (see box 3.5). Extension box 3.6). Alternatively, producer or community programs implemented by the private sector groups can procure services directly with fund- are typically more operationally efficient, more ing provided by public extension programs. This accountable for their performance and results, arrangement helps ensure service provider and more flexible in promoting extension staff accountability to clients. Selecting the service for good job performance and dismissing staff provider, awarding the contract, and approving for poor performance. work plans are procurement functions that can be shared by client groups and different levels Contracts make providers accountable for the of government. Contracting arrangements should quantity and quality of services to be delivered increase farmer participation in three areas: and introduce penalties or nonrenewal of con- selecting extension providers, deciding the tract if these are not met. Provision of services content of work programs, and assessing perfor- by a wider set of suppliers makes it possible to mance of extension providers. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS competitive selection depending on the cost and Box 3.6 Bangladesh: extension partnership initiative funds quality of proposals. Competitive contracting In support of its new agricultural extension policy, Bangladesh procedures seek to improve efficiency and established three partnership funds at different levels under the quality by instilling a private sector attitude of Agricultural Services Innovation and Reform Project: cost consciousness and results orientation, even in public institutions forced to compete to · A Upazila (subdistrict) partnership fund provided provide services. Program transparency and US$1,500 per year of flexible funding for each of the 640 subdistricts to use to promote the collaboration between reputation are enhanced by fair and well- public and private agencies in delivery of extension developed competitive procedures. services through subdistrict partnership projects.These funds supported on average four to five small-scale CONTRACTS VS GRANTS . . Contracting involves projects per subdistrict. selection of a service provider to deliver de- · A competitive grants program in 12 districts financed fined services, whereas grant programs allocate district partnership projects implemented jointly by two or resources on the basis of project proposals more service providers from the public or private sector. · A national-level competitive grants program funded prepared by client groups or service providers. national partnership projects to build the capacity of Either approach can use competitive or non- smaller NGOs to provide quality extension services. competitive procedures. Competitive grants are These partnership funds increased collaboration between often suited to research outreach programs (see service providers and increased acceptance of NGOs as box 3.7). But the communities that need legitimate extension service providers. Impacts and sustainability extension services the most are less likely to be are yet to be determined. able to prepare competitive proposals, provide Source: Authors. cofinancing, demonstrate potential economic impact, and compete for projects. PERFORMANCE-BASED CONTRACTING . Extension TRANSITION ISSUES . Moving from public agency services are typically contracted on the basis of service delivery to contracted services fre- financing inputs needed for delivery of ser- quently encounters problems, especially when vices. An alternative approach involves perfor- there is opposition from extension staff worried mance-based contracts that tie payment to about loss of employment or suspicious of outputs or delivery of services, such as the private institutions' motivation and capacity. number of women farmers trained, the number Reforms must be sensitive to and deal with such concerns and opposition. Financing costs 120 of publications distributed or sold, or results and impacts, such as increased production, of staff retrenchment is often useful and may reduced irrigation water use, or improved be combined with training and the reorienta- product quality. These results-based contract- tion of redundant extension agents to jobs with ing schemes provide incentives to improve private service providers which usually offer efficiency and/or effectiveness of extension better salaries, support, and job satisfaction. services, but they frequently encounter prob- lems of measuring output and outcome quality, LESSONS LEARNED as well as problems with contract costing and PROGRAM/CONTRACT MANAGEMENT . Experience high- negotiations. In these and other schemes, lights the importance of developing capacity to contract performance can also be evaluated by prepare terms of reference, negotiate contracts, farmers who directly observe performance of monitor contractor performance and compli- service providers. ance, and exercise financial control. Program management skills are needed at the national COMPETITIVE CONTRACTING . Contracts can be level, but training and capacity building require awarded on the basis of negotiations (often even greater attention if contracting is done by limited to contracts with client organizations or local government or client groups. Contracting public sector agencies), or on the basis of requires a collaborative relationship between AGRICULTURE INVESTMENT SOURCEBOOK agencies and government commitment to shift Box 3.7 Kenya: competitive grants for research outreach from controlling resources and programs to monitoring and supervising contracts. In 2000, the Kenyan Agricultural Research Institute, under pressure to ensure that its technologies reached farmers, CONTRACTOR CERTIFICATION. Contracting requires a embarked on the Agricultural Technology and Information minimum established capacity within service Response Initiative to empower farmers to make technology providers to compete for contracts and deliver and information demands on agricultural service providers.The services--a major problem in some countries initiative targets community-based organizations (CBOs) as beneficiaries or intermediaries (farmer organizations) facilitating and in remote areas of most countries. A member acquisition of appropriate technologies and informa- registry of prequalified service providers tion. Grants cover acquisition of technologies (for example, expedites contracting under government- planting material), exchange visits to other farmers who have financed contracting systems. Such a registry is already adopted the technology, visits by the institute's staff, and ideally maintained by the private sector in a other costs of observing, learning, and adopting technologies. trade association, farmers' federation, NGO Smaller grants are given preference over larger ones to expand forum, agricultural extension society, or the number of beneficiaries.The average grant is about government agency. The registry must be US$3,000.The iniatiative is now working with 178 CBOs to cover 11,835 farm families. Experience has been quite positive: managed in a fully transparent fashion and an example of success is the Shaza Women's Group in the kept up-to-date. Kwale district, which was able to multiply members' assets four times in 18 months. QUALITY ENHANCEMENT . Competition between Source: Gustafson 2002. service providers can discourage information sharing and good practice and can cause service providers to attempt to increase short- Silva 2000). For situations in which these term profits by neglecting training and special- factors are lacking, contracting on behalf of the ized technical support, both of which are community by an intermediary may be war- necessary for enhancing quality of services. ranted. Experience in Africa indicates that a Institutional arrangements and program fund- facilitating professional NGO is crucial to ing allocation to quality-enhancing support successful operation of user innovation funds services (training, technical support, develop- for producer organizations (Collion 2001). ment communications) can exploit economies of scale to provide support to service providers and can emphasize national priority issues RECOMMENDATIONS FOR PRACTITIONERS 121 (gender equity, environmental conservation). Public financing for extension services con- tracts constitutes an investment in technical COMMUNITY CONTRACTING . Contracted extension services for sustainable agricultural systems programs work best when community or development. This requires political will for producer organization (clients) are heavily extension reform; capable service providers; involved in selecting extension agents, evaluat- clarity in institutional roles and objectives; and ing services, certifying agents, cofinancing an effective demand for services. There can be program costs, contracting services, determin- no blanket prescription for design of such ing program content, and deciding how ser- contracting systems, but the following recom- vices are allocated. Such contracting is facili- mendations should guide contracting programs tated for cases in which there have been (see box 3.8): previous community-managed projects; there is some degree of social cohesion; community · Programs need to clearly separate functions organizations have legal status; communities of financing and service delivery with are responsible for program operations and procedures and guidelines that maintain the maintenance; and there is provision for capac- integrity and objectivity of the contracting ity building for community organizations (de MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS · Requiring some cofinancing by clients helps Box 3.8 Potential investments to ensure their desire for and commitment · Costs of program and contract management units. to using services. The level of cofinancing · Training and technical and legal assistance for establishing will often be fairly low, perhaps 5 percent contracting procedures. to 25 percent for small and marginal farm- · Studies to establish program priorities and targets. ers; for larger farmers, a higher cofinancing · Cofinancing of contracts for extension services. rate can be required with provision for · Training, development communications, and technical eventual graduation to full self-sufficiency. support for service providers. · Training, orientation, and promotion of contracting programs for potential clients and service providers. · M&E studies and monitoring systems to assess perfor- SELECTED READINGS mance and impact. Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 Source: Authors. for a full list of Websites. process. This will often involve a third Rivera, W. M., and W. Zijp, eds. 2002. Contract- party in the procurement (contracting) of ing for Agricultural Extension: Interna- services financed by public funds and tional Case Studies and Emerging Practices. delivered by private or other providers. New York: CABI Publishing. · Contracting procedures require clear terms Rivera, W. M., W. Zijp, and G. Alex. 2000. of reference and deliverables for services, "Contracting for Extension: Review of as well as a clear means of evaluating Emerging Practice." AKIS Good Practice completion of contract requirements. This Note. AKIS Thematic Team. World Bank, helps in defining and organizing activities Washington, D.C.* and avoids contentious disputes over completion of contract work. REFERENCES CITED · Service providers need good links to Beynon, J., S. Akroyd, A. Duncan, and S. Jones. research and other sources of information. 1998. Financing the Future: Options for Agricultural Research and Extension in · Contracted extension services should, as far Sub-Saharan Africa. Oxford: Oxford Policy 122 as possible, involve competitive selection Management. procedures. Competition complicates the selection process but introduces a rigor Collion, M.-H. 2001. "World Bank Strategies for useful in defining plans. Funding Research and Extension." Paper presented at Funding Development-Oriented · Whenever possible, contracting directly by Agricultural Research and Extension work- clients is desirable. Even in cases in which shop, December 10-14, Feldafing, Germany. this is not feasible, clients still need to have some role in contractor selection and Cox, M., and H. Ortega. Forthcoming. "Chile: evaluation. Origins and Evolutions of a Privatized Extension System." In W. M. Rivera, and G. · Contracting procedures must be sensitive to Alex, eds., Extension Reforms for Rural broader societal issues of equity, directing Development. Place: Publisher. services to small and marginal farmers when appropriate and ensuring equal de Silva, S. 2000. "Community-Based Contract- access to services by women, youth, and ing: A Review of Stakeholder Experience." minority groups. World Bank, Washington, D.C. AGRICULTURE INVESTMENT SOURCEBOOK Feder, G., A. Willett, and W. Zijp. 1999. "Agri- cultural Extension: Generic Challenges and Some Ingredients for Solutions." Policy Research Working Paper 2129. World Bank, Washington, D.C. Gustafson, D. J. 2002. "Supporting the Demand for Change: Recent Project Experience with Farmer Learning Grants in Kenya." Paper presented at New Approaches to Extension: A Workshop for Practitioners, sponsored by the World Bank, USAID, and the Neuchatel Group, November 11-15, Washington, D.C. Rivera, W. M., W. Zijp, and G. Alex. 2000. "Contracting for Extension: Review of Emerging Practice." AKIS Good Practice Note. AKIS Thematic Team. World Bank, Washington, D.C.* This note was prepared by Gary Alex, based on a World Bank Good Practice Note "Contracting for Extension: Review of Emerging Practice" with inputs from David Nielson and the Sustainable Agriculture (SASKI) Thematic Team of the World Bank. 123 MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS AGRICULTURE INVESTMENT NOTE location-specific services to improve manage- ment and efficiency of input use, conserve natural resources, support diversification and DECENTRALIZING value-added production, respond to community- AGRICULTURAL EXTENSION or farmer-specific interests, and provide nonfarm AND INFORMATION SERVICES information services relating to poverty reduc- tion. Decentralizing extension services helps to Decentralization reforms that are implemented address many problems of extension by facilitat- as part of wider public sector reforms offer ing a greater interaction with clients and a better opportunities for fundamental changes in the focus on local needs and opportunities. way in which rural extension services are provided. Transferring program governance, administration, and management to the local GLOBALTRENDTOWARD DECENTRALIZATION level facilitates user participation and Even as national extension systems involve cofinancing, enhances ability to respond to more groups or bodies, state and local govern- local problems and opportunities, increases ments have become more important with the accountability to clients, and increases program transfer of responsibility for government ser- efficiency. These reforms are not easy. A vices from national to local governments. comprehensive strategy for decentralizing Decentralization reforms became widespread extension services must ensure service quality, during the 1980s and 1990s when governments develop capacities needed at all levels in the pursued decentralization initiatives because system, and provide a clear definition of the centralized approaches to economic manage- respective roles and responsibilities of local ment and service provision had failed. Effective and national governments and user groups. decentralization requires a combination of administrative, political, and financial decen- National extension agencies were organized to tralization (see box 3.9). transfer standard technologies to farmers throughout the country. Over time, this often proved inefficient and made it difficult for BENEFITS programs to be responsive to clients. Extension Decentralization provides the potential to increasingly has been required to provide respond more effectively to specific local needs 124 Box 3.9 Defining decentralization Decentralization generally involves a mix of three reform strategies: · Administrative decentralization is the transfer of authority over regional staff from the central government to regional or local governments. · Political decentralization (or democratic decentralization) is the selection of local government officials by local election rather than by central government appointment. · Fiscal decentralization is the transfer of responsibility for raising and spending program funds to lower-level government units. Three additional reform strategies that are related to but distinct from decentralization are: · Deconcentration is the central government dispersing staff responsibilities to regional offices without changing the basis for authority and control.This is not true decentralization and can actually increase central control and influence. · Delegation is the transfer of responsibility for public functions to lower levels of government or to other organizations which implement programs on behalf of the central government. · Privatization is government transfer to the private sector of managerial, fiscal, and decisionmaking control, while retaining regulatory authority. Source: Authors. AGRICULTURE INVESTMENT SOURCEBOOK and become more accountable to users. Some Box 3.10 United States: a decentralized extension system effective extension systems, such as the United States, Scandinavia, and France, have long been The U.S. Cooperative Extension Service is a successful decen- decentralized with responsibility devolved to tralized system.The Cooperative Extension Service was local governments, often in conjunction with established in 1914 with the objective of "extension education." local producer organizations (see box 3.10). "Cooperative" refers to the cooperation between the federal, Decentralization is generally expected to state, and county governments in organizing and financing encourage local financing and ownership of services.The service worked closely with farmer organizations (Farm Bureaus) for many years and is financed by federal, state, programs, result in more efficient and equitable and county governments, as well as state agricultural universi- allocation of government resources, provide ties.The federal government provides financing, broad program incentives for efficient service delivery, ensure lower- guidelines, and reviews of program compliance. State govern- cost services, build local capacity, and respond more ments define specific programs, provide cofinancing, coordinate effectively to local needs. local programs, and ensure auditing and reporting. State universities provide technical support and coordination; and Decentralized development efforts, such as CDD, county governments provide a share of the financing, guide offer the potential for increased community local implementation, participate in selection of personnel, and evaluate programs and personnel. Local volunteers from the participation to ensure the inclusion of all groups community assist in implementation and have been important of society in rural decision-making, regardless of in extension program development. gender, age, class, or ethnicity. In addition to devolving control and decision-making power, Source: Claar, Dahl, and Watts 1980. these initiatives can help communities build skills (human and social capital) through education and training, as well as by expanding the depth and frequently stop at this point, and central range of their social networks. authorities often retain control over deconcentrated administrative structures. As a Decentralization offers opportunities to intro- result, an important decision must be made duce other reforms, such as contracting out about whether to phase reforms and risk services, strengthening M&E, and improving getting stalled, or implement total reforms at management. Decentralization facilitates client one time, recognizing the risk of serious pro- participation in planning, cofinancing, imple- gram disruptions. menting, and evaluating programs, and it makes greater accountability possible by FUNDING. Fiscal decentralization is often seen as 125 making program administration closer and a way to reduce central government budgets by more accessible to clients. off-loading tasks that a central government can no longer finance, a practice known as "de- volving insolvency." Intergovernmental fiscal POLICY AND IMPLEMENTATION ISSUES transfers or grants are usually needed to fi- Decentralization represents a fundamental nance decentralized programs. Concern over restructuring of power and financial relation- local administrative capacity and accountability ships and is rarely implemented without frequently leads central governments to impose controversy. A number of key issues in plan- controls that are costly to administer and that ning such reforms must be addressed: restrict local flexibility in managing funds. However, experience indicates that local PHASED VS ABRUPT REFORM . . Deconcentration is governments are generally capable of assuming nearly always the first and necessary step in substantial fiscal responsibility. While grants any process of decentralization. This puts staff from the central government are usually neces- from central administrations in closer contact sary to maintain programs, decentralization with local people, problems, and conditions, offers opportunities to introduce cost sharing and it also provides a channel for local interac- by local government and users and increase tion. Unfortunately, decentralization reforms total resources available for extension. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS COORDINATION. Decentralization involves differ- tive, and political decentralization. Reforms ent institutions and levels of government must be tailored to country-specific conditions collaborating in financing and implementing (see box 3.11). Privatization, deconcentration, programs. Coordination is essential as program and delegation initiatives can complement and objectives, approaches, training schedules, reinforce an overall decentralization policy, but implementation periods, and incentives vary these do not constitute--and can in some cases between decentralized implementation units. work against--effective decentralization. There is also potential for overlap of programs Successful decentralization reforms require: in different areas, competition for staff, clients, and markets, and duplication of effort in · Providing local men and women with providing support services, such as training and substantial influence over local develop- technical support. ment activities and the local political system. LEVEL OF DECENTRALIZATION . Decentralization may · Ensuring availability of adequate financial involve a decision to decentralize authority to resources from intergovernmental fiscal local governments or to local community transfers or grants and user payments to groups. Devolving program responsibility to enable decentralized institutions to accom- local communities fully empowers rural people plish their tasks. but bypasses and weakens local government. Community collaboration with local and national · Ensuring adequate administrative capacity governments in managing programs makes it of local units through training and infra- possible to coordinate programs across a structure investments. broader area, ensures that interests of the poor are represented, facilitates the scaling up of · Establishing reliable mechanisms, such as successful initiatives, and overcomes local and transparent planning, reporting and evalua- often male-dominated authoritarian enclaves. tion, and routine audits, for accountability of decisionmakers to local people. LESSONS LEARNED Strategies for decentralization must be adapted to Decentralization takes many forms, and there the local institutional environment, legal frame- are various combinations of fiscal, administra- work, political traditions, administrative structures, 126 Box 3.11 India, China, and Uganda: approaches to decentralized service provision India's National Agricultural Technology Project established Agricultural Technology Management Agencies in pilot districts to coordinate agricultural extension and rural development activities.The agencies, registered as civil societies to provide a degree of autonomy, are delegated responsibility for extension, are controlled by governing boards of stakeholders.They also receive guidance from farmer advisory committees established in production blocks; and have administrative offices linked to state and national extension offices and receive technical backstopping and training from regional research staff. China's Agrotechnology Extension Center System, based on national, provincial, county, and township institutions, guides extension activities and provides technical support to township agrotechnology extension stations.These provide key services from more than 370,000 staff and 500,000 farmer technicians operating at the village level. Funding for each level of the system comes mainly from that level of government. Both are actively engaged in innovative strategies to broaden their funding base through fee for service arrangements, contracts with producers, input sales, and profit sharing with clients. Uganda's National Agricultural Advisory Services Program represents an ambitious plan to decentralize extension services, scaling up from six pilot districts to national coverage by 2008. An autonomous board coordinates the program at the national level. Local farmer groups are represented in subcounty and district levels. Farmer forums approve project proposals submitted by farmer groups. Funding for projects comes from the program's fund, most of which is allocated to subcounty farmer forums. Source: Swanson and Samy 2003. AGRICULTURE INVESTMENT SOURCEBOOK and social and agro-ecological conditions. Decen- Box 3.12 Ghana: incomplete decentralization reforms tralized extension reforms can be appropriate for cases in which there is already a strong political In 1997, Ghana's Ministry of Food and Agriculture decided to decentralization in the country but should be decentralize operations to provide more responsive and undertaken with caution when decentralization is effective services. Staff and budget of the ministry were to be not yet well established (see box 3.12). transferred to 110 District Directorates of Agriculture. In 2002, these still remained under the ministry because legislation to Decentralization still requires the central govern- establish a local government service for the staff of district government units had not been enacted. Because extension ment to retain responsibility for cofinancing, staff have not yet been integrated and because specialized quality control, promotion, support services, and services have been disrupted, frustration has grown, reducing M&E. Clear division of responsibilities and the impact of decentralization. Political commitment was capacity building at all levels is key to successful essential to start reforms but because of loss of commitment, decentralization reforms. This process depends implementation stalled. Agricultural extension can not effec- on a supportive national policy framework and tively decentralize operations without the framework of overall a clear extension strategy within this framework decentralization policies and structures. (AKIS 2000). Over the short term, decentraliza- Source: Amezah and Hesse 2002. tion rarely reduces--and may increase require- ments for central government financing. policy objectives with local people's priori- ties that emerge from the decentralized RECOMMENDATIONS FOR PRACTITIONERS program governance. Before launching decentralization of extension services, investments in extensive planning, · Provide for fiscal transfers from central to promotion, and training in new operational local government to finance decentralized procedures is essential to sensitize staff to the services, structuring transfers to give users changes and to the likely opposition from maximum influence over programs and central agencies that lose influence because of promote institutional pluralism in service decentralization. Extension strategies generally provision. should (see box 3.13): · Develop capacities in a range of public and · Decentralize service provision whenever private providers, such as local governments, possible, emphasizing user control over executing agencies, and community or 127 program planning, implementation, and producer groups, and introduce competitive evaluation. Box 3.13 Potential investments · Provide for extensive planning, wide promotion of the rationale and principles · Training and raising awareness for all staff regarding new behind decentralization, and training in procedures and rationale for decentralization. new operational procedures, in addition to · Development of new regulations and operating proce- ensuring clear terms of reference for divi- dures. sion of responsibilities among different · Equipment and facilities for local government agencies. levels of government. · Training and capacity building for client organizations and service providers. · Fiscal transfers to local government. · Provide adequate centralized support for · Central support services, including subject matter special- decentralized services, especially for train- ists, development communications and mass media, and ing, subject matter specialists, and the training facilities. production of extension materials. · M&E systems. · National and local strategy development and priority- · Develop procedures for priority setting to setting with participation of all stakeholders. reconcile central government financing and Source: Authors. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS mechanisms that ensure the most compe- Views on International Approaches? work- tent institutions provide services. shop, sponsored by the World Bank, USAID, and the Neuchatel Initiative, No- · Establish effective systems to monitor and vember 12-15, Washington, D.C. evaluate decentralized programs and ensure that the data are available at appro- Claar, J. B., D. T. Dahl, and L. H. Watts. 1980. priate levels. Central monitoring should be "The Cooperative Extension Service: An sensitive to equity issues and the possibil- Adaptable Model for Developing Coun- ity of local elite capture of programs, that tries." College of Agriculture INTERPAKS exclude services to poor people, women, Series 1. University of Illinois Urbana- or minority groups. Champaign, Urbana-Champaign. Swanson, B. E., and M. M. Samy. 2003. "Decen- SELECTED READINGS tralization of Agricultural Extension Sys- Asterisk (*) at the end of a reference indicates tems: Key Elements for Success." Proceed- that it is available on the Web. See Appendix 1 ings of Regional Conference on for a full list of Websites. Operationalizing Reforms in Agricultural Extension in South Asia, sponsored by The AKIS. 2000. "Decentralizing Agricultural Exten- Ministry of Agriculture of the Government sion: Lessons and Good Practice." AKIS of India and the World Bank's South Asia Thematic Team. World Bank, Washington, Rural Development Unit, May 6-8, New D.C.* Delhi, India. Manor, J. 1999. The Political Economy of Demo- This Note was prepared by Gary Alex, based on a World cratic Decentralization. Washington, D.C.: Bank Good Practice Note "Decentralizing Agricultural World Bank. Extension: Lessons and Good Practice" with inputs from David Nielson and the Sustainable Agriculture (SASKI) Thematic Team of the World Bank. Swanson, B. E., and M. M. Samy. 2003. "Decen- tralization of Agricultural Extension Sys- tems: Key Elements for Success." Proceed- ings of Regional Conference on Operationalizing Reforms in Agricultural 128 Extension in South Asia, sponsored by The Ministry of Agriculture of the Government of India and the World Bank's South Asia Rural Development Unit, May 6-8, New Delhi, India.* REFERENCES CITED AKIS. 2000. "Decentralizing Agricultural Exten- sion: Lessons and Good Practice." AKIS Thematic Team. World Bank, Washington, D.C. Amezah, K., and J. Hesse. 2002. "Reforms in the Ghanaian Extension System." Case study was prepared for the Extension and Rural Development: A Convergence of AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE India found that community user groups rarely perform as expected, and, although most group members felt group objectives had been CLIENT GROUPS AS KEY achieved, participation was poor, little informa- INTERMEDIARIES IN tion was available to members on group EXTENSION activities, and sustainability relied heavily on project staff (World Bank 2002). Despite past Client groups of various types make extension efforts, few producer organizations in develop- services more accessible to small-scale farmers ing countries have developed as effective by providing economies of scale in service organizations with sustainable programs. delivery and a mechanism for producers to express their demands for services. Working with client groups may enable extension PRODUCER GROUPS AND ORGANIZATIONS programs to reach more farmers and rural In pluralistic extension systems, various client households (increasing efficiency), facilitate groups help to formulate client demands for participation in extension activities (increasing services. Producer groups are the major focus effectiveness), and develop human resources for agricultural extension services, though other and social capital (increasing equity). The client organizations, based on community member- group role may entail receiving services for ship, specific social or developmental objec- organizational strengthening (client), facilitating tives, or specialized client groups, such as delivery of services (partner), providing ser- youth clubs or women's organizations, can be vices to members (executing agency), or equally important to extension programs. Rural financing services (financier). Roles and poten- producers' groups fall generally into two tial differ markedly between small, informal categories with differing objectives and poten- extension contact groups and formal commer- tials, as well as differing extension needs cial organizations. Producer organizations are a (Rondot and Collion 2001). main focus for agricultural extension, but women's and other community groups are also COMMUNITY-BASED, RESOURCE ORIENTED GROUPS - . important partners. Investments are needed to These are generally small informal groups of strengthen client group capacities and develop farmers and rural people with diversified mechanisms for their effective involvement in production systems. They require extension extension and advisory services. assistance for community organization, mar- 129 keting, and collaborative management of Past development programs seeking to work natural resources. One type of such farmer through producer or community groups have grouping is the extension contact group achieved varying levels of success. In the 1960s organized for the convenience of extension and 1970s, donor programs supported coopera- service delivery. Other informal groups may tives, many of which failed (often spectacu- be semipermanent, coming together for a larly) for varying reasons, especially because of specific purpose and dissolving when this has excessive governmental control. Rural develop- been achieved, such as managing natural ment programs organized community groups to resources. These seldom evolve into formal undertake a wide variety of activities, and organizations and, although they can assume agricultural extension services organized varied roles in extension and information contact groups for technology transfer. Such service delivery, their major strength is in local groups were often effective in facilitating serving as a contact point for extension. service delivery and increasing client participa- tion in programs, but many were "groups" in COMMODITY-BASED AND MARKET ORIENTED GROUPS - . name only, with little organizational identity or These are generally larger and more formal cohesion and little independence. A study in organizations, with more sophisticated needs MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS for extension assistance in production and people scattered over wide, sometimes inacces- marketing, business planning, and develop- sible, areas. Client organizations help extension ment for specific products. These groups can "reach" members but, more importantly, serve play a wider role in extension because they are to organize demand for extension services. more likely to be able to define needs, They enable members to participate in defining cofinance service delivery, and coordinate objectives and needs, provide feedback to help extension and information activities. programs deliver more relevant services, be- come more accountable to clients, and establish Current trends likely to increase the importance a base for cofinancing and eventual self-financ- of producer organizations and facilitate their ing of services. In working with client organiza- involvement in extension include moves to tions, extension services build important social and decentralize government, better definition of human capital, empowering clients to analyze respective roles of public and private sectors, and resolve their own problems (see boxes more competitive markets, improvements in rural 3.14 and 3.15). As agricultural markets become infrastructure and services, and better-educated more competitive and demand for information producers. Future support for client organizations and services increases, there will be a growing will be more effective if based on better under- need for more permanent, formal organizations standing of issues involved in strengthening such to provide rural services. groups and a more comprehensive strategy for organizational development and sustainability. POLICY AND IMPLEMENTATION ISSUES VARIED ROLES OF CLIENT ORGANIZATIONS . Client BENEFITS organizations can convene members for dis- Extension systems face challenges in delivering seminating information and training, contract information services to large numbers of rural extension services on behalf of members, Box 3.14 Norway: agricultural research/extension circles Norway's agricultural research/extension circles are an example of farmer-owned and led extension services. About 25 percent of Norwegian farmers are Circle members, paying annual fees and electing management boards. Circle programs combine extension and adaptive research and include field experiments, soil testing, farm policy analysis, information and advisory services, 130 and promotion of agricultural communities. Priorities are established in membership meetings, with research ideas and guidelines obtained from the national university. Factors contributing to program success include farmer ownership and leadership, combination of adaptive research and extension, fee-based membership, public sector financing, and adaptation of an existing institutional model. Source: Haug 1991. Box 3.15 Malawi: National Smallholder Farmers' Association The National Smallholder Farmers Association was formed in 1997 to provide services and promote the social and economic development of smallholders. It is financed through a government levy, member dues, user fees, and donor support and its 96,000 members are organized in about 5,000 local "clubs." Groups of five to 10 clubs are federated into Group Action Committees organized into 32 separate associations. Services are focused on marketing, using collective bargaining power to negotiate favorable transportation rates and market terms and prices, and providing assistance for feasibility studies, training, and technical and management advice. Associations work with traditional crops (tobacco, maize, cotton, and groundnuts), but are giving increased attention to higher-value and export crops (chili peppers, paprika, ginger, turmeric, and sesame).The associations have field staff and operate farm supply shops that serve as informal information centers. Source:Walton 2002. AGRICULTURE INVESTMENT SOURCEBOOK provide input to program governance and Box 3.16 West Africa: institutional arrangements priority setting, lobby government for extension services, or assume full responsibility for A workshop in Bohicon, Benin in 2001 reviewed experience of providing services to members. 10 West African extension programs that provided manage- ment advisory services for family farms. Approaches varied by MARKET ORIENTATION . Some special interest clients country and program, but each relied on some form of (for example, women's groups, environmental producer organization to manage services.The management conservation groups) may continue to support advisory services evolved in response to farmer need to compete in rapidly changing markets. Advisory services extension systems due to personal commit- analyzed individual farm situations and opportunities, and ment, but few producer groups will sustain developed farm management capacity using management tools interest if there is no direct economic benefit. and decision aids that identify farmers' options. Producer For this reason, sustainable extension programs organization arrangements to support these programs included generally must support marketing activities or a farmer organization that managed the system in Mali; cotton market-oriented agricultural production to organizations managing systems in Mali and Burkina Faso; local generate the financial benefits that provide a farmer groups that managed centers providing services in Mali; basis for sustainability of the extension systems. and a farmer organization in Benin that contracted a private firm to provide advisory services to individual farmer members. DUAL ROLE FOR EXTENSION. Extension services Source: Faure and Kleene 2002. support clients through establishing client organizations and strengthening their programs procedures to ensure that these groups are not and core management systems, in addition to excluded. If this fails, establishment of sepa- providing technical and advisory services to rate organizations might be necessary to promote innovation, increase profitability, provide equal services. Women's political implement projects, and develop linkages to voices can be strengthened by ensuring other sources of assistance. equality of opportunity to participate in orga- nized governing bodies at the local, regional, LEVEL OF ORGANIZATION . Producer organizations national and international levels, as well as by face a dilemma in terms of scale of operation. promoting leadership training for rural women CBOs (typically 10 to 30 members) can achieve and ethnic minorities. group cohesion and unite around common local objectives, but they lack economies of scale and political influence. National or re- LESSONS LEARNED 131 gional organizations can be more effective INSTITUTION BUILDING . Extension services can work advocates with government and achieve econo- with producer organizations as full partners, mies of scale in operations, but they may lose representing members' interests. This requires touch with the rural membership base. A patience and a long-term perspective. Donor strategy of linking community groups in a support can strengthen client organizations and national federation seeks to combine these stimulate demand for extension, but, having strengths (FAO 2001). West African experience donor funding carries a risk of undermining reflects the varied possible roles of producer long-term sustainability of the organizations organizations in providing market-oriented (Delion 2000). advisory services (see box 3.16). EXISTING VS NEW ORGANIZATIONS . . Working with EQUITY CONCERNS . Many groups that are domi- existing organizations is often more successful nated by local elites do not truly empower than starting new ones, especially if groups are producers or reach disadvantaged groups formed by a project specifically to qualify for a (Chamala and Shingi 1997). Ensuring participa- special subsidy or benefit. In Brazil, such tion of women, minority groups, and the poor associations rarely survived beyond the subsidy might require changes to organizational period (Pieri et al. 2002). MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS GROUP PROMOTION . Responsibility for promoting · Define the role of client organizations, which client organizations has often fallen to poorly depends on the type of client. Organizations prepared extension agents with little training or of large farmers and those producing cash understanding of principles of group formation. crops are most likely to be able to assume Most extension programs need dramatic improve- full responsibility for organizing and financ- ment in staff skills (social, legal, and business) for ing extension services. Organizations of working with client groups, whether informal small farmers with diversified production community groups or larger formal organizations. systems are likely to be effective partners in planning and implementing programs in ACCOUNTABILITY AND ADVOCACY . Producer organiza- conjunction with other service providers but tions are often seen as a mechanism for small- will generally remain dependent on public scale farmers to make public extension agen- financing for services. cies more accountable and responsive, and as advocates for continued program funding. · Carry out social assessments, including Accountability is enhanced only if client organi- gender analyses, to understand better the zations have real control over program re- dynamics of client groups and their leader- sources and management. There are only a few ship and assess the participation and instances of producer organizations effectively benefit distribution by gender, age, defending extension program funding (as in ethnicity, and income level. Venezuela) (Carney 1996). Building effective organizations that can lobby for and influence · Devote resources to building client organi- extension priorities will take time and possibly zation capacity and increasing member new organizational arrangements. participation in planning, implementation, cofinancing, and evaluation of extension programs. Extension programs need to RECOMMENDATIONS FOR PRACTITIONERS emphasize training both for client organiza- National extension strategies and program tion staff and members, as well as for mechanisms will vary depending on types of extension service providers. producers/clients, local institutions, and local opportunities and problems. Extension agencies · Promote independence of client organizations, should consider options for working with client enabling them to identify extension needs, organizations in any program. Public support select service providers, and evaluate program 132 should be oriented toward empowering clients, performance. Channeling funding through organizing sustainable groups, developing client organizations to procure services, rather human capacities, and encouraging participatory than providing them directly from public problem-solving through extension investments agencies or public agency contracts strength- that (see box 3.17) (Chamala and Shingi 1997): ens organizational autonomy and influence. Box 3.17 Potential investments · Technical assistance and training for government and stakeholders to develop a favorable policy and regulatory environ- ment for client organization involvement in extension. · Training and study tours for client group members and leaders. · Technical assistance for participatory planning and implementation of extension activities. · Multi-stakeholder forums for extension planning and evaluation. · Market linkage development and market information services. · Support for youth groups, women's groups, and ethnic and cultural minority groups. · Cofinancing grants for client groups to procure needed services, including information and communication technology equipment. Source: Authors. AGRICULTURE INVESTMENT SOURCEBOOK · Plan for collaboration among client Natural Resource Perspectives 14. ODI, organizations, local government, the London. private sector, and producers in providing services. Chamala, S., and P. Shingi. 1997. "Establishing and Strengthening Farmer Organizations." · Encourage transparency in program opera- In B. Swanson, ed., Improving Agricultural tions so members are fully aware of pro- Extension: A Reference Manual. Rome: gram objectives, status, and finances. This FAO. may prevent the misuse of organizations by politicians. Delion, J. 2000. "Producer Organization-Donor Partnerships in Project Implementation in SELECTED READINGS Africa: Risks and Precautions from a Social Asterisk (*) at the end of a reference indicates Perspective." AKIS Discussion Paper. World that it is available on the Web. See Appendix 1 Bank, Washington, D.C. for a full list of Websites. FAO. 2001. "The Inter-Group Resource Book: A Carney, D. 1996. "Formal Farmers Organiza- Guide to Building Small Farmer Group tions in the Agricultural Technology System: Associations and Networks." Rome, FAO. Current Roles and Future Challenges." Natural Resource Perspectives 14. ODI, Faure, G., and P. Kleene. 2002. "Management London.* Advice for Family Farms in West Africa: Role of Producers' Organizations in the Chamala, S., and P. M. Shingi. 1997. "Establish- Delivery of Sustainable Agricultural Exten- ing and Strengthening Farmer Organiza- sion Services." Paper presented at New tions." In B. Swanson, ed., Improving Approaches to Extension: A Workshop for Agricultural Extension: A Reference Practitioners, sponsored by the World Bank, Manual. Rome: FAO.* USAID, and the Neuchatel Group, Novem- ber 11-15, Washington, D.C. Delion, J. 2000. "Producer Organization-Donor Partnerships in Project Implementation in Haug, R. 1991. "Public-Private Cooperation: Africa: Risks and Precautions from a Social Farmer-Led Research/Extension Circles in Perspective." AKIS Discussion Paper. World Norway." In W. M. Rivera and D. J. 133 Bank, Washington, D.C.* Gustafson, eds., Agricultural Extension: Worldwide Institutional Evolution and Rondot, P., and M.-H. Collion. 2002. "Investing Forces for Change. Amsterdam: Elsevier in Rural Producer Organizations for Sustain- Science Publishers. able Agricultural Development." Paper presented at Policies and Approaches for Pieri, C., G. Evers, J. Landers, P. O'Connell, and Rural Poverty Reduction: What Works in E. Terry. 2002. "No-Till Farming for Sustain- Practice, sponsored by the European able Rural Development." Agriculture and Commission and the governments of Rural Development Working Paper. World France, Germany, the United Kingdom and Bank, Washington, D.C. the Netherlands, September 4-6, Agropolis, Montpellier, France.* Rondot, P., and M.-H. Collion. 2002. "Investing in Rural Producer Organizations for Sustain- able Agricultural Development." Paper REFERENCES CITED presented at Policies and Approaches for Carney, D. 1996. "Formal Farmers Organiza- Rural Poverty Reduction: What Works in tions in the Agricultural Technology System: Practice, sponsored by the European Current Roles and Future Challenges." Commission and the governments of MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS France, Germany, the United Kingdom and the Netherlands, September 4-6, Agropolis, Montpellier, France. Walton, J. 2002. "Malawi: National Smallholder Farmers' Association of Malawi (NASFAM)." Case study was prepared for the Extension and Rural Development: A Convergence of Views on International Approaches? work- shop, sponsored by the World Bank, USAID, and the Neuchatel Initiative, No- vember 12-15, Washington, D.C. World Bank. 2002. "Community User Groups: Vehicles for Collective Actionæor Personal Gain?" PREM Notes 72. World Bank, Wash- ington, D.C. This Note was prepared by Gary Alex with inputs from Pierre Rondot and the Sustainable Agriculture (SASKI) Thematic Team of the World Bank. 134 AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE simple channels for two-way communications. New technologies can give farm families better access and can be a major empowering re- MASS MEDIA AND source. Key communications tools for improv- COMMUNICATIONS ing extension services include: TECHNOLOGIES IN EXTENSION · Development communications. This is essential to extension services, providing Extension systems have yet to exploit the full easily understood information for electronic potential of mass media communications and face-to-face communications. technologies to improve rural people's access to knowledge and information. Development · Mass media. This includes broadcast (radio communications and mass media like radio and and television), print (newspapers, maga- print media have long been a part of extension zines, and extension brochures), and other systems but have generally not received ad- approaches, such as poster campaigns, equate attention or financing. New technologi- traditional theater, and songs. Public exten- cal developments can make these function sion services have been slow to realize the more efficiently and effectively and provide potential of mass media, but private firms extension systems with opportunities to deliver use mass media effectively in advertising new information services in new ways. Private campaigns. Increasing rural literacy and service delivery, cost recovery, and wholesaling basic education should make mass media of information are important strategies for communications more effective in reaching expanding use of information and communica- large numbers of small-scale farmers. tions technologies in rural extension systems. · Rural telecommunications systems. These Communication is the essence of extension range from the pay phone to digital wireless services. Extension services, both people and phones and the Internet and are powerful approaches, seek to provide rural people with tools for expanding the flow of information knowledge and information. The information of all types, and facilitating market transac- and communications technology (ICT) revolu- tions, changes in employment, competition, tion provides new options for accessing infor- emergence of new industries, and social mation by providing it directly to farmers and transformations (Talero and Gaudette 1996). 135 rural households or to nonfarmer sources of Phone communications enhance quality of information, such as extension agents, life and make working and living in rural agribusiness, and other intermediaries. Most areas more attractive. extension programs have yet to effectively integrate mass media and ICTs into systems for · Information technologies. These manage supporting extension staff. These technologies large volumes of information that can be are likely to become increasingly important as used in planning, administering, and moni- extension systems try to provide information to toring extension programs. Technologies, a wider and more diverse client base. such as remote sensing, geographic infor- mation systems, global positioning systems, and weather and climate forecasting gener- INFORMATION AND COMMUNICATIONS ate knowledge that extension systems TECHNOLOGY IN EXTENSION SYSTEMS provide to clients. ICTs offer opportunities to reach more people and to carry out various functions within BENEFITS extension systems more effectively and effi- New information technologies and the inven- ciently. ICTs can provide easy access to local or tiveness of agricultural scientists, farmers, rural global information and knowledge and are women, and entrepreneurs are leading to new MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS mass media and ICT applications in agriculture. of lower education, skill levels, and incomes. Communications technologies can help exten- Women have less access to ICTs than men. In sion systems provide information better, selected developing countries, women ac- cheaper, and faster. The ability of information counted for 6-37 percent of Internet users. technologies to manage large quantities of data Women's lower access to ICTs is due to cultural enables these systems provide new services. and social attitudes that restrict women's use of Desktop publishing, PowerPoint presentations, new technologies or that require seclusion of digital images, and lower-cost audiovisual women; financial dependency on male family hardware improve communication effective- members; and less educational opportunities ness. Computers and new software allow for women (Wete 1991). farmers, producer organizations, and extension agents to access information on a range of new COST EFFECTIVENESS. Public extension services can technologies, markets, and other information mainstream mass media in cost-effective exten- from local or remote databases. sion programs. In Malawi, even in the early 1980s, direct extension agent-to-farmer services ICTs and traditional mass media can help the cost US$21 per contact; a one-day farmer farmer compete in the evolving knowledge training course cost US$4 to US$5 per partici- economy where competitive advantage is often pant; a mobile film show cost US$0.17 per dependent on timely access to high-quality farmer per hour; and a radio program cost information. Changes in farming systems also US$0.004 per listener per hour (Perraton et al. require extension systems to provide more 1983). Advances in communications technolo- knowledge and information support as produc- gies have further reduced costs and opened ers diversify to new crops, meet higher food opportunities for new and better applications quality standards, or adapt to greater resource of ICTs. constraints. Many benefits derive from linking new technologies with traditional media. COST RECOVERY . Many extension services (market Internet searches identify global knowledge information and farm level advisory services) resources for local print media use; call-in provide private benefits that should be paid for Internet radio shows allow listeners to phone by users. Cost recovery is important in expand- in questions that can be researched on the ing rural access to information services. Rev- Internet before the results are then reported enue from advertising associated with informa- over the radio. tion dissemination (radio or television advertis- 136 ing) or subscriptions (magazines, or Internet advisory services) offer opportunities for self- POLICY AND IMPLEMENTATION ISSUES financing mass media services. Public extension In expanding use of ICTs, extension systems agencies need to establish good business will need to address the cost and policy issues relations with private partners, either by selling of reaching clients in rural areas. advertising to private firms for government- owned media or providing high-quality infor- THE DIGITAL DIVIDE. In 1999, Latin America, Africa, mation products for use by private sector and the Middle East accounted for only 4.2 publishers and broadcasters. percent of all people connected to the Internet. There were only 0.7 telephones per 100 people TRAINING AND SUPPORT . Introducing computers and in rural areas of low-income countries, com- new communications technologies in traditional pared to 48.5 in rural areas of high-income extension agencies can improve efficiency but countries (Hudson 1998). Rural areas are also can also have major implications for training much less connected than urban areas. Physical and technical support costs, in addition to the infrastructure is not the only factor: rural initial hardware costs. Investments in curricula people are often less able to use ICTs because of training programs and staffing are needed to AGRICULTURE INVESTMENT SOURCEBOOK provide extension service providers with the KNOWING THE CLIENT . Knowing audience charac- capacity to effectively use new technologies teristics, preferences, needs, interests, and and to link clients and sources of information. access to media are critical to understanding the potential use of specific media, analyzing POLICIES AND REGULATIONS . Regulatory constraints and targeting audiences, and designing media may limit rural access to communication tech- products. nologies. National and international regulations constrain expansion of local radio. Protection INSTITUTIONAL ARRANGEMENTS . Support for develop- of telecommunications monopolies, restrictions ment communications in public extension on voice-over Internet protocol, and regulation services is complicated by the number of of Internet use often limit rural access to ICTs. government agencies requiring such services. Extension programs can identify such policy Limited demand from any one institution often constraints and raise them with national makes it desirable for extension services to policymakers. Educating rural constituencies contract out communications support to spe- (producer organizations and agribusiness) cialized agencies. This requires a recurrent about these policy issues can create a constitu- budget item for communications support, but ency for reform. avoids investment in costly equipment that may be underused and poorly maintained. LESSONS LEARNED TELECENTERS. Rural telecenters (or telecottages) The falling costs and ever-increasing capacity have efficiently provided rural people with of ICTs, their ease of use and potential for access to ICTs; however, financial sustainability wide coverage, and the entertainment value is still a major problem for such centers. Gener- of cleverly packaged information and educa- ally, telecenters work best when Internet access tional media present opportunities to mix is part of larger information centers and linked different types of digital and traditional infor- to rural radio and other information services.4 mation technologies. Telecenter networks are useful in exchanging ideas and good practice experience. Varying MATCHING MEDIA TO MESSAGES . Radio and television institutional arrangements are possible (see box reach many people quickly with simple mes- 3.18). UNESCO has produced a useful guide to sages. Print is good for getting detailed infor- establishing telecenters in Africa (Jensen and mation to people. Interpersonal communica- Esterhuyen 2001). 137 tions, group meetings, and demonstrations are best for teaching and developing credibility. A range of media can be combined in an overall Box 3.18 India:InfoVillage Project in Pondicherry communications strategy, but this is something The Info Village Project in Pondicherry, India, supported by the that public extension services often do poorly. M.S. Swaminathan Research Foundation, has established village information centers managed by villagers. Farmers have been DEVELOPING CONTENT . The use of ICTs and mass willing to pay for extension and marketing information from media is not a one-time investment. There must these centers. In one village, four women are managing a center be capability and commitment to continuous effectively.They send and receive e-mails and faxes and development of quality information and educa- download daily news from the Internet and display it on a tional materials to supply clients through these Bulletin Board outside the info center.The Info Centers are media. Effective development communications highly user-friendly, demand-driven, managed by local people, and cater to a variety of information needs. requires active participation of intended beneficia- ries and continuous assessment of their interests. Source: MSSRF 2002. 4. See the IAP,"Russian Federation: Using Information and Communications Technologies for Rural Information Services" MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS RECOMMENDATIONS FOR PRACTITIONERS · Build into programs strategies that promote Extension systems can use mass media and ICTs equal access and opportunity for the poor in three interlinked information subsystems for and disadvantaged groups, including accessing and developing knowledge products, women, to use mass media and ICTs. supporting intermediaries and service providers, and linking rural people directly to sources of · Assess telecommunications policies and information and knowledge. Investments are regulations that might constrain rural access needed so that public extension services can: to information and communication services. · Develop extension strategies that identify · Promote use of the Internet and establish- available communications resources; ment of self-financed telecenters. assess needs for communications; and determine the type of communications Cost efficiency and practicalities dictate the need support needed. Many traditional uses of to develop multipurpose information systems ICTs in extension are proven technologies that provide health, educational, cultural and that still need to be piloted and adapted other information, as well as agricultural infor- to specific countries. mation. Extension programs can also achieve efficiencies by wholesaling public information · Analyze information needs through knowl- services--packaging information and distributing edge, attitude, and practice surveys, includ- it through electronic and other means for use by ing gender analyses, that can be conducted frontline extension service providers. through rapid rural appraisals and do not need to be costly or lengthy. SELECTED READINGS Asterisk (*) at the end of a reference indicates · Expand use of mass media, especially that it is available on the Web. See Appendix 1 radio, to complement other extension for a full list of Websites. services and integrate use of various media for distribution of information. FAO. 2001. "International Workshop on Farm Radio Broadcasting." Workshop Report. · Establish capacity in development commu- FAO, Rome.* nications to package information for use in extension and advisory service programs, Fundacion Chasquinet. http://www.chasquinet.org. 138 including provision for building capacity for local input of content and for supply and Garforth, C. 1986. "Mass Media and Communi- distribution of local material (see box 3.19). cations Technology in Investment." In G. Jones, ed., Rural Extension: Strategies and Goals. London: Elsevier Applied Science Box 3.19 Potential investments Publishers. Expanding use of ICTs in rural extension systems will require Hafkin, N., and N. Taggart. 2001. "Gender, investments in the 4Cs Information Technology and Developing Countries: An Analytic Study." Office of · Connectivity (equipment and infrastructure). · Capacity building (training and institution building for use Women in Development. USAID, Washing- of ICTs). ton, DC.* · Content (preparation of materials and linkages for obtaining information and knowledge products). · Conducive environment (policy and regulatory reforms to REFERENCES CITED facilitate use of ICTs). Hudson, H. E. 1998. "Global Information Source: Authors. Infrastructure: The Rural Challenge." In D. AGRICULTURE INVESTMENT SOURCEBOOK Richardson and L. Paisley, eds., The First Mile of Connectivity--Advancing Telecom- munications for Rural Development through a Participatory Communications Approach. FAO, Rome. Jensen, M., and A. Esterhuysen. 2001. "The Community Telecentre Cookbook for Africa: Recipes for Self-Sustainability: How to Establish a Multi-Purpose Community Telecentre in Africa." UNESCO, Paris. M.S. Swaminathan Research Foundation. Information Village Research Project. http:// www.mssrf.org/. Perraton, H., D. T. Jamison, J. Jenkins, F. Orivel, and L. Wolft. 1983. "Basic Education and Agricultural Extension-Costs, Effects, and Alternatives." Staff Working Paper 564. World Bank, Washington, D.C. Talero, E., and P. Gaudette. 1996. "Harnessing Information for Development: A Proposal for a World Bank Group Strategy." Discus- sion Paper 313. World Bank, Washington, D.C. Wete, F. 1991. "New Technology for Transfer- ring Agricultural Information." In W. M. Rivera and D. J. Gustafson, eds., Agricul- tural Extension Worldwide: Institutional 139 Evolution and Forces for Change. Amsterdam: Elsevier Science Publishers. This Note was prepared by Gary Alex with inputs from Matthias Grueninger and the Sustainable Agriculture (SASKI) Thematic Team of the World Bank. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS INNOVATIVE ACTIVITY PROFILE members included farmers, advisers, and public officials. For two years, the group generated ideas, monitored developments, and ESTONIA:TRANSITIONTO formulated concepts and strategies. The PRIVATE EXTENSION group's function is continuing under an ADVISORY SERVICES informal advisory concept group made up of major stakeholders. Since independence in 1991, Estonia has followed an open and liberal reform path with Privately operated advisory services were agriculture important to economic growth and intended to provide agronomic and farm busi- export earnings. Before independence agricul- ness advice for the most commercially viable tural production was organized in approxi- farms (about 3,700). The project established a mately 350 large state cooperatives, each Private Advisory Services Development Fund to managing some 3,500 hectares with about 300 support a demand-driven advisory service, employees. Assets of the state and collective which funded certified private advisers on a farms were privatized after independence, and contract basis. Private advisers were trained in the farm structure evolved toward smaller-size methodology and technical subjects, and an family farms. The agronomic advisory service Association of Rural Advisors in Estonia was before independence was highly specialized, created. A system for certification of advisers aimed at servicing state and collective farms, was put in place under the Ministry of Agricul- and ensuring delivery of centrally planned ture, and only certified advisers qualify for production targets. Advisors did not provide advisory contracts that are partly subsidized by business- or market-related advice. After inde- the Fund. Government subsidies for individual pendence, new private farmers lacked business advisory contracts between farmers and advisers experience and needed advice on production were to be gradually reduced over a nine-year techniques, business operations, and farm period (from 90 percent in 1996 to 0 percent in management. 2004). However, phasing out of the subsidy has been delayed for a few years in response to What's innovative? Establishing a Private Advisory slower-than-anticipated growth in farm incomes. Services Development Fund and using different ex- tension strategies, including the Internet for differ- The middle category of farmers received public ent categories of farmers. extension services through mass media, farm- 140 ers' organizations, and information networks. The project supported publications from PROJECT OBJECTIVES AND DESCRIPTION various agricultural institutions and it also The objectives of the agriculture project were funded a large number of group advisory to increase rural incomes and stimulate the sessions conducted by farmers and federation rural economy. Project components included advisers or by private advisers in response to land reform, farm drainage rehabilitation, land requests made by county councils and/or use management, agricultural advisory services, farmers' groups. In addition, the project sup- food quality and veterinary laboratories, and ported the establishment of an Agricultural project management. Information Coordinating Center (AICC) and an internet-based agricultural information network The extension component targeted different connecting the farming community to rural categories of farmers using different extension advisers, the ministry, and other domestic and strategies, depending on information needs, international resources for information. The purchasing power, and access to technologies central portal and Web site of the AICC (http:// and solutions. To make the strategies demand- www.epk.ee) is maintained and continually driven and relevant, a National Agricultural updated under a contractual arrangement with Extension Task Force was created whose the Foundation for Rural Development. AGRICULTURE INVESTMENT SOURCEBOOK A large number of marginal farmers (about husbandry, and they adopted improved agricul- 6,500) need information on both farming and tural practices, especially in plant protection, alternative employment opportunities. Rural animal nutrition, and fodder production. Information Centers (RIC) in almost all commu- nities, linked to the AICC, provide this informa- There is now broad understanding and accep- tion electronically. The project has supported tance among farmers that advisory services have the establishment of the Centers with training to be paid for by the beneficiaries. Annual for staff and provision of computers and office customer satisfaction surveys, conducted in 1996 equipment. The information activity has strong through 2000, showed very high levels of links with other initiatives, including banks, satisfaction with the advice given (more than 90 insurance companies, and commercial compa- percent), and more than one-half of the respon- nies promoting their services through the dents indicated that they continue to buy advice. Internet. The ministry provides printed informa- tion for RICs and electronic information LESSONS LEARNED AND ISSUES FORWIDER through the AICC. APPLICABILITY Government does not need to "own" the rural advisory system for it to be effective and BENEFITS AND IMPACTS efficient. The Estonian experience shows that Over the project period, 13,572 private advisory an effective public-private partnership can contracts were approved. The number peaked satisfactorily meet the varying information at 2,894 in 1998 and then declined to 2,689 in needs of the rural clientele, and can very 1999; 2,350 in 2000; and 1,410 in 2001. The quickly adapt to changing client characteristics number of active certified advisers participating and needs. in the scheme declined from a high of 189 in 1997 to 69 as of September 2002 (with 10 more Internet-based information services are proving waiting to be certified). Reasons for the decline to be a cost-effective and efficient way to link include: the emergence of private input suppli- rural populations in sparsely populated areas to ers furnishing "free" topical advice; the estab- the world. lishment of private advisers who prefer to operate outside the state-supported system; and Having a nationally agreed agricultural and the increase in farmers' basic know-how and a rural policy and strategy in place is beneficial subsequent decline in their need for advice. for designing a project targeted at national 141 Most advisers have expertise in plant produc- priority objectives. tion (29 percent), animal husbandry (20 per- cent), or farm economics (36 percent), with PROJECT COUNTRY: ESTONIA only a limited number experienced in fields, such as forestry, marketing, or business plan- Project Name Agriculture Project (Agricultural ning. About two-thirds of current certified Advisory Service Component) advisers are part-time and hold other jobs, as Project ID P008403 well (for example, university teachers, research- ers, private farmers). Many of the advisers who Project Component Cost US$5.3 million left the advisory support system are employed with private companies. Dates FY 1997 ­ FY 2002 Contact Point Gotz Schreiber Dairying is the dominant farming system and, The World Bank, 1818 H Street with project support, has become quite prof- NW,Washington D.C. 20433 itable: with average net farm incomes increased Telephone: (202) 473-4495; by an estimated 35 percent during the five E-mail: Gschreiber@worldbank.org years of the project. Farmers increased their knowledge in grain production and animal MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS INNOVATIVE ACTIVITY PROFILE (ATMAs) at the district level; Farmers' Infor- mation and Advisory Centres and Farmers' Advisory Committees (FACs) for continuous INDIA: PARTICIPATORY AND production areas (blocks); Farmer interest DECENTRALIZED groups and self-help groups at the village AGRICULTURALTECHNOLOGY level; and strengthened institutions for train- TRANSFER ing, coordination, and M&E at the state and national level. From the mid 1960s to the late 1980s, agricul- tural extension played a central role in improv- To provide operational and financial flexibil- ing agricultural productivity in India. ity, ATMAs are registered as independent societies under the Societies Registration Act. What's innovative? Decentralized agricultural tech- Their management structure provides for nology management agencies increase user partici- improved interagency coordination and pation in extension programs,involve nontraditional accountability to all stakeholders, including partners, and make extension more accountable farmers and its governing board includes the to farmers. district collector as chair; the project director as secretary; and membership from district The T&V system was broadly implemented and line departments, zonal research stations, initially worked well in irrigated areas, provid- farmer representatives, NGOs, the private ing rapid dissemination of green revolution sector, and others. At the block level, FACs technologies, but T&V was much less effective have a rotating farmer representative as in rainfed areas. While the overall extension chairperson; a member secretary; and farmer system grew rapidly, it was unable to adapt to representatives, block level functionaries, and changing needs and grew less efficient and others as members. Village level groups work effective. Constraints included a multiplicity of closely with FACs and public and private public extension agencies; lack of coordination; extension agents. limited technical capacity; weak community organizations and poor communications capac- ATMAs provide for decentralized participatory ity; and weak financial support. A new ap- operation of farmer-driven extension services proach was needed to develop technologies and have institutionalized bottom-up planning applicable to diverse agro-climatic conditions; processes through preparation of Strategic 142 focus on sustainable agriculture; adopt commu- Research and Extension Plans, based on nity participatory approaches; use a farming participatory rural appraisals and Block Action systems approach to serve the poor in marginal Plans. Aggregation of block plans forms the areas; develop a broader skill base; and adjust district's annual work plan. The ATMA pro- to financial constraints. gram relies on a group approach based on village level groups, as well as training of volunteer farmers to be paraprofessionals. PROJECT OBJECTIVES AND DESCRIPTION A component of the National Agricultural ATMAs support private extension initiatives by Technology Project implemented an effective contracting NGOs to take on extension re- and efficient demand-driven extension service sponsibilities in selected blocks/areas, using with strong linkages to researchers and farm- farmer-to-farmer extension services provided ers, improved coordination among the line by individuals or through farmer organiza- departments, and public-private partnerships tions, in addition to developing partnerships for technology testing and extension. The with input providers (seeds, fertilizers, and Project's institutional innovations include crop protection chemicals) for demonstrations Agriculture Technology Management Agencies and farmer training. The ATMAs use teams of AGRICULTURE INVESTMENT SOURCEBOOK research and extension personnel to prepare FACs are operational in most project blocks, Strategic Research Extension Plans; identify and they are recognized by government line research priorities in joint workshops with departments; however, ATMAs have yet to fully state agricultural university scientists and assert their authority and overcome the chal- district/block functionaries; and finance some lenges of providing greater representation for technology refinement and validation work in female members and more leadership training. response to location-specific needs. Internal conflicts between ATMA priorities and departmental responsibilities persist, and BENEFITS AND IMPACTS extension staff require considerable motivation ATMAs in most districts have developed in such to work in a farm advisory role with multiple a way that farmers and other stakeholders have funding sources. a sense of program ownership. Operational flexibility allows extension services to respond PROJECT COUNTRY: INDIA to local needs and to improve program rel- evance and effectiveness, but program Project Name National Agricultural Technology sustainability is still uncertain. Project (Innovation Technology Dissemination) ATMA success stories include the diversification Project ID P010561 of production systems for greater income and/ Project Component Cost or sustainability (for example, the cultivation of US$ 31.5 million high-value crops including flowers, fruits, vegetables, and medicinal plants); improved Dates FY1999 ­ FY 2004 natural resource management, such as Contact Point Paul Singh Sidhu vermiculture; integrated pest management; The World Bank, 70 Lodi Estate, organic farming; well recharging; integrated New Delhi 110 003, India plant nutrient management; resource conserva- E-mail: Psidhu@Worldbank.org tion technologies; and the development of new enterprises, such as cashew processing, bee- keeping, dairying, value addition through processing, and group marketing. 143 LESSONS LEARNED AND ISSUES FORWIDER APPLICABILITY The Farmer Interest Groups effectively mobi- lized men, women, and young people to join common interest groups such as producer groups for flower, fruit, vegetable, milk, and other products, as well as marketing groups for seed. These groups have developed federations for mutual support. Training of farm leaders in technology and leadership skills is important, and successful groups can help promote new groups. Strong farmer organizations/federations can be a positive link in the cost-effective provision of extension support to small and marginal farming communities, as well as an alternative to privatization of extension service. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS INNOVATIVE ACTIVITY PROFILE improve decisionmaking by farmers, public institutions, and private enterprises. Central to this was the development of a national market RUSSIAN FEDERATION: USING information system for collecting, processing, INFORMATION AND and disseminating market information on about COMMUNICATIONS 50 agricultural commodities and inputs. This TECHNOLOGIES FOR RURAL would aid the agricultural sector in its transition INFORMATION SERVICES from a centralized command economy to a market economy. In the early 1990s, when the centrally managed economy changed to a market-based economy, The information system was designed on the Russian farmers and policymakers faced serious basis of pilot projects. Oblast (regional level) constraints to improving agricultural production offices collect and process information locally systems. These obstacles included inefficient and from rayon (district level) offices, and farm structures, lack of competitive markets, manage the database. A central Market Informa- and an outdated information system designed tion Unit in the ministry draws information from to meet the requirements of a centralized commodity exchanges, Goskomstat, interna- bureaucracy. Strengthening and expanding tional sources, and databases at the oblast level. agricultural information and knowledge sys- The system consists of a Price Information tems was seen as a way of addressing a wide Service for farmers, traders, processors, and range of linked issues. consumers, and a Price Monitoring Service for government agencies and policymakers. What's innovative? Regional agriculture and market information made available through a Web site and The project provided equipment, supplies, a computing network linking 28 regions, nearly one- training, and technical assistance to ministry, third of all the regions in the Russian Federation. and to its departments at oblast and rayon levels. The ministry released the market infor- In the past, the government used Goskomstat mation, initially as a public good, through (State Statistical Committee) and Ministry of television, radio, electronic, and print media, Agriculture and Forestry statistical systems in and it phased in the introduction of cost recov- Moscow to generate information necessary for ery through provision of commercial informa- managing a centrally planned economy. The tion services. During the 1995­2000 period, the 144 ongoing privatization, deregulation, and decen- project established: tralization of the economy led to the emer- gence of private farmers, restructured farms, · An initial framework for the development and agribusiness enterprises which has gener- of a rural information and knowledge ated a need for new statistical and information system needed during Russia's transition to services to improve marketing decisions, such a market economy. as opportunities to adjust production and marketing activities in response to changes in · A computing network connecting 28 re- prices, demand, and supply of agricultural gions and more that 300 districts across commodities and inputs. Russia. This network provided agriculture and market information and a Web site (http://www.aris.ru) and included sections PROJECT OBJECTIVES AND DESCRIPTION on price information, markets, and agricul- The main objective of the market information ture information. development component of the Agricultural Reform Implementation Support Project was to · A modern press and video center in the make available information and knowledge to ministry, using a variety of media to dis- AGRICULTURE INVESTMENT SOURCEBOOK seminate multidisciplinary material on · Tailor information packages to local agriculture and related topics to regions, situations. institutions, and farm producers. · Incorporate flexibility and scalability in technology hardware, using internationally BENEFITS AND IMPACTS accepted standards. The market information system is currently operating in 28 regions and about 300 rayons · Expect only partial cost recovery, recogniz- across Russia (roughly one-third of all Russia). It ing that information can be a public good, provides weekly and biweekly producer, whole- especially in transition economies. sale, and retail prices on a wide range of agricul- tural products (by grades and quality, as well as · Link various information technologies (for prices for inputs, such as agricultural machinery, example using Web page material to pro- fertilizer, chemicals, and fuel). These prices are duce a series of newsprint reports to be disseminated through the Internet, the Agricul- distributed regionally). tural Reform Implementation Support Web site, answering machines, mass media, and on The revolution in information and communica- information boards in the ministry. Periodic tions technologies provides a host of opportuni- market reports and analytical reports are pro- ties to improve farmer access to market, techni- duced and placed on the Internet. The services cal, and other information needs. Most extension offered by system are now the main source of programs, and probably most rural programs, producer, wholesale, and retail prices used by can incorporate new information technologies agricultural producers, traders, banks, donor and systems to advance their objectives. agencies, and others interested in entering the agricultural sector in Russia. COUNTRY: THE RUSSIAN FEDERATION Econometric studies commissioned by the Project Name Agricultural Reform Implementa- project show that the market information system tion Support Project (Market led to a substantial reduction in the variation of Information prices of 10 products covered by the information System Component) system within the participating regions (a 20 Project ID P008811 percent reduction in price variation). This Project Component Cost 145 indicates substantially improved efficiency of US$9.3 million agricultural markets and increased access to market information by market participants. Dates FY 1995 ­ FY 2001 Contact Point Mark Lundell The World Bank, 1818 H Street LESSONS LEARNED AND ISSUES FORWIDER NW,Washington, D.C. 20433 Telephone: (202) 458-4655; APPLICABILITY E-mail: mlundell@worldbank.org Access to relevant market and production information benefits farm and consumer households through reduction in regional and temporal variations in price and product availability. Effective and efficient rural infor- mation systems should: · Build on the local culture, customs, and media and incorporate these into local information and knowledge-transfer project activities. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS INNOVATIVE ACTIVITY PROFILE · Advisory and information services to farmers. NAADS provides funding and training for initiatives from farmers groups, UGANDA: EXTENSION working in conjunction with local govern- DECENTRALIZATION, ment, to contract for private agricultural PRIVATIZATION,AND REFORM advisory services. In Uganda, current real incomes of rural people · Technology development and linkages and real agricultural GDP are still below levels with markets. NAADS provides funds to of the 1970s; however, recent agricultural farmers to contract researchers to work growth (more than four percent annually over with them in their fields on technology the past 10 years) provides momentum for rural and market development and adaptation. development. This growth has been accompa- nied by a profound reorientation of the public · Ensuring quality of services. NAADS funds sector role in the agricultural economy and the development of a regulatory frame- public institutional reforms. However, agricul- work and service standards for service tural productivity is still low. providers. What's innovative? A decentralized, private exten- · Promotion of private sector institutional sion system that allows farmer groups to contract development. NAADS provides limited their own extension service providers and research- funding on a competitive basis for retrain- ers in technology development and marketing. ing and technical upgrading for service providers. In addition, the project provides Low productivity is in part a consequence of a comprehensive package of benefits, inadequate communication among researchers, including training, which will enable public extension, and farmers. Farmers' needs, both sector extension providers to transition to agricultural and socioeconomic, such as the employment in the private sector. impact of HIV/AIDS on farming households, are not sufficiently reflected in research and · Program management, monitoring, and extension efforts. Research and extension are evaluation. NAADS establishes and sup- overly dependent on donor funding, and ports national and district level entities to require a more stable institutional base of both coordinate, monitor, evaluate, and admin- 146 financial and political support. ister the project. Brochures, radio spots, and rural drama PROJECT OBJECTIVES AND DESCRIPTION groups are used to disseminate information The National Agricultural Advisory Services on the NAADS project. Market and commod- (NAADS) project, part of the Plan for Modern- ity studies will provide a better understanding ization of Agriculture, is based on strong of the local economic conditions and help government commitment to decentralization identify project priorities. and private sector development. Its objective is to improve the productivity and livelihoods of The project philosophy, consistent with the farmers, by establishing a relevant and respon- government vision, includes: sive contract-based agricultural advisory ser- vice. This involves the transforming of the · Independence and flexibility. The NAADS existing publicly-delivered national level board is a small and semi-autonomous extension service to a decentralized, largely unit. It is not housed within either the farmer-owned, private sector advisory services Ministry of Agriculture or the National system. Components of the project are: Agricultural Research Organization. AGRICULTURE INVESTMENT SOURCEBOOK · Further decentralization. Responsibility and project planning and implementation stages funding for agricultural advisory services is of critical importance. are being moved from the district level to the subcounty and farmer level. · A responsive training program must be established for the staff of the extension · Contracting out services. The government system. has decided to give districts strong incen- tives to reduce the number of extension · Flexibility is required to meet the needs of a providers employed as civil servants, in heterogeneous population of beneficiaries. favor of contracting the services of agricul- When the delivery of extension services has tural advisers. been limited to one delivery mechanism this has often been difficult to achieve. Enabling · Cost sharing. The government has decided subcounties and beneficiaries to contract to institute, at a gradual and deliberate with any qualified institution or entity to pace, the requirement that farmers and deliver advisory services will permit great local governments pay part of the cost of flexibility in the types of delivery mecha- the project. nisms that might be employed. NAADS is still in its pilot phase, but the project BENEFITS AND IMPACTS has attracted a great deal of attention and Sixteen districts, which cover a total of 224 support in Uganda and from donors interested subcounties, are in a pilot phase of the NAADS in sustainable approaches to extension and project. Organized into local groups some information service delivery in Africa. 8,000 farmers participate collectively in decisionmaking processes. The framework PROJECT COUNTRY: UGANDA developed for extension services provides a strategic base for rural information and commu- Project Name National Agricultural Advisory nication services. Services Project Project ID P044695 Farmer control of resources provides and strengthens previously weak linkages to the Project Cost US$107.92 million research system, makes technologies more Dates FY 2000 ­ FY 2008 147 accessible, and facilitates the use of farmer Contact Point Christine E. Cornelius innovations and local knowledge. The World Bank, 1818 H Street NW,Washington, D.C. 20433 The private sector advisory partners have begun Telephone: (202) 458-1882; to register as companies and eventually extension E-mail: Ccornelius@worldbank.org services will be completely privatized. Current extension workers, who will soon become private sector service providers, are involved in retraining to match their skills with what is required by private sector advisory services. LESSONS LEARNED AND ISSUES FORWIDER APPLICABILITY · Participation of local professionals, such as policymakers, researchers and extension agents and beneficiaries throughout the MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS INNOVATIVE ACTIVITY PROFILE The project specifically targets poor farmers and their families with small but viable farm- ing operations and finances four component VENEZUELA: CONTRACTING activities: DECENTRALIZED EXTENSION SERVICES · Establishment of institutional structures to coordinate and administer the decentralized In Venezuela, the existence of chronic rural agriculture extension system. Among other poverty, despite abundant natural resource expenditures, the project funded the devel- wealth, has created a sense of urgency for opment of national and state-level subject improving the productivity and competitiveness matter specialists. of its agriculture sector. By the mid-1990s, it was clear that agricultural extension services · Extension services contracted out to private were not capable of modernizing agriculture firms or NGOs for 180 municipalities. and promoting rural development. The govern- ment did not know how many extension · Training for private extension agents, agents it had or how much it was spending on members of ACEs and local government, extension. Several different agencies provided and national and regional extension staff. extension services, but extension agents were rarely in the field. Small farmers claimed that · Technical assistance and analytical studies services never reached them, and larger farmers to improve extension service planning and felt the extension agents had nothing to offer. implementation. Research programs claimed to have many new technologies "on the shelf," but these technolo- Municipal agricultural extension services are gies were not being adopted by farmers. provided in each participating municipality through contracted services of executing bodies What's innovative? Decentralization, and contract- (private firms, universities, and NGOs). Each ing of private extension services to improve account- municipal agricultural extension office prepares ability, flexibility, and responsiveness to farmer needs. an annual municipal project outlining the objectives and the proposed activities to achieve each objective. This plan is submitted PROJECT OBJECTIVES AND DESCRIPTION to the Board of the ACE for approval, after 148 A fundamental premise for the Agricultural which participating municipalities submit plans Extension Project was to ensure that extension to the implementing agency--the Foundation services were accountable to clients, and this is for Training and Innovation for Rural Develop- incorporated in its institutional structure. The ment--for approval of matching funds to decentralized program, focused at the municipal cofinance the project. The foundation negotiates (district) level, relies on extension agents con- agreements with municipalities, relevant state tracted through private firms and NGOs. This governments, and ACEs in the municipalities for provides flexibility and responsiveness to clients. cofinancing contracted extension services and Client participation is encouraged through then employs competitive procedures to con- establishment of Civil Associations for Extension tract services from NGOs or private firms. (ACEs) at the municipal level. The ACEs, con- sisting of representatives of the municipal The costs of the municipal project are shared government and beneficiaries of extension between four contributors: participating farmers, services, coordinate the implementation of the municipal government, the state government, extension activities. Cofinancing by clients and and the national government. It is expected that municipal and state governments ensures that farmer contributions will generally be small to recipients value the services being provided. begin with but will increase over time. AGRICULTURE INVESTMENT SOURCEBOOK Extension approaches are based on farmer The project has already attracted considerable preference, the results of an annual diagnostic attention and has had visits from delegations survey, and technical assistance available from from several African and Latin American coun- subject matter specialists. Extension program tries that are also considering extension service design focuses on providing services targeted reforms. A regional workshop held in 2001 to small farmers in an effort to enhance social provided an opportunity to share Venezuela's and gender equality. Environmental and natural experience with other countries in the region. resource conservation impacts of projects are given priority attention, and the project in- cludes activities to increase the environmental PROJECT COUNTRY: VENEZUELA awareness of farmers. Project Name Agricultural Extension Project Project ID P008222 BENEFITS AND IMPACTS Project Cost US$79.0 million Benefits from the extension project are in- Dates FY 1996 ­ FY 2004 creased awareness by farmers with a better of Contact Point Matthew McMahon their own extension needs, as well as increased The World Bank, 1818 H Street visibility and credibility of extension agents. NW,Washington, D.C. 20433 Farmers are now organized into 76 ACE Telephone: (202) 473-8586, groups, representing about 10,000 farmers. E-mail: mmcmahon@worldbank.org Countrywide, 492 extension agents deliver services to 45,000 clients (not all clients are members of the ACEs) in 123 municipalities. Program monitoring systems indicate that there has been wide adoption of the innovations introduced by the extension teams, with more than 4,000 innovations adopted in participating municipalities. While impact evaluations are being undertaken, demand from municipalities to participate in the program now exceeds the resources available to the program. 149 Nearly 25 percent of extension agents are women, and extension services for women have emerged as an important part of the overall municipal extension program. LESSONS LEARNED AND ISSUES FORWIDER APPLICABILITY Contracting extension service delivery from private firms and NGOs is becoming more common and is an effective way of enhancing accountability to clients, which is an impor- tant part of any service. Using existing or creating new social mechanisms is an effec- tive way to make service providers more accountable to clients. MODULE 3: INVESTMENTS IN AGRICULTURAL EXTENSION AND INFORMATION SYSTEMS 4 INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION 151 A growing population and limited natural resource base means that if current and future food and fiber needs are to be met, these resources will have to be used in a more sustainable way. Promoting sustainable agriculture requires that farm management techniques foster synergies, conserve nutrients, increase economic stability, and promote equitable outcomes for male and female small-scale farmers.This overview summarizes the basic underlying principles and approaches for plan- ning investments in sustainable agricultural production systems, including technologies to intensify production.These issues and investments complement investments needed for the sustainable manage- ment of off-farm natural resources important to agricultural production systems.1 1. See Module 5,"Sustainable Natural Resource Management" for more information on the sustainable management of off-farm natural resources important to agricultural production systems. there is limited new land and water resources Box 4.1 Household strategies to improve livelihoods that can be brought into production to satisfy · Intensification of existing farm production patterns through this demand. The expected ecological impacts increased use of inputs or better quality inputs. from doubling food production using past · Diversification of production with emphasis on greater production strategies may result in production market orientation and value addition involving a shift to systems becoming unsustainable. Agricultural new, generally higher-value products. systems must therefore intensify existing land · Increase farm size, an option limited to a few areas where and water resources using more sustainable additional land resources are still available. methods, and by changing current production · Increase off-farm income to supplement farm activities and systems and diversifying into new, more provide financing for additional input use. · Exit from agriculture, including migration from rural areas. productive enterprises. Source: Dixon et al. 2001 and FAO 2001. Agricultural intensification is an increase in the productivity of existing land and water re- RATIONALE FOR INVESTMENT sources in the production of food and cash Future global food and fiber demand is ex- crops, livestock, forestry, and aquaculture. pected to increase substantially as populations Generally associated with increased use of grow, and average incomes rise. However, external inputs, intensification is now defined Table 4.1 Comparison of farming systems and relative importance of different poverty reduction strategies Dualistic mixed Wetland Rainfed Rainfed Rainfed large/small Category rice based humid highland dry/cold farms Characteristics Agr. population (million) 860 400 520 490 190 Total land (m ha) 330 2,013 842 3,478 3,116 152 Irrigated (%) 58 11 20 18 9 Agr. pop./cultivated ha 860 400 520 490 190 Alternative Strategies for Poverty Reductiona Intensification * * -- -- *** Diversification *** *** -- ** ** Increased farm size -- -- -- -- * Increased off-farm income ** ** *** * -- Exit from agriculture -- -- ** *** -- a. Assessments of relative importance based on expert judgment: *** Highest priority. ** Second highest priority. * Third highest priority. Source: Dixon et al. 2001. AGRICULTURE INVESTMENT SOURCEBOOK as the more efficient use of production inputs. Box 4.2 Production practices relating to sustainable Increased productivity comes from the use of intensification improved varieties and breeds, more efficient use of labor, and better farm management Integrated pest management (IPM) is an ecosystem-based (Dixon et al. 2001). Diversification, which strategy that seeks to control pests or their damage through a represents a change in the farm enterprise combination of techniques (biological control, pest monitoring pattern to increase profitability or reduce risk, against economic thresholds, habitat manipulation, modification is one option for sustainable intensification. of cultural practices, use of resistant varieties), using less toxic chemical pesticides only after pest monitoring indicates their Although intensification of production systems need. is an important goal, these systems need to be Conservation farming (CF) encompasses four broad, inter- sustainable to provide for current needs with- twined management practices: minimal soil disturbance (no out compromising the ability of future genera- plowing and harrowing), maintenance of a permanent vegeta- tions to meet their needs. Sustainable agricul- tive soil cover, direct sowing, and sound crop rotation. tural can be defined as the management and conservation of the natural resource base, and Low external input and sustainable agriculture (LEISA) uses the orientation of technological and institu- farmers' knowledge and a range of management practices tional change to ensure the attainment and (agroforestry, IPM, intercropping, crop-livestock integration, continued satisfaction of human needs for microclimate management) to minimize the need for purchased present and future generations. Such sustain- inputs. able development in the agriculture, forestry, Organic agriculture employs agronomic, biological and mechani- and fisheries sectors conserves land, water, cal methods to control pests and maintain soil fertility with plant, and animal genetic resources and is virtual elimination of synthetic chemicals for crop and livestock environmentally nondegrading, technically production. appropriate, economically viable, equitable, and socially acceptable (FAO 1995). Precision agriculture maximizes productivity of inputs, often using a global positioning system (GPS), to match input A recent study investigating alternative house- application and agronomic practices with soil attributes, hold strategies for farming systems in develop- seasonal conditions, and crop requirements as they vary across ing countries reinforced the need for greater a field or between small plots. development attention to diversification and Diversification is an adjustment of the farm enterprise pattern intensification (see box 4.1) (Dixon et al. 2001). in order to increase farm income or reduce income variability 153 For five categories of farming systems that by reducing risk, by exploiting new market opportunities and cover approximately 98 percent of cultivated existing market niches, diversifying not only production, but also lands, the characteristics and relative impor- on-farm processing and other farm-based, income-generating tance of alternative poverty reduction strategies activity (Dixon et al 2001). are presented in table 4.1. Intensification and diversification are important in all cases. How- Source:Authors. ever in the relatively constrained circumstances of rainfed highlands and rainfed dry/cold climates, off-farm employment and exit from by making greater use of biological and eco- agriculture are more important (though not logical factors in production processes (FAO always easily achievable). 2003). A range of new technologies, manage- ment strategies, and analytical tools relevant to Sustainable agriculture is not a clearly defined sustainable agricultural intensification has production model, but rather a set of comple- emerged in recent years (see box 4.2). mentary approaches that seeks to minimize negative environmental impacts from agricul- The heterogeneity in developing countries of ture, by increasing efficiency of input use and productive resources, infrastructure, inputs, MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION biodiversity, soil degradation, and reduced Box 4.3 Pakistan: effects of resource degradation on agricultural water availability and quality, and these further productivity reduce future agricultural productivity. The Pakistan Punjab illustrates the potential problems arising from agricultural intensification and resource degradation. Average growth in total factor productivity since the green PAST INVESTMENT ACTIVITY revolution has been moderate at 1.26 percent, but with wide Commodity-focused investments in the 1970s regional variation. Negative growth observed in the wheat-rice and 1980s sought to expand and intensify system relates in large part to continuous and widespread production systems, such as basic food crops resource degradation measured by specific indicators of soil and traditional cash crops that have broad and water quality.This resource degradation has offset much of impacts on poor people and/or national econo- the gain from investments in technology, infrastructure, and mies. These investments generally supported education. Policy distortions, especially water pricing, and lack of research and extension on more sustainable cropping systems, monocropping and expansion of a single contributed to this resource degradation. dominant technology or production system, and often focused on more productive regions Source: Ali and Byerlee 2001. of a country. Since the 1980s, World Bank financing for production of specific agricultural commodities has declined steadily, in line with skilled labor and access to new technologies the decrease in total Bank financing for agricul- means that development initiatives have be ture, and consistent with the growing recogni- targeted to locally specific problems. For tion that the public sector is not well suited to instance, in many African countries intensifica- picking commodities or production activities tion will likely involve increasing the use of that were likely to be economically successful. underutilized resources and external inputs (especially fertilizer), whereas in some Asian Only 26 of the Project Appraisal Documents countries that have fully capitalized on green (PADs) for current projects specifically men- revolution technologies, substituting better tioned sustainable agriculture practices. This knowledge to reduce external input use will be may reflect a significant and worrisome weak- key to sustainable development (see box 4.3). ening of the technical analysis and input into project preparation and appraisal. As sustain- Environmental and social sustainability of able agricultural intensification is a key strategy productive resources depend in part on eco- for achieving goals of rural poverty reduction 154 nomic profitability that must provide for rein- and environmental conservation, there is an vestment in the maintenance of these resources urgent need to increase support to this area. (including the natural environment) and on a There is also a related need to increase techni- satisfactory standard of living for owners and cal expertise, to ensure sound planning for employees involved in the production process. investments in the intensification and In turn, economic sustainability is dependent sustainability of production systems. on a productive workforce and productive natural resources. New investments for intensification of agricultural production systems since the mid 1990s have Sustainable agricultural intensification invest- generally been based on a better understanding ments are particularly relevant to poor people of the underlying social, economic, and environ- in developing countries, where poverty, agri- mental elements of sustainability, and a general cultural productivity, and resource degradation commitment to the principles underlying sustain- are closely interrelated, and negatively affected able agriculture and development. These invest- by increasing population pressures on the ments have focused mainly on high-value com- natural resource base. Poverty often results in modities, minimum tillage, and integrated pest overcropping, which contributes to a loss of management (IPM). AGRICULTURE INVESTMENT SOURCEBOOK KEY ISSUES FOR INVESTMENT hold economy. In addition, marketing Future investments are likely to support more supply chains and a wide range of stake- diverse products and production systems and holders are part of the holistic approach to include less favorable production regions. required for sustainable agricultural systems Investments will need to apply modern science (see figure 4.1). and new marketing systems to help both women and men farmers move into more · Sensitive to social change. The transition productive and sustainable production systems. from one farming system to another is Investments in sustainable agricultural intensifi- often as much an issues of behavioral cation must be economically, environmentally, change as of economic change. Production and socially sound, efficient, and based on systems are rooted in cultures and tradi- sustainable institutions. Common characteristics tions and major changes may require two for these investments are described as follows: or more generations of farmers to make the transition, such as from subsistence farming · Based on holistic systems approaches. to commercial farming; from nomadic Farming systems are defined by economic, pastoralism to settled agriculture; and from social, and environmental conditions within traditional to nontraditional crops. Since which they operate. Interventions must be social resistance to change may be strong, a based on an understanding of the interrela- sound social analysis should be in the plan tionships between these factors, and will for new investments in agricultural intensifi- therefore frequently require a holistic, cation. Extension services must help farm- multidisciplinary approach. For example, ers address and adapt to social change, but introduction of a new production system or these services are frequently very weak in an innovation in an established system will their ability to deal with social issues. often require attention to the policy envi- ronment, agro-ecology, market systems, · Targeted to specific production environ- social system (including the gender and ments. There are 72 major categories of social group-based division of labor and farming systemsæeach with numerous access to resources), and the farm/house- variationsæfound in the various agro- FIGURE 4.1 STAKEHOLDERS INFLUENCING AGRICULTURAL PRODUCTION AND SUPPLY CHAINS 155 Policy Level Agricultural Production Food Industry Consumption Input Industry Food Process Food Retail Research Producers Consumers NGOs Industry Industry Research Extension Note:The arrows represent the direction of major influences in the supply chain, though influence can flow both ways. Source: Sorby, Fleischer, and Pehu 2003. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION ecological regions of the developing world · Focused on poor and marginal farmers. If (Dixon et al. 2001). Investments in sustain- countries are to achieve social objectives able intensification must be designed within and improve political stability, investment the context of established agricultural in sustainable agricultural production systems and the level of technology, re- should be directed at poor people. But, this source availability, and market opportuni- does not mean that all can find sustainable ties in the area. In areas for example where livelihoods within agriculture and some high input use already threatens environ- marginal farmers with little potential to mental resources, the challenge will be to improve incomes in agriculture must seek use less purchased inputs more efficiently. off-farm employment. Practitioners must In other areas, as in most of Africa, in- consider wider social impacts of invest- creased use of production inputs will be ments, and the need for alternative employ- necessary to provide sustainable livelihood ment. options to growing populations. · Equitably shared by all gender and minor- · Supported by a sound policy framework. As ity groups. Agricultural production system the private sector is largely involved in innovations are socially sustainable only agricultural production and marketing when all members of society share in the systems, governments have a key role in benefits. Since, on a global basis, nearly establishing a facilitating policy and regula- one-half of all farmers are women, and tory environment for sustainable agricul- since in most rural areas women carry out ture. To maximize agriculture's efficiency many specialized production activities and sustainability, public policy should (planting, weeding, vegetable gardening, seek to internalize all costs and benefits in managing small animals, postharvest han- the prices of production inputs, such as dling), investments must ensure their improving pricing mechanisms for irrigation participation in programs and avoid nega- water, facilitating land market development, tive impacts. Men may displace women and eliminating distorting taxes and subsi- farmers, as has occurred in some parts of dies on chemical inputs, including fertiliz- Africa, when export horticultural market ers. Government investment programs must opportunities have encouraged men to take also provide for critical infrastructure, such over women's traditional plots of land. The as roads, and other public goods, such as same is true for many minority ethnic and 156 regulatory frameworks, administration of cultural groups, who have more limited property rights, research, and information access to education, loans, property rights, services, especially for small farmers. and technical information. Social analysis is needed to guide project design and invest- · Built on knowledge-intensive innovations. ment, draw on traditional knowledge, and Sustainable intensification must build on a identify and mitigate negative environmen- strong understanding of the system and its tal impacts on different groups. Gender components. Research and extension (R&E) analysis is a particularly important tool for will need to provide the technical and predicting gender-specific impacts of management recommendations suited to agricultural intensification investments, and specific farms and fields rather than broad this facilitates the mitigation of adverse general areas. "Precision farming" systems impacts, such as increases in women's will help apply the knowledge to field-level workload or reduced access to land. production. Investments in biotechnology, information and communications technolo- · Participatory processes. All relevant stake- gies (ICTs), and processing, and marketing holders should be included in the design technologies are also needed. and implementation of sustainable intensifi- AGRICULTURE INVESTMENT SOURCEBOOK cation activities as this will empower mand for quality, safety of products, and farmers to plan and execute these activities, information on method of production. In and to obtain information and develop these circumstances, an effective response options needed in the decision-making requires that agribusinesses, government process. With these skills, farmers have a and commodity organizations develop better ability to negotiate their interests standards, grades and certification of with agribusinesses and governments. processes. The latter may relate to farm Strengthening representative rural producer practices, including environmental and organizations (RPOs) and other advocacy social conduct (that is, encouraging envi- groups for the agricultural sector can ronmentally sustainable or "good" farming facilitate this empowerment. practices). Farmer organizations have a central role in scaling up production to · Environmentally sound. Sustainable agricul- develop new markets and meet market tural production systems must be environ- demands. mentally soundæneither depleting the natural resource base on which they de- · Low risk. Agricultural production nearly pend nor contributing significantly to the always involves substantial risk due to depletion of downstream resources. Agri- weather, pests and diseases, and market cultural intensification investments should prices. Farmers, particularly resource-poor seek to reduce soil erosion and land degra- farmers, are risk adverse, and may maintain dation, avoid loss of biodiversity, and traditional production systems and practices improve efficiency of land and water even when market, environmental, and resource use. In general, more efficient use technological changes make these no of existing resources avoids pressures on longer sustainable. Sustainable intensifica- more marginal production areas, thus tion innovations are most acceptable to preventing more widespread environmental farmers when these involve minimal risk or degradation. reduce risks. Where this is not the case, investments may be needed to help deal · Nonpolluting. As agricultural production with risk by providing financial, informa- systems use inputs more intensively, avoid- tion, and risk management services, as well ing pollution of environmental resources as improved infrastructure. In addition, (water, land, air) and food products financial incentives such as matching grants 157 through minimizing downstream pollution may be needed to encourage resource-poor from agrochemicals, livestock manures, and farmers to try out more sustainable meth- soil erosion is critical to the sustainability of ods of production. downstream production systems. Govern- ment regulation relating to pollution, both · Trade-offs. Options for intensification will mitigation measures and charges, is relevant not necessarily involve win-win scenarios. to environmental assessments of new In practice there are trade-offs between production systems. productivity (and income), environmental sustainability, and various social objectives. · Market and private sector based. Lack of Common trade-offs include efficiency/ input and output markets required for equity, specialization/flexibility, profits/ production system intensification affects environmental benefits, and long-term/ particularly small farmers. Investment is short-term paybacks. These trade-offs needed to develop these markets and present difficult choices for policymakers infrastructure as they will expand produc- and sound cost/benefit analysis accounting ers' production options and facilitate pro- for economic variables, and their social and duction changes to satisfy consumer de- environmental implications, must be em- MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION ployed. This will involve building the equipment costs, enhances soil fertility, capacity of both public and private sector reduces erosion, and improves water decision makers to make effective decisions infiltration, thereby reducing unit costs and within complex decision environments. It conserving land resources. Improved crop will also require that compensatory mecha- residue management, including mulching, nisms are used to mitigate adverse effects is often a necessary component of these on those groups that are negatively affected systems. No-till systems of conservation by initiatives that provide positive overall farming have proven a major success in net benefits to the target population. Latin America, and are being used in South Asia and Africa.2 FUTURE DIRECTIONS FOR LENDING · Organic farming eliminates use of chemical Public investments to intensify sustainable inputs and can be sustainable as long as production systems are generally best focused practices maintain productivity at a reason- on facilitating the capacity of farmers, govern- able level, consistent with price incentives ment, and the private sector to make decisions provided by growing market opportunities about the appropriate technological and resource for organic produce. Organic farming allocation and on providing the necessary social/ depends mainly on the development of organizational and physical infrastructure. It is niche markets with reliable standards and critical that agricultural production systems be certification systems for production.3 sufficiently flexible to adapt to changing environ- mental and economic conditions. · IPM systems have been developed for many crops to control pests, weeds, and New technologies will be developed and diseases, while reducing potential environ- variations on established production systems mental damage from excessive use of are likely to continue. At present, improved chemicals. Scaling up IPM technologies is a production practices that may warrant public challenge, as these management systems sector support include: rely on farmers understanding complex pest ecologies and crop-pest relationships. · Varietal improvement will remain crucial as Thus, IPM systems require continuous it becomes increasingly difficult to "adjust research and technical support and inten- the environment to the plant." Plant variet- sive farmer education and training.4 158 ies adapted to specific production environ- ments and sustainable agricultural practices, · Precision agriculture improves productivity and to pest and disease resistance will by better matching management practices become increasingly important. Livestock to localized crop and soil conditions. improvement will increase productivity and Relatively sophisticated technologies are make more efficient use of scarce land and used to vary input applications and produc- water resources. Biotechnology's potential tion practices, according to seasonal condi- as a tool for sustainable production systems tions, soil and land characteristics, and should be evaluated and supported on a production potential. However, with help case-by-case basis. from extension and other services, resource poor farmers can also apply such precision · Conservation farming practices can reduce agriculture principles for differential input unnecessary input use. Minimum tillage or application and management on dispersed no-till crop production reduces labor and small plots. Appropriate technologies 2. See the AIN,"ConservationTillage" 3. See the AIN,"Organic Agricultural Production Systems" 4. See the AIN,"Integrated Pest Management" AGRICULTURE INVESTMENT SOURCEBOOK suitable for use by small farmers include profitable and generate substantial employ- simple color charts to guide decisions on ment and foreign exchange, but require fertilizer application, and laser leveling of safeguards to ensure that poor people fields for irrigation. benefit equitably. In some areas, family fish ponds can provide important family nutri- Public investment can also support transition to tion benefits.6 more profitable and sustainable farming sys- tems. Some of the system adaptations that are · Tree crops, including fruit, beverage, timber, options for sustainable intensification of pro- and specialty crops, offer opportunities for duction include: environmentally sound production systems as these maintain vegetation cover, and can · Integrated crop-livestock production can reduce soil erosion. Tree crops, especially enhance environmental sustainability by multiple species plantations, help maintain feeding crop residues to animals, thus a relatively high level of biodiversity. They improving nutrient cycling. This crop- are important to export earnings in many livestock approach is likely to become countries and, while often suited to large- increasingly profitable given the large, scale plantations, are also important to worldwide increase in demand for meat, smallholders with mixed cropping systems. milk, and animal fiber. The suitability of many livestock enterprises to small farm Sustainable intensification will frequently require production systems holds considerable activities that provide an enabling environment potential for poverty reduction. and support services for the market-led changes, or component technologies, including manage- · Agricultural diversification which must be ment practices. Much investment will come from pursued where existing farming systems are private sector-based market supply chains, includ- not environmentally sustainable or eco- ing input supply and output marketing and pro- nomically viable. Diversification into high- cessing enterprises and farmers. Public investment value, nontraditional crops and livestock will need to focus on a number of key areas. systems, such as horticulture are attractive because of the growing market demand for NEW KNOWLEDGE AND INFORMATION SERVICES . A key these products, high labor intensity and investment area is in technology associated high returns to labor and management. In with management innovations to improve 159 contrast to other low-input strategies for overall productivity and sustainability of agri- sustainable intensification, diversification to cultural systems. Much research will focus on high-value products frequently requires use development of improved management sys- of relatively high levels of inputs, which tems, with emphasis on understanding agricul- must be monitored and managed carefully.5 tural ecology, farm management and social systems. Biotechnology offers opportunities to · Aquaculture has potential for sustainable diversify and intensify agricultural production growth in many countries, as declines in systems--tissue culture for production of virus- global capture fisheries (that is, non-farmed free planting stock (for example, bananas) and fishing) has put upward pressure on retail transgenic crops with pest resistance or other prices for fish. Investments must take into beneficial characteristics (see box 4.4). account the potential environmental im- pacts due to habitat loss, land use change, Agricultural extension, education and training and introduction of new species. Many investment is needed at all levelsæfarmers, intensive aquaculture systems are highly technicians, and university graduatesæ--to 5. See the AIN,"Market-Driven Diversification" 6. See the AIN,"Aquaculture Production Systems" MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION introduce principles of sustainable intensifica- Box 4.4 South Africa: Bt cotton and sustainable development tion and to develop human resources in this of the Makhathini Flat field. Many sustainable intensification invest- ments have significant information require- South Africa has been a leader in Africa in research, production, ments, such as weather forecasts, market and commercialization of biotechnology products. In the Makhathini Flat, an arid region, smallholders grew cotton as a information, natural resource conditions, and subsistence crop, but since growing Bacillus thuringiensis (Bt) pest incidence, for which investments in rural cotton (genetically modified cotton producing a protein that information and communications systems are acts as insect control), they have seen the following benefits: needed. · Environmental/agronomic benefits: more than 50 percent PUBLIC POLICY AND REGULATORY SYSTEMS . In many reduction in pesticide spraying; easier crop management; cases, government policies limit agricultural reduced risk of bollworm attacks. intensification and diversification, by distorting · Economic benefits: 20 percent to 60 percent yield increases; higher gross margins (on average US$50 per production decisions and by encouraging hectare); reduction in labor requirement. monocropping through input and output · Social/health benefits: school enrolment improvement; subsidies (see box 4.5). Pricing policies on fewer pesticide poisonings; general community livelihood water, land resources, and other natural re- improvement; less drudgery in weeding for women. source inputs to agricultural production sys- tems should encourage efficient allocation and use, an issue especially important to irrigation water management. Public policies should encourage investment in productive infrastruc- ture, such as small-scale irrigation and erosion Box 4.5 Policy issues affecting adoption of sustainable control. However, these policies must be agriculture practices complemented by regulatory systems and incentives that minimize pollution from agricul- Price, trade, and tax policiesæinput subsidies encourage tural production and processing activities. excessive use; minimum support prices for cereals discourage Government monitoring of changes in environ- diversification; electricity or fuel subsidies encourage groundwa- ter depletion; subsidized milk/dairy imports discourage local mental conditions is an important input to production; and fuel or machinery subsidies discourage guide policy formulation on sustainability. conservation tillage. MARKET . While 160 AND PRIVATE SECTOR DEVELOPMENT · Investments: analytical work, advocacy, stakeholder investments in the policy and regulatory inclusion, policy formulation. environment and in public goods knowledge Insecure property rightsæno incentive for long term and information services benefit the private investments. sector, additional public investments may be · Investments: land titling, group ownership, conflict resolu- tion, gender-based division of labor and access to re- needed to facilitate private investment. Gov- sources, intellectual property rights (IPRs) required to ernments must provide key infrastructure for promote private sector research and development. rural transportation and communications, and Externalitiesæwater and air pollution, siltation, salinization, may need to share the risks that private com- climate change. panies undertake with new sustainable intensi- · Investments: advocacy, information campaigns, and fication investments. Targeted and time-limited regulations. grants promoting specific investment initiatives, Financial marketsæenvironmental conservation investments such as pilot production trials, marketing trials, commonly have long gestation periods and high initial investment costs; and traditional banking services are often training, and extension activities, are useful to inaccessible and compounded by insecure land tenure. test and introduce new production systems and · Investments: new financial services mechanisms for innovations. Access to efficient financial services agriculture. is key to enabling farmers to intensify production Source: Authors. systems. RPOs provide a mechanism for collec- AGRICULTURE INVESTMENT SOURCEBOOK tive action for input procurement, testing new pesticides authorized for procurement. technologies and innovations, and establishing sustainable output markets. SELECTED READINGS Asterisk (*) at the end of a reference indicates SCALING UP INVESTMENTS that it is available on the Web. See Appendix 1 Investments in intensification of sustainable for a full list of Websites. agricultural production systems require moni- toring systems that evaluate economic, social, Bruinsma, J., ed. 2003. World Agriculture: and environmental changes throughout and Towards 2015/2030: An FAO Perspective. following the program's implementation. Key Earthscan Publications Ltd.: London.* impact indicators are investment profitability, poverty, and environmental conditions. Useful de Haan, C., T. S. van Veen, B. Brandenburg, J. outcome indicators include: area coverage, Gauthier, F. Le Gall, R. Mearns, M. Simeon. numbers of producers, value of production, 2001. Livestock Development: Implications equity in employment generation, and pro- for Rural Poverty, the Environment, and ductivity changes of natural resources and Global Food Security. Directions in Devel- other inputs. opment 23241. Washington, D.C.: World Bank.* A more clearly poverty-focused approach to lending, and better understanding of the Rosegrant, M. W., X. Cai, and S. A. Cline. 2002. principles of sustainable agriculture, are likely World Water and Food to 2025: Dealing to result in increased lending either as project with Scarcity. IFPRI: Washington, D.C.* components or as a project, integrating Scherr, S. J., and P. B. R. Hazell. 1994. "Sustain- various elements of sustainable intensifica- able Agricultural Development Strategies in tion. Increased technical input for project Fragile Lands." EPTD Discussion Paper 1. design and supervision to support additional IFPRI, Washington, D.C.* lending is critical in order to complement those skilled in process and policy issues. U.K. Department for International Develop- Attention to two World Bank safeguard ment, Overseas Development Institute, policies is especially relevant to investments Netherlands Ministry of Foreign Affairs. in intensification and diversification of agri- 161 Keysheets for Sustainable Livelihoods. http:/ cultural production systems: /www.odi.org.uk/keysheets. · Environmental assessment (Operational Policy (OP)/Bank Procedure (BP) 4.01)æan REFERENCES CITED Environmental Assessment is required if a Ali, M., and D. Byerlee. 2001. "Productivity new agricultural production system has Growth and Sustainability in Post-Green potentially adverse environmental risks or Revolution Agriculture in the Indian and impacts. Pakistan Punjabs." World Bank Research Observer 16 (2): 199-218. · Pest management (OP 4.09)æany agricul- tural production investment involving Bruinsma, J., ed. 2003. World Agriculture: procurement and use of pesticides, or that Towards 2015/2030: An FAO Perspective. could expand the use of pesticides and Earthscan Publications Ltd.: London. unsustainable pest management practices, requires an Environmental Assessment, a Dixon, J. A., D. P. Gibbon, and A. Gulliver. Pest Management Plan, and a list of the 2001. Farming Systems and Poverty: Im- MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION proving Farmers' Livelihoods in a Changing World. Rome: FAO; Washington, D.C.: Word Bank. James, C. 2002. Global Review of Commercial- ized Transgenic Crops: 2001 Feature: Bt Cotton. ISAAA Briefs 26. Ithaca, N.Y.: ISAAA. Pétry, F. 1995. Sustainability Issues in Agricul- tural and Rural Development Policies. Training Materials for Agricultural Planning. 2 vols. Rome: FAO. Sorby, K., G. Fleischer, and E. Pehu. 2003. "Integrated Pest Management In Develop- ment: Review of Trends and Implementa- tion Strategies." World Bank, Washington, D.C. This Overview was prepared by Sam Kane, Eija Pehu,Wayne Frank (USAID), and Gary Alex, with inputs from the Sustainable Agriculture (SASKI)ThematicTeam of the Bank. Peer review comments were provided by Peter Hobbs (Cornell University), Maria Fernandez, and Arja Vainio-Mattila (University of Western Ontario). 162 AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE economically viable and environmentally sus- tainable, diversified production systems. MARKET-DRIVEN Diversification at the farm level is the adoption DIVERSIFICATION of multiple production activities that are complementary in economic and/or ecological In many cases diversification can lead to im- dimensions--this complementarity contributes proved agricultural productivity and income, to the overall sustainability of the farming through integrated resource management and system. The diversification process generally responding to changing markets. Important involves introducing new farm enterprise issues for diversifying into market-oriented activities (for example, crops, livestock, pro- production systems include: developing markets cessing) and reflects a reallocation of produc- and market access, managing risks, targeting tion resources and inputs, as well as a change small farmers, and promoting an enabling policy in production methods and the outputs pro- environment. Donors and governments will duced. This note discusses the framework that need to provide the training, infrastructure, and will encourage market-driven diversification analytical support necessary to improve the conducive to sustainable intensification, ability of farmers to make the transition to through improved crop rotations, FIGURE 4.2 INDIA: PER CAPITA CONSUMPTION INCREASE BY FOOD GROUP, 1977-99 Percent 100 90 80 70 163 60 50 40 30 20 10 0 Pulse Cereals Meat, eggs, Vegetables Milk fish Source: Joshi et al. 2002 MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION complementarities among different farm enter- more environmentally sustainable while also prises (livestock and crop), and improved risk responding to market signals profitably. management. BENEFITS NEEDTO ADJUSTTO CHANGING MARKET Farm-level diversification involving mixed FORCES production systems can exploit potential Increasing international migration, global media synergies and complementarities among differ- and marketing systems, rising average incomes, ent operations for more productive and more and urbanization are rapidly changing the sustainable use of the resources upon which structure of consumer demand throughout the farm systems depend. Replacing monoculture world. This is true for markets in both indus- systems with mixed systems can improve trial and developing countries, and for food biodiversity, and can reduce production risks and nonfood products (see figure 4.2). These associated with droughts and pest infestations. changes give rise to new market opportunities The increased variety of outputs produced (both domestic and export) at a time when reduces marketing risks associated with unex- prices for traditional commodities--such as pected declines in the price of any one prod- rice, cotton, coffee, and tea--are declining. uct. Diversification may also allow labor and machinery requirements to be more evenly On the supply side, technological advances distributed throughout the year, seasonal cash have expanded the range of production possi- flows to be better managed, product ranges to bilities at the farm level. Improved agricultural be broadened, and marketing risks to be machinery, biotechnology, new herbicides, and reduced (see box 4.6). IPM have facilitated better use of the sources of competitive advantage unique to developing The transition to more profitable production countries (for example, unique microclimates systems increases demand for farm and non- and soil types, low labor costs, and counter- farm labor (largely due to the more labor- season production). New technologies have intensive nature of high-value crops), and is also increased the feasibility of integrating associated with increasing incomes for wage different systems within any one "mixed" employees. Diversification can have large farming system (multipurpose machinery for multiplier effects, creating off-farm employment integrated crop rotations). Supply-side changes opportunities in downstream and upstream 164 that expand the range of feasible options, and economic sectors. demand-side factors that alter the relative profitability of those options, are requiring that farmers make a transition from traditional POLICY AND IMPLEMENTATION ISSUES enterprises (often monoculture) to new and Diversification must be a market-oriented unfamiliar ones. The new enterprises can be process, driven by consumer demand and initiated by private sector agents. However, public sector participation will remain critical in Box 4.6 Benefits of diversification to livestock production certain areas such as the regulatory and policy environment and the provision of pure or · Provides a source of organic fertilizer. · Buffers food supply, reducing climatic and price risks of partial public goods (for example, infrastructure crop production. and research). · Provides meat, milk, and fiber for household use or sale. · Provides transport and traction, spreading labor demand A STABLE AND SUPPORTIVE POLICY ENVIRONMENT . and offering alternative sources of income. Perhaps most important is an overall agricul- · Uses crop residues as livestock feed. tural policy that does not skew production Source: Authors. incentives, and that promotes efficient decision- AGRICULTURE INVESTMENT SOURCEBOOK making based on market demand and resource Box 4.7Turkey: policy reform constraints. In many countries, agricultural policies distort production decisions toward Turkey recently reformed its agricultural policies to promote food grains undermining competitiveness and diversification. In phasing out input and output subsidies, a the long-term sustainable management of system of decoupled subsidies was used to partially cushion natural resources. Support policies aimed at the blow to farmers. Because prior subsidies had led to a encouraging adjustment to market-led produc- surplus of hazelnut and tobacco production, a project tion should be transitory and crop neutral. provided financial and advisory support to farmers to switch production to alternative crops. Support includes incentives for uprooting existing tree crops, and technical and business LIBERALIZATION OF RULES AND REGULATIONS. Rules and advice on alternative production systems. Strengthening of regulations governing market activity, curbing national land administration systems and cooperatives are abuse of market power (particularly in network further elements of reform. Improved information systems will industries such as transport, energy, and com- provide an additional foundation for comparing the cost, munication), and enforcing contract law help to speed, and transparency of alternative production methods, strengthen markets and ensure that the poor and facilitate monitoring of new production systems intro- benefit equitably. Policies that protect resource duced in each region. use rights (land and water in particular) and Source: World Bank Internal Documents. encourage investments on a long-term basis are essential for successful diversification initiatives (see box 4.7). Insecure land title dampens the incentives for farmers to make the initial invest- ments needed to transform their production ORGANIZED FARMERS . RPOs are useful in facilitating systems. Secure land and water ownership rights innovation and diversification into new farm improve farmers' ability to provide collateral to enterprises. Collective action enables small lenders, thereby facilitating access to financial farmers to source inputs in bulk and at com- resources required for initial investments. petitive prices, explore market opportunities and linkages, obtain market and technical MARKETS AND INFRASTRUCTURE . Transition to new support, pool output to improve bargaining production enterprises must be based on power, and form partnerships with commercial market demand and sustained competitiveness enterprises, governmental agencies, R&E of producers (typically from either low-cost entities, and other community groups. production or high-value and differentiated 165 products). This depends on competitive non- GENDER EQUITY . Diversification can offer new farm private enterprise at each stage of the employment opportunities to both women and supply chain, and requires strengthening of men, but safeguards are needed to ensure processing and logistical systems, input supply equity of opportunity. Women are often disad- systems, and financial services. vantaged by traditions that discriminate with regard to participating in market networks, RISK ENVIRONMENT . Natural resource suitability, accessing financing and inputs, and entering crop yields, market prices, and adequacy of into contracts. Furthermore, diversification can infrastructure provide more uncertainty for result in women being displaced from tradi- new crops than for traditional products. Irriga- tional production and marketing activities. tion, integrated capital markets (to reduce price Processing plants frequently employ a high variability through risk pooling), stable govern- percentage of women in their workforce, but ment policy, and reliable information and labor standards are often low and potential for communication systems all help to reduce risk. exploitation of women is high. Activities Technical services are needed to minimize risks involving diversification should allow for the of pests and diseases devastating new crop or empowerment and participation of women and livestock enterprises. minority groups. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION signed to respond to the needs of small and Box 4.8 Key considerations for diversification marginal farmers, providing technologies suited · Government policy and stability of policies--exchange rate to small farms. Improved transportation and trends, volatility, and risks; trade tariffs, quotas, and taxes. communication systems reduce isolation com- · Economic and environmental compatibility of alternative mon to small farmers in less productive areas, farming activities and potential conflicts among different and thereby reduce transaction costs for market enterprises. participation. · Infrastructure and distribution channels and participants in the supply chain. PUBLIC INVESTMENTS . Diversification must be based · Market demand and sustainability. on private investment, but co-investment by the · Asset ownership patterns and security of access to land, water, loans. public sector is likely to be required to facilitate · Food security (household and national). adjustment and the introduction of new pro- · Storage requirements, critical product volumes, food safety duction and marketing systems. Investments requirements. must be appropriately timed and sequenced, · Existing research and extension systems. with adequate market analysis before product- · Potential for value-added processing. specific investments are made. Initial invest- Source: Authors. ments should be as generic and flexible in nature as possible to reduce risk of market LESSONS LEARNED volatilities and production uncertainties for ASSESSING ALTERNATIVES . The process of assessing specific products. The public sector can finance alternative diversification opportunities requires or cofinance feasibility studies and investment intensive analysis and research and farmers strategies to promote private investment and typically do not have the resources required for can share start-up costs and risk by providing in-depth feasibility analyses (see box 4.8). The matching grants that are time limited and public sector can facilitate this process, but targeted. Public financing is also appropriate must maintain a supportive rather than a lead for public goods investments for removing role, encouraging farmer and private sector infrastructure bottlenecks and ensuring ad- initiative as opposed to "picking winners." equacy of technical support systems. INFORMATION AND COMMUNICATION . Cost-effective, SHARING LEARNING COSTS. Diversification usually dependable communication systems are essen- involves technology development and learning tial to convey market information to processors that can best be provided through R&E systems 166 and producers, so that the products produced that enable costs of learning and experimenta- are competitive in markets and satisfy con- tion to be pooled and shared equitably (see sumer demands. APROFA, a governmental box 4.10). In most cases, production and agency in Mali, uses agribusiness centers and marketing technologies will not be readily reference centers to disseminate new technolo- available in-country, but can be "imported" gies and products to producers. It has become from other countries. This may involve sourc- increasingly important to invest in forward ing the technology from either a private firm or information systems that maintain product a public research center. Local research capac- identity and traceability throughout the entire ity is useful--if not essential--to facilitate supply chain. technology import and to address second- generation problems. TARGETING SMALLHOLDERS . Diversification opportu- nities are not always equal, and small-scale farmers are often relatively less able to access RECOMMENDATIONS FOR PRACTITIONERS information and financial resources that will Diversification initiatives must be market led allow them to enter new markets (see box 4.9). and based on sustainable comparative advan- Research and extension systems can be de- tage. Public investments (see box 4.11) should: AGRICULTURE INVESTMENT SOURCEBOOK Box 4.9 India: self-targeting of project components Many components of the Uttar Pradesh Diversified Agriculture Support Project were chosen because of their "self-targeting" character in reaching poor and disadvantaged groups.The seclusion of women required that they be provided access to home- based income-earning opportunities.Also, the extent of landlessness required that activities not be biased against those with little or no land. Households with small or marginal landholdings benefit from horticulture activities, since fruit trees can be planted along plot boundaries or in home gardens. Livestock activities, including small ruminants (sheep and goats), and cow and buffalo milk production, provide significant benefits to the poor, including those with little or no land (provided they also have access to commons, cut fodder, or crop residues). Source:World Bank Internal Documents. Box 4.10Vietnam: technical support for diversification InVietnam, the Agricultural Diversification Project provided technical support for intensifying crop and livestock production, focusing on participatory research and extension, for example, piloting fruit tree plantings and nurseries. Inclusion of farmers in the research process ensured that technologies responded to farmer needs.The project promotes a mix of farm activities, such as investment in rubber, livestock, and food crops, in a "smallholder technical package" that introduces sustainable management practices (such as terracing and contour farming on sloping and degraded lands). Source:World Bank Internal Documents. · Seek farmer collaboration through participa- Box 4.11 Potential investments tory evaluation of the suitability of alterna- tive production systems and products. · Analytical support for market and technical feasibility. · Development of output and input markets. · Policy support and guidance for the sequencing of · Sequence investments and activities such investment activities. that they systematically build markets and · Financial markets and risk management tools to encourage capacity to supply them. private investment. · Infrastructure to improve market access--roads, ports, · Invest in flexible skills and technologies cold chains, telecommunications. (rather than those that are highly product · Public good R&E. 167 specific) and target products with multiple · Regulatory and certification systems to satisfy market and trade standards. uses and markets. · Market and technical information systems. Source: Authors. · Establish appropriate means to manage risk through development of infrastructure that reduces uncertainty in production and marketing processes. SELECTED READINGS Asterisk (*) at the end of a reference indicates · Facilitate development of producer organi- that it is available on the Web. See Appendix 1 zations to promote the interests of for a full list of Websites. smallholders through collective action. Delgado, C. 1995. "Agricultural Diversification · Make production inputs and markets "user and Export Promotion in Sub-Saharan friendly" (for example, available in small Africa." Food Policy 20 (3): 225-243. packages and convenient locations) so that farmers can test the new production system World Bank. 1990. "Agricultural Diversification: without committing to a complete transition. Policies and Issues from East Asian Experi- MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION ence." Policy and Research Series 11. World Bank, Washington, D.C.* REFERENCES CITED Joshi, P. K., A. Gulati, P. S. Birthal, and L. Tewari. 2002. "Agriculture Diversification in South Asia: Patterns, Determinants, and Policy Implications." MSSD Discussion Paper 57. IFPRI, Washington, D.C. This Note was prepared by Sam Kane, Kristina Sorby, and Shawki Barghouti with inputs from the Sustainable Agricul- ture (SASKI)Thematic Team of the World Bank. 168 AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE lands of Ethiopia with one or two cows; rice farmers in the Punjab of India with 10 buffa- loes; and Sahelian pastoralists with herds of up SMALLHOLDER DAIRY to 100 animals. PRODUCTION Although future regional market developments Smallholder dairy production is common in are difficult to predict, it seems that developing many parts of the developing world, provid- countries have a good chance of benefiting ing an important source of nutrition and from new market opportunities. Milk produc- income to millions of households. Income tion growth in developed countries is con- from such production often accrues to women strained by land and water availability, and who use this to provide better nutrition and increasingly by strict environmental legislation education for their children. Projections for and reforms in subsidies provided to the dairy future growth in demand for livestock prod- industry. Because of the comparative advantage ucts show good growth prospects for the of temperate climates, production expansion is dairy industry. Public support is often needed most likely to come from North America, the to put in place appropriate policies, establish Southern Cone of South America, and areas marketing chains, and provide services for such as the Ukraine, though there remain growth of smallholder dairying. opportunities for growth in other areas, such as China, India and Eastern Africa (see box 4.12). Globally, there are about 300 million rural and periurban poor whose livelihoods depend on the daily income and nutrition they receive from milk production. In India, about 40 million landless poor families get a major part Box 4.12 India: Operation Flood--how a commodity project of their income from milk. Since there are can reduce poverty fewer economies of scale involved in dairy production than in some other livestock Operation Flood was supported by the Bank and other donors production systems, the strong concentration from the mid 1970s to the mid 1990s. It originally started as a of production evident in the pig and poultry marketing project but gradually developed into production and sector is not yet seen in the dairy sector. input services. It is based on a three-tier cooperative system that includes: Markets in developing countries are secure, as 169 demand for milk and milk products is ex- · Village-level dairy cooperative societies, which are farmer pected to increase by more than 3 percent controlled, with an elected management committee, annually over the next 10 to 20 years (Delgado including at least one woman. et al. 1999). Per capita milk consumption will · Regional milk producers' unions that own the dairy plants then still be only one-fourth of the per capita and transport equipment for milk collection and process- consumption in the industrial countries. ing. · State federations for interstate sales and coordination. The National Dairy Development Board, a government apex organization, provided the technical support. Operation Flood SMALLHOLDER DAIRY DEVELOPMENT now has 9 million members (60 percent are landless), with a Smallholder dairy production takes many forms daily milk throughput of about 30 million liters. It has made and is often combined with cottage industry important contributions to poverty reduction, human health, (small household) processing activities. Small- and nutrition and is the most successful Bank operation in the holder dairy production is mostly carried out livestock sector. Operational issues included interference by by the family, with some very limited hired government, in particular in the federations, and its search for labor. Examples of smallholder dairy produc- monopoly positions when support from outside sources was tion are the mixed farms in Central America phased out. with 25 cattle; small mixed farms in the high- Source: de Haan et al. 2001. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION BENEFITS MARKETS. Milk, being highly perishable, requires Certain characteristics of smallholder dairy daily collection and market delivery. Many past production systemsæintensive, year-round labor investments have focused on developing needs, the provision of regular income, and western-style collection, processing, and distri- easy substitution of the product between home bution systems, with pasteurized products. and marketæmake dairy production a good However, there is growing evidence, for ex- example of pro-poor approach to agriculture ample from Nairobi (Staal 2002), that this and rural development. The production charac- approach might be counterproductive. Pasteur- teristics of smallholder dairying, such as use of ization and packing costs nearly double the crop residues, fodder-crop rotation, and pro- price of milk to consumers, thus reducing farm duction of organic fertilizer, provide a strong gate prices and limiting access by the urban synergy with other parts of the farming system. poor. Giving the formal sector the exclusive Milk's perishable nature and the limited market- right to distribute milk and milk products also ing leverage of an individual small producer affects employment opportunities for many make it highly suitable for cooperative market- small intermediaries involved in the distribution ing, and hence an important tool for farmer system. In addition, marketing through a formal empowerment. However, smallholder dairying collection system introduces one of the few carries risks. In many cases, a small herd economies of scale in dairy production, as it is constitutes a large part of the farmer's assets, often accompanied by a requirement for on- and disease and death can wipe out these farm cooling equipment, which is normally assets entirely, potentially leading to increased profitable only with a production level of 100 indebtedness and poverty. liters or more per day. Such requirements, in situations where milk is boiled before con- sumption, are unnecessary, as boiling obviates POLICY AND IMPLEMENTATION ISSUES the need for pasteurization. SUBSIDIES AND DUMPING. With milk production mainly being a smallholder activity, and milk seen by many as a being a staple product, the LESSONS LEARNED dairy sector is the subject of political attention Success in smallholder dairy production can be and inappropriate policies. Thus the sector has evaluated at three levels; farm, market, and suffered from excessive price controls, and institutional (see box 4.13). Dairy production greatly distorting subsidies both in OECD normally requires a high quality of support 170 countries and in developing countries. In services as dairy breeds are generally more developing countries, the dairy sector has been costly and more vulnerable than other cattle to negatively affected by the dumping of surplus disease and health problems. subsidized dairy products by the European Union (EU) and the United States. With global VETERINARY. Because smallholder dairy develop- trade negotiations in the World Trade Organiza- ment is a rather risky endeavor, good, easily tion (WTO) on the issue of agricultural subsi- accessible veterinary services are essential. dies, producer groups, local industry, donors Experience in many countries, such as India and finance ministries need to discuss issues of and Kenya, shows that private veterinary domestic liberalization and appropriate adjust- services (also supplemented by public services ment that may be needed as a transition for the "public goods" such as vaccination) are mechanism. Other policy issues encountered in highly desirable, and can provide the flexible, Bank projects include cooperative monopolies dynamic services the smallholder dairy pro- (India), excessive interference of government in ducer requires. the sector, the introduction of unsustainable subsidies, for example for artificial insemination BREEDING. The choice of dairy breed has been (AI) (India, Kenya, Morocco) and health ser- subject to much debate. Past introductions of vices, and excessive food safety regulations. pure exotic breeds have almost universally AGRICULTURE INVESTMENT SOURCEBOOK failed (with the exception of restocking pro- Box 4.13 Indicators of success grams in areas such as the Balkans). Generally, a combination of selection in local breeds and A successful smallholder dairy sector is characterized by the cross-breeding with exotic genetics is more following: appropriate, leaving it to the skill of the indi- vidual smallholders to decide on the level of · At the farm level: calving rate of 80 percent or more, a exotic germplasm they can manage. This production level (depending on conditions) of 600 to approach has been quite successful in India, 3000 liters per lactation (that is, about 300 days), mostly Northern Brazil, and Kenya. fodder based, and economically attractive. · At the marketing level: a viable formal collection system (private or cooperative), supplemented by small traders. Breeding systems are also subject to consider- · At the institutional level: an influential national organization. able debate. AI systems, often demanded by Source: Authors. Bank clients, have high costs and logistic and maintenance requirements, because of the need for liquid nitrogen to store semen. Such facili- accompanied by an insurance system to miti- ties can be organized in areas with good gate animal loss risks. However, experience communications and infrastructure, but many with livestock insurance has not been very AI systems have proven unsustainable without good, because of the moral hazard problems continued subsidies. Terminating subsidies, as involved. in Kenya, can then cause collapse of the system, which in the absence of alternatives, The credit-in-kind system, whereby animals are results in a considerable deterioration in the provided on condition that some of the off- genetic base of the dairy herd. AI requires spring are passed on to other members of the adequate producer skills, infrastructure, and community, has been effective in many pro- communication facilities. Where AI is to be grams. If the program is adequately integrated introduced, it should be privatized, and where in the local community, peer pressure ensures appropriate conditions do not exist, bull camps sustainability of the passing-on mechanism. A or the use of fresh semen have given good number of nongovernmental organizations results, as in Indian Watershed projects. (NGOs), such as Heifer Project International, Oxfam, and Farm Africa, are specialized in this EXTENSION. Most general extension staff mem- area (see box 4.14). bers have little experience with livestock and 171 dairy farming. Key areas requiring additional FARMER ORGANIZATIONS . The perishable nature of extension training include fodder production dairy products gives individual farmers little and livestock feeding schemes, husbandry (in particular calf raising), and dairy hygiene. Box 4.14 Indonesia: in-kind credit in Java Health and breeding services can best be handled by specialized professional services. The Provincial Development Program of Central Java Province Extension staff must also help producers cope introduced a new in-kind loan project in the 1980s to replace with social change, such as changing gender the existing small ruminant credit system.Target farmers were roles and issues of access and control over divided into groups of 10 with each farmer receiving two resources. female goats or sheep. Each group leader received small ruminant management training and a good quality buck or ram. Each recipient had to repay four lambs or kids over a three- CREDIT. Capital requirements for smallholder year period. Post-program evaluation in 1988 found the dairy producers are high and may be especially program to be successful in introducing new technology, constraining for women farmers. Credit increasing farmer income, improving production performance, schemes need to be long-term. If, for example, and improving dynamics within farmer groups.The system can a pregnant three-year-old cow is the starting work equally well for dairy cattle. stock for the family dairy, credit terms should be for at least three years. Loans are ideally Source: de Hann et al. 2001. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION leverage in marketing. However, the involve- · Establish an appropriate balance between ment of many smallholders in milk marketing public and private involvement in the makes dairy products suitable to cooperative supply of services. In many instances public processing and marketing systems. Most coop- sector involvement is best restricted to eratives also provide services such as health limited-term cofinancing arrangements that and breeding, although cross subsidies of these encourage private sector investment. A services through the price of the milk become direct government role is appropriate in an issue. Government interference can how- areas such as auditing of certification ever be a constraint to building organizational systems and management of quarantine capacity. procedures and epidemic risks. FEED SUPPLY . Feed supply is a major issue for · Promote establishment of effective financial smallholder dairy systems, as most systems markets and risk management mechanisms. operate under conditions of extreme land This is largely the role of the private sector, pressure (Kenya, India) or labor availability and private investment may be best initi- (West Africa with high labor needs at the end ated through limited-term cofinancing of a marked dry season). Feed conservation for schemes. dry season supplementation has been a major issue, as most technologies, such as silage, · Provide technical assistance to both male haymaking, and urea treatment are not suitable and female farmers. Assistance is needed in for smallholder or humid tropical environ- areas such as breeding policy (what breeds ments. Fodder trees and mixed tree-legume are most suitable to the production and protein banks can be a solution. market environment?; where to source breeding stock?; is AI appropriate?), animal health (control of internal parasites, mastitis RECOMMENDATIONS FOR PRACTITIONERS management), milk hygiene, and feeding Key conditions for successful dairy develop- policy (managing feed supply, conservation ment involve market access and availability of of surpluses, supplementary feeding). services to smallholders and require public policy and institutional development and targeted investment. Sound investments gener- SELECTED READINGS ally must (see box 4.15): Asterisk (*) at the end of a reference indicates 172 that it is available on the Web. See Appendix 1 Potential investments: for a full list of Websites. · Conduct a detailed assessment on the extent de Haan, C. 2000. "Livestock Breeding Tech- and nature of market demand. Key ques- nologies and Rural Development: Develop- tions to consider include: Do local consum- ment Experiences." World Bank, Washing- ers want pasteurized milk and can they ton, D.C.* afford it? Are there opportunities to export? What safety and quality standards must be de Haan, C., H. Steinfeld, and H. D. Blackburn. met? All initiatives to promote smallholder 1997. Livestock and the Environment: dairying must be led by market demand. Finding a Balance. Brussels: European Commission Directorate-General for Devel- · Promote private sector development of opment.* supply chain infrastructure required for efficient production and marketing. This de Haan, C., T. S. van Veen, B. Brandenburg, J. includes transportation and communication Gauthier, F. Le Gall, R. Mearns, M. Simeon. systems, food testing and certification 2001. Livestock Development: Implications for facilities, and cold chain infrastructure. AGRICULTURE INVESTMENT SOURCEBOOK Rural Poverty, the Environment, and Global Box 4.15 Potential investments Food Security. Directions in Development 23241. Washington, D.C.: World Bank.* · Animal health and breeding services, with a focus on developing private systems. Costs would be about LEAD Initiative. Livestock, Environment and US$2,000-5,000 for breeding services, and US$10,000 ­ Development. http:// 20,000 for veterinary practices. www.leadvirtualcentre.org. · Extension services to provide specialized skills for dairy production. · Market development and infrastructure. Cooling systems Rangnekar, D., and W. Thorpe, eds. 2002. vary between US$1000 and US$20,000.Wood-fueled Smallholder Dairy Production and Market- pasteurization plants at nominal costs can be effective up ing -- Opportunities and Constraints. to about 500 liters per day; small pasteurization plants Proceedings of a South­South workshop (2,000 liters per day) cost about US$10,000; and larger held at National Dairy Development Board, processing plant costs vary according to individual design. Anand, India, March 13-16, 2001. Anand, · Financial services (savings and credit) need to be included India: National Dairy Development Board; in the overall microfinance systems, eventually supported Nairobi, Kenya: International Livestock by special credit in-kind schemes. · Producer organization support, mostly in the form of Research Institute.* technical assistance. Source: Authors. World Bank. Sustainable Agriculture. http:// lnweb18.worldbank.org/ESSD/ardext.nsf/ 26ByDocName/SustainableAgriculture. This Note was prepared by Cees de Haan with inputs from the Sustainable Agriculture (SASKI)Thematic Team of the World Bank. REFERENCES CITED de Haan, C., T. S. van Veen, B. Brandenburg, J. Gauthier, F. Le Gall, R. Mearns, M. Simeon. 2001. Livestock Development: Implications for Rural Poverty, the Environment, and Global Food Security. Directions in Develop- ment 23241. Washington, D.C.: World Bank. Delgado, C., M. Rosegrant, H. Steinfeld, S. Ehui, 173 C. Courbois. 1999. Livestock to 2020: The Next Food Revolution. Washington, D.C.: IFPRI; Rome: FAO; Nairobi, Kenya: ILRI. Staal, S. 2002. "The Competitiveness of Small- holder Dairy Production: Evidence from Sub-Saharan Africa, Asia and Latin America." In D. Rangnekar, and W. Thorpe, eds., Smallholder Dairy Production and Marketing -- Opportunities and Con- straints. Proceedings of a South­South workshop held at National Dairy Develop- ment Board, Anand, India, March 13-16, 2001. Anand, India: National Dairy Devel- opment Board; Nairobi, Kenya: Interna- tional Livestock Research Institute. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION AGRICULTURE INVESTMENT NOTE could conceivably rise to nearly 90 million tons if the 10 percent annual rate of increase be- tween 1985 and 1999 can be maintained. AQUACULTURE PRODUCTION Doubling of the 1999 production level (33 SYSTEMS million metric tons) will require global expan- sion of aquaculture systems and an estimated With possible future food shortages and overall capital investment of US$20-30 billion declining yields of capture fisheries, the (see box 4.16). potential for aquaculture production in devel- oping countries continues to rise. Worldwide The development of reliable production tech- production from aquaculture is growing nologies that often require only simple man- rapidly, far outstripping the growth rate in the agement skills has facilitated the recent rapid catch of wild fish from both freshwater and expansion of the industry. Options for aquacul- marine sources. Future public sector invest- ture development can involve production at ments need to provide a policy environment household, community, or industrial scale, and the technological base necessary to employing ponds, net pens, net cages, flow- promote aquaculture investments by private through raceways, and water recirculation farmers, while ensuring compliance with systems. Fish monoculture systems have also environmental regulations and encouraging been developed for a wide range of species sustainable production practices. that are most often grown on processed feed diets in ponds or raceways, and in irrigation Aquaculture is the farming and husbandry of canals with flowing water. aquatic organisms such as fish, crustaceans, mollusks, seaweed, and the production of freshwater and marine pearls. It has grown at BENEFITS an annual average rate of 10 percent since the Aquaculture can be integrated with other mid 1980s, reaching 33.3 million tons (or farming systems. Inland fish culture is often about 26 percent of global fish supply) in carried out in farm ponds with direct links to 1999. During the same period, capture fisher- animal husbandry and agriculture, where by- ies averaged an annual growth rate of less products of each subcomponent are recycled as than 2 percent, and its contribution to human resources for the others (for example, fish nutrition actually declined by about 10 per- waste that enters irrigation canals becomes a 174 cent because of an increase in wild catch supplementary fertilizer for crops). Pond culture species of lower value (typically used to on farms of this kind often includes the culture produce fishmeal for feed and fertilizer). of many fish species that feed on grasses, legumes, benthic invertebrates, detritus, zoop- lankton, and phytoplankton. Fish culture has CONTEXT FOR AQUACULTURE INVESTMENTS been gaining application in rice fields where a Aquaculture development is driven by an second benefit is control of insect pests and increased demand for products and a need to reduced the need to apply pesticides. reduce dependency on overexploited inland and marine capture fisheries. In 1999 per Areas that are not suitable for agriculture and capita annual consumption of fish products are not critical habitats for wildlife can often be worldwide was about 21 kilograms. Capture effectively used for aquaculture pond develop- fisheries are close to their limits, and the ment. Publicly-owned lands and waters suitable growing world population means that annual for conversion to aquaculture can be devel- aquaculture production must increase by oped or leased to poor households that other- about 21 million tons to maintain the current wise lack productive assets. Furthermore, level of per capita fish consumption. This is a aquaculture often produces direct management challenging goal, but aquaculture production roles for women. In addition to generating AGRICULTURE INVESTMENT SOURCEBOOK income and employment opportunities at the Box 4.16 Aquaculture goes global local level, aquaculture can generate foreign exchange from exports and can improve food Most aquaculture development has occurred in Asia, particu- availability and quality for local consumers. larly China, which produced about 57 percent of the world's aquaculture products (FAO 1997). However, production from In China, filter-feeding bivalves (clams, oysters, the rest of the world nearly doubled between 1984 and 1995. scallops), seaweed, and bottom-dwelling sea Fish farmers in Latin America, the Caribbean, Europe, the cucumbers are often reared near fish cages as a Middle East, and Africa have a valuable base of knowledge and experience upon which to build.Technological advances, such as means of capturing fish wastes and improving hatchery development, feed formulation, disease control, water quality. Although somewhat more com- engineering, and production system management, particularly plex to manage, these integrated marine aquac- from Asia, have global significance and applicability as the ulture systems improved environmental impacts demand for aquaculture spreads to other, less experienced of aquaculture, and have an added advantage regions. of reducing market risks to farmers from potential diseases or price fluctuations that Source: Zweig 1998. affect any one product. sion and training, as well as assistance in disease Aquaculture is increasingly used to produce diagnosis, prevention, and control. For example, fingerlings and seed materials for community- the Shrimp Farming and Environment consor- based programs for stocking open water such tium provides useful guidelines on better man- as irrigation and hydropower reservoirs, lakes, agement practices for shrimp aquaculture, and and coastal areas. This also provides lessons on the Food and Agriculture Organization (FAO) has proper management of greater (nonfarm) technical guidelines in a Code of Conduct for aquatic environments. Responsible Fisheries (FAO 1995). Environmental and social impact assessments POLICY AND IMPLEMENTATION ISSUES need to be included in the process of site Rapid growth of aquaculture has not been selection. Integrated coastal zone and rural without problems, including disease pandemics development plans can help identify suitable such as those with global shrimp farming and areas for aquaculture development. These plans carp culture in South Asia. Exceeding carrying help ensure that development does not nega- capacity has in some cases led to levels of fish tively affect critical natural habitats or entail an 175 waste that caused toxic conditions that can kill unacceptable level of risk from possible indus- aquaculture crops and degrade water quality. trial or municipal pollution. A summary of Proper planning and facility monitoring (includ- generic environmental issues and an assessment ing new tools for predictive modeling of water strategy for aquaculture has been prepared quality) have helped to manage most systems, (World Bank 1991. Social implications, such as although consistent disease control still has not the ability of small farmers, the landless, women, been achieved for some species. and minority groups to participate in, and benefit from, the development of aquaculture systems, Public and private sector roles need to be must be carefully evaluated. This would require defined. Although a high percentage of aquacul- evaluation of possible impacts on gender-based ture production is generated through private division of labor and access to resources. sector investment and management, the public sector can play an important role in formulating Capacity building, both in terms of knowledge a regulatory framework. Licensing private aquac- and physical and institutional infrastructure, is ulture enterprises helps ensure minimal adverse necessary to promote sustainable aquaculture environmental and social effects and mitigation (see box 4.17). Hatcheries for supply of finger- of any such impacts. Public sector services can lings and specialized input suppliers of fish provide support for research programs, exten- feed and other inputs and services are best MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION adversely affect biodiversity and fish popula- Box 4.17 China: coastal and inland aquaculture tions, and use for feed may transmit diseases to The objective of the Sustainable Coastal Resources Develop- cultured organisms (as documented for brackish ment Project is to establish integrated coastal zone manage- water shrimp). Processed feeds should be used ment plans that include zoning of mariculture (that is, marine instead of feeds derived wholly from wild fish organisms raised in their natural habitat).This involves the and mollusks. Alternatives include lysine-rich production of fish in cages and ponds, oysters, hard clams, yeast, a single-cell source of protein that is several species of seaweed, and shrimp in four coastal prov- being widely used in China and other countries. inces. In addition to improved shrimp culture methods, the project provides training in seafood processing techniques and Transfer of species used for aquaculture be- upgrades processing plants.The Southwest Poverty Reduction Project includes an aquaculture component to provide tween river basins, countries, and regions must employment for people from impoverished inland areas in be carefully evaluated with regard to impacts Guangxi through enterprises involved in the production of on other indigenous aquatic species, habitats, seafood products, including fish, shellfish, and pearls. and genetics, as well as for the possibility for inadvertent transmission of disease. The Freshwater Fisheries Project developed integrated fish farming complexes around eight major Chinese cities, providing a Water quality standards are important to ensure source of fish close to markets.The Guangxi Agricultural the optimal growth and quality of aquatic Development Project achieved its objectives of providing organisms. With the ongoing expansion of employment for about 2,200 households and production of about 8,500 tons of fish a year from the development of 1,500 aquaculture development, countries that lack hectares of integrated fish ponds on saline, alkaline, or water- guidelines for water quality will need to create logged soils. It introduced yeast as a protein-rich feed supplement them to assist potential entrepreneurs with site to replace fish meal, reducing the cost of feed and dependency selection, and to help protect the consumer upon foreign exchange to import fish meal.Tourism emerged as from unsafe aquaculture products. an unexpected benefit, because tourists are attracted to view migrating birds drawn to some of the project fish ponds. Postharvest fish handling methods and infra- structure should ensure that a safe product Source: Zweig 1998. reaches domestic and export markets which may have specific requirements. For example, developed in the private sector. Research and the United States National Oceanic and Atmo- extension systems must develop and promote spheric Agency (NOAA 1993) and the Euro- pean Community have developed specific 176 production technologies (stocking, disease control, feeding practices), suited to small and requirements for the seafood processing indus- landless farmers. Infrastructure needs include try that also require safe and environmentally processing facilities and cold-chains, and sound production methods. Existing facilities regulatory systems must provide for compli- often need only simple changes requiring ance and certification of food safety standards. modest investments to ensure quality standards are met. LESSONS LEARNED Greater reliance on aquaculture reduces depen- RECOMMENDATIONS FOR PRACTITIONERS dency on aquatic natural resources, and en- There is broad scope for investment in aquac- hances the capacity to foster conservation of ulture development to improve food supply; natural aquatic habitats and biodiversity (see provide employment and income, diversify and box 4.18). intensify farming systems; and improve re- source use. Most investment will come from Collection of wild seed stock should be discour- private enterprise, but public sector investment aged, as should the collection of fish for feed will need to (see box 4.19): purposes. Harvesting of wild species can AGRICULTURE INVESTMENT SOURCEBOOK · Develop mechanisms for the poor, both Box 4.18 South Asia: experiences with aquaculture men and women, to participate. Aquacul- ture development can take place at multiple In Bangladesh, the Third Fisheries Project was designed to levels, from small-scale household opera- enhance floodplain fisheries, improve shrimp farming, and tions through to community projects and develop aquaculture by groups of women. In addition to industrial plants. Land and water tenure increasing fish production, the project helped improve under- rights policies are central to making it standing of aquatic ecology and production dynamics and of the possible for the poor to engage in aquacul- social complexities and policy issues that affect the livelihoods of local people.These findings are being applied in the pro- ture production. Leasing public land and posed Fourth Fisheries Project, which emphasizes community water bodies to poor households can be an participation and organization. important tool for poverty reduction. In India, the Shrimp and Fish Culture Project focuses on · Finance research and training on aquacul- increasing shrimp production on government lands converted to ture systems to address problems and seek shrimp farms. Some 75 percent of ponds were to be leased to ways of exploiting new technological poor coastal families who could not otherwise afford to become opportunities. involved in shrimp farming. An inland component of the project supports efforts by cooperative societies to gain access to fishing rights in lakes and reservoirs, and offers credit to begin rearing · Identify where aquaculture can be inte- fingerlings and purchase appropriate fishing gear and boats. grated effectively into existing farming systems, or can make profitable use of Source: Zweig 1998. lands that are unsuitable for other pur- poses. · Combine various types of aquaculture in Box 4.19 Potential investments integrated systems to take advantage of symbiotic relationships among species, · Establishment of a favorable policy and regulatory environment for development of aquaculture. such as bivalves and caged finfish. · Matching grants for small-scale aquaculture in poor regions. · Encourage proper planning and monitoring · Research and development of seed stock production to maintain healthy stock, prevent disease, systems, alternative feeds for fish, and improved production mange cash flows and production cycles. technologies. · Development of improved postharvest processing and 177 · Ensure environmentally sound development storage systems. of aquaculture systems, based on environ- · Training and management advisory services. · Market research and promotion. mental impact assessments and monitoring · Environmental assessments, mitigation measures, regulatory of environmental impacts. mechanisms, and monitoring. Source: Authors. · Ensure that international quality and safety standards are met, and that certification systems are established and operative. World Aquaculture Society. http://was.org/ main/FrameMain.asp. SELECTED READINGS Asterisk (*) at the end of a reference indicates REFERENCES CITED that it is available on the Web. See Appendix 1 FAO. 1995. Review of the State of World Aquac- for a full list of Websites. ulture. Fisheries Circular 886, Rev. 1. FAO Inland Water Resources and Aquaculture Network of Aquaculture Centres in Asia-Pacific. Service, Fishery Resources Division. Rome: http://www.enaca.org. FAO. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION FAO. 1997. The Status of World Fisheries and Aquaculture: 1996. Rome: FAO. NOAA. 1993. "National Marine Fishery Products Inspection Manual (Hazard Analysis at Critical Control Points Submission Guide)." NOAA, National Marine Fisheries Service, Inspection Services, Department of Com- merce, Silver Spring, Md. World Bank. 1991. Environmental Assessment Sourcebook: Vol. II, Sectoral Guidelines. Technical Paper 140. Washington, D.C.: World Bank. Zweig, R. 1998. "Sustainable Aquaculture: Seizing Opportunities to Meet Global Demand." Agriculture Technology Notes 22. World Bank, Washington D.C. This Note was prepared by the Sourcebook team based on a World Bank AgriculturalTechnology Note "Sustainable Aquaculture" with inputs from Ronald Zweig and the Sustainable Agriculture (SASKI) Thematic Team of the World Bank. 178 7. This AIN has been adapted from O. Damiani,"Small Farmers and Organic Agriculture: Lessons from Latin America and the Caribbean" (IFAD, Rome, 2002). AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE in place of chemical inputs. Cultural and biologi- cal practices control pests and crop rotations, and animal and green manures maintain soil ORGANIC AGRICULTURAL fertility. There is a virtual prohibition on use of PRODUCTION SYSTEMS synthetic chemicals for crop and livestock production. Most organic agricultural systems Organic agriculture can improve farmers' in- also apply improved land husbandry techniques, comes and the management of natural re- such as soil-conservation measures, crop rota- sources, but entails additional production and tion, and reduced crop residue burning. certification costs and a significant time lag for transition to organic certificate and to realize Organic production usually involves annual profits. Organic production must be based on inspection of production sites by independent sustainable comparative advantage and is likely specialized certification agencies, interviews with to be most successful in areas with effective producers, review of organic fertilizers and other research and extension systems, a supportive inputs used, and laboratory tests of soils, water, policy and regulatory framework, necessary and agricultural products. Requirements include: infrastructure, adequate certification systems, land must not have been used for conventional and good access to foreign markets. Producer agriculture relying on chemical or synthetic associations have been key to accessing mar- inputs for a minimum time period (usually three kets, disseminating production technologies, and years); conventionally grown crops must be a monitoring compliance with organic standards.7 minimum distance from organic crops, and a forested area may be required as a barrier Over the past 50 years, agricultural production between organically and conventionally grown has increased dramatically, in part through the crops; inputs must be organic with no chemical use of chemical fertilizers, pesticides, and or synthetic inputs permitted; soil-conservation antibiotics. These technologies and the inten- measures must be applied; and farmer associa- sive production systems they support can result tions must be able to organize supervision to in increased human and environmental health ensure that organic standards are met by all risks. As a result, a market has developed for members. Certification focuses on the process of "organic" food products, which consumers production rather than the end product itself. perceive as being safer and more environmen- tally friendly. Retail sales of organic products 179 were estimated at US$19.7 billion worldwide in BENEFITS 2000, and have grown more than 20 percent Small farmers may have competitive advantages annually in major markets over the past 15 in organic farming and can benefit in several years. However, these growth rates are from a ways (see box 4.20). First, production costs low base, and organic food sales generally may be reduced by substituting labor and account for less than 2 percent of total sales in organic inputs for chemical inputs that are most markets. Thus opportunities to profitably often more expensive and difficult to obtain. enter this market are somewhat limited by Second, prices may be higher for organic demand. Organic agricultural production, given products. Third, organic production may its limited production levels and variability in reduce health risks from handling chemical yields, is unlikely to impact substantially on inputs. Finally, soil conservation measures and global food supplies. control of pests and diseases with manual and biological methods may reduce contamination of natural resources. ORGANIC PRODUCTION SYSTEMS Organic agricultural production systems employ Benefits of organic production are by no means agronomic, biological, and mechanical methods guaranteed as crop yields may fall, price MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION does not require major on-farm investment, Box 4.20 El Salvador: benefits of fresh organic vegetable there are costs, such as certification costs, some production additional investments in soil conservation and equipment, higher labor costs, and sometimes Three farmer associations in the Las Pilas region are producing lower yields. organic vegetables on 36 hectares.The 52 members of the associations previously cultivated cabbage and tomato with conventional technologies, selling them through intermediaries LAND TENURE. Most organic producers own their in the wholesale fruit and vegetable market in San Salvador. land. Small farmers lacking secure land tenure are Their shift to organic production involved a wide variety of new reluctant to move into organic production, as they vegetable crops, planning of cultivation in order to sell year- need to invest in land-conservation measures. round, and direct marketing to supermarkets, restaurants and hotels in San Salvador. Organic production in Las Pilas success- TECHNOLOGY ISSUES. Organic production requires fully competes against imports, mainly because of product quality and product differentiation. a high level of managerial knowledge and ability to protect crops from pests and diseases, Source: Damiani 2002. and to comply with the production process requirements. Access to adequate quantities of organic inputs, such as natural pest enemies, premiums may diminish as production increases, livestock manure, mineral rock phosphate, and distribution systems may prove inadequate, and organic matter can be a problem. Lack of unexpected negative environmental impacts (for technology can be an advantage for some example, weed migration from fields to natural organic producers as their success is related to habitats) may result. Investment in organic not previously using chemical inputs and: they production should be made only after feasibility can be certified as organic with little or no studies based on realistic production and market change in production practices; training and assumptions indicate that benefits are likely to technical assistance costs are likely to be be sustainable over the long term. significantly lower; and the transitional period can be shorter and less expensive, and yield decreases are likely to be less. POLICY AND IMPLEMENTATION ISSUES YIELD OF ORGANIC PRODUCTS . Typically, yields fall ENVIRONMENTAL IMPACTS. Organic production (by up to 10 percent to 30 percent) as a result systems can have some negative environmental of the conversion to organic production, and impacts, such as overuse of animal manures 180 there are commonly significant pest and soil that can lead to nitrite pollution of water fertility problems throughout the transition supplies. Insufficient application of organic period. The extent of declining yields depends manures can lead to soil "mining" and long- on physical farm characteristics, farm manage- term productivity declines. ment, and previous chemical input usage. Small producers who use little or no chemicals may CERTIFICATION REQUIREMENTS AND COSTS. Reliable see no change, or even an increase in yields independent accreditation and control systems due to better management. Also, yield volatility are essential to enforce organic standards and is likely to be greater with organic production regulations, and to meet phytosanitary stan- due to pest losses. dards and general quality requirements. For organic farmers, certification is one of the most TRANSITION TO ORGANIC PRODUCTION . The transition important cost items, with costs varying as they from conventional to organic production depend on availability of a certification agency, usually takes three years and during this pe- farm size and volume of production, and the riod, farmers cannot obtain organic certification product. Total certification cost usually involves and its resulting price margin. Access to afford- both a fixed cost and a variable cost that covers able credit throughout the transition period is certification and inspection. For example, costs critical. While shifting to organic production are: US$18.50 per hectare for coffee farmers in AGRICULTURE INVESTMENT SOURCEBOOK Guatemala, US$11 per farmer for cacao produc- processing, and packing facilities, handling ers in Costa Rica, and 4.4 percent of gross only organic crops. This additional cost means revenue for sugarcane farmers in Argentina. the minimum volume of organic product needed for a viable enterprise is more than for LABOR COSTS . Organic production systems often conventional crops. Stable relationships with use more labor because they need additional soil importers, traders, or wholesalers in the target conservation measures--such as, construction market are important to coordinate distribution and upkeep of terraces and live barriers; new and access information. management practices; manual control of weeds, pests, and diseases; and applying large volumes GENDER ISSUES . Because of less business experience of organic fertilizers. They also have potentially and gender-based discrimination, women organic increased harvest costs (see table 4.2). The farmers may find it more difficult to make re- combined effect on production costs from quired contacts, negotiate agreements, and obtain increased labor requirements and lower chemical access to credit. Women find low paying jobs in inputs will vary and must be assessed in relation organic farming, providing labor for weeding and to other factors, particularly yield and price harvesting (for crops like coffee, cacao, banana changes. In places where chemical input is low, and vegetables) and in packing facilities. total costs are likely to rise because labor cost increases are likely to exceed chemical savings. LESSONS LEARNED RESEARCH, EXTENSION AND TRAINING. Extension PROCESSING AND MARKETING FACILITIES . Marketing of services have, with the exception of coffee, most organic products requires certified sorting, faced problems in finding professionals trained Table 4.2 Production costs of organic and conventional crops (US$/ha) Crop Organic Conventional Sugarcane (Argentina) Production cost (PC) 490 562 Labor cost (LC) 238 154 181 LC/PC (%) 49 27 Coffee (Mexico) Production cost (PC) 680 452 Labor cost (LC) 522 360 LC/PC (%) 77 80 Banana (Dominican Republic) Production cost (PC) 2,560 2,370 Labor cost (LC) 1,826 1,218 LC/PC (%) 71 51 Source: Damiani 2002. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION in organic agriculture. Including organic farmers. Investments in organic agriculture (see production systems into research and educa- box 4.22) should: tion programs is essential to supplying tech- nologies and well-trained professionals for the · Strengthen associations of small producers future. For small organic producers, extension that play a major role in marketing, produc- services are particularly important to improve tion, dissemination of organic technologies, product quality and ensure compliance with and monitoring members' compliance with organic production methods. organic methods of production. STRENGTHENING FARMER ASSOCIATIONS. Producer · Provide financial support during the transi- organizations play a major role in enabling tion period by covering start-up costs of small farmers to begin organic production as certification systems, and organization of an they make possible economies of scale by effective and participatory monitoring marketing product in quantities that attract system. foreign buyers. These buyers find it easier and cheaper to contract with organizations · Strengthen government policies and institu- rather than with a large number of individual tions dealing with organic agriculture, such farmers (see box 4.21). Associations train that appropriate regulations protect produc- large numbers of small-scale farmers, and ers, consumers, and exporters. organize monitoring systems to ensure compliance with production standards. · Use NGOs with experience in organic Compliance is very important because if production as preferential partners for only one member fails to comply with projects. NGOs have frequently promoted production standards, buyers' trust is lost production based on local resources, rather and there are severe consequences for the than on purchased inputs and often have entire group. skills in supporting small farmer associa- tions and marketing of organic products. MARKETING ORGANIC PRODUCTS. Supermarkets are the fastest growing sales outlets for organic · Consider using domestic markets as an produce but small-scale farmers often do not entry point to gain experience with organic sell to these because they lack marketing production processes, certification require- skills and connections. As a result, marketing ments, and quality standards. 182 through farmer associations has been key in helping small farmers obtain better prices. · Target producers with the highest potential Marketing contracts (that is, contract farming) for success, concentrating on small farmers may secure and stabilize prices, and may with stable land tenure, access to financial provide access to extension services and resources and other inputs for organic credit. Outgrower schemes are common, but farming. may require high costs for monitoring and enforcing contract provisions. In developing countries, domestic markets for organic SELECTED READINGS products are attractive because they can be Asterisk (*) at the end of a reference indicates less demanding in terms of quality, than that it is available on the Web. See Appendix 1 export markets. for a full list of Websites. Coote, C., P. Greenhalgh, and J. Orchard. 2003. RECOMMENDATIONS FOR PRACTITIONERS "High Value Horticulture and Organic Organic production is one of several options Export Markets for Sub-Saharan Africa." for improving production and incomes of small Natural Resources Institute, U.K. AGRICULTURE INVESTMENT SOURCEBOOK Box 4.21 Costa Rica: farm associations and organic cacao and banana TheTalamanca Small Farmers Association (APPTA) created in 1987 had 1,500 members by 2000. Most members abandoned cacao plantations in the 1970s because of disease and low prices, and were making a living from subsistence crops and poultry. APPTA promoted a revival of cacao production and, with help of an NGO, established contacts with buyers of organic cacao in the United States. By the early 1990s, APPTA had a significant area of cacao certified by a United States certification agency (Organic Crop Improvement Association), allowing members to regain an important source of cash income. Following this initial success, APPTA obtained organic certification for banana production for baby food (puree of organic banana) for export to Europe and the United States. Source: Damiani 2002. Box 4.22 Potential investments · Training for producers on organic production and markets and problems of noncompliance. · Extension services for organic production and maintenance of product quality. · University training and research programs to develop resources and technologies for organic agriculture. · Support for soil conservation measures and for certification costs during the transition period. · Support for farmer associations, NGOs, and marketing firms developing organic agricultural markets. · Financial resources to support investment in packing and processing facilities. Source: Authors. Damiani, O. 2002. "Small Farmers and Organic Agriculture: Lessons from Latin America and the Caribbean." IFAD, Rome. FAO/ITC/CTA. 2001. World Markets for Organic Fruit and Vegetables: Opportunities for Developing Countries in the Production and Export of Organic Agricultural Products. 183 Rome: FAO/ITC/CTA.* Scialabba, N. 2000. "Factors Influencing Or- ganic Agriculture Policies with a Focus on Developing Countries." IFOAM Scientific Conference, August 28-31, Basel, Switzer- land.* REFERENCES CITED Damiani, O. 2002. "Small Farmers and Organic Agriculture: Lessons from Latin America and the Caribbean." IFAD, Rome. This Note was prepared by the Sourcebook team based on an IFAD publication "Small Farmers and Organic Agriculture: Lessons from Latin America and the Caribbean" by Octavio Damiani. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION AGRICULTURE INVESTMENT NOTE ute food and nonfood agricultural products for both local urban markets and for export. As the UPUA production system is close to urban URBAN AND PERIURBAN consumers, it can be well connected in terms AGRICULTURE of input and output markets. UPUA products may reach urban consumers and processing Agricultural activities in and around cities and points the day they are harvested. These towns contribute significantly to meeting the systems are also characterized by the small needs of these urban areas, providing employ- scale of production, high proportion of perish- ment to urban dwellers, especially women, and able crops (especially leafy vegetables), disease absorbing city wastes. Institutional and techno- and insect pressure, intensity of input use, crop logical innovations are needed to integrate diversity, and low use of mechanical power. urban and periurban agriculture (UPUA) with evolving urban marketing systems, and to satisfy demands of urban consumers. Other BENEFITS investment needs include capacity for supply Poor men and women engage in UPUA to and demand analysis, awareness campaigns on increase household food security and to gener- food quality and environmentally sound prac- ate income. The contribution of food produced tices, technological and institutional innovation in UPUA to meet the total food needs of for production and monitoring food safety and different cities varies widely. For Hanoi, it quality, and an enabling environment for the supplies about one-half of the food demand, private sector to distribute inputs and services. and engages more than 10 percent of the urban labor force in processing and marketing, Migration of the poor from rural to urban areas retailing, input supply, and seed and seedling (where basic services are more available and production (Anh, Anh, and, forthcoming). costs of living are less) will continue to be a These percentages are higher for many African major trend in developing countries. This cities and some Latin American cities. Even in results in shifting poverty from rural areas to cities like Manila where little land is left for urban slums and increasing urban and crop-based agriculture, the contribution of periurban agriculture. Sustainable production, agricultural business activities to income and processing, and distribution of food in and employment remain significant (Ali and around cities and towns contribute to the goal Porciancola 2001). UPUA systems can play an 184 of a safe, affordable, and reliable food supply important role in environmental and public for the urban poor, and provide income and health by reusing and managing urban waste- employment to a large number of urban poor, waters and solid waste. Maintaining a large especially women. Critical issues concerning number of trees in cities and home gardening UPUA include: use of pesticides; use of urban contribute to air quality as well as employment. waste in agricultural production; environmental Urban agriculture can also be seen as a survival pollution caused by agricultural activities in strategy for the urban poor during crisis peri- densely populated areas; conflicts over land ods, and contributes to household food secu- and water between agricultural, industrial, and rity, especially for women and the elderly. housing uses; unhygienic food marketing; and an inability of producers, wholesalers, retailers, and other agents engaged in food processing POLICY AND IMPLEMENTATION ISSUES and marketing to integrate within coordinated Key issues of UPUA in production, livelihood food chains. earnings, environmental protection, and input supply at the household, institutional, and UPUA includes activities within or on the fringe policy levels are included in table 4.3. of a town or city that use natural, physical, and human resources to grow, process, and distrib- INPUTS AND SERVICES SUPPLIES . In the provision of AGRICULTURE INVESTMENT SOURCEBOOK Table 4.3 Issues of sustainable urban and peri-urban agriculture (UPUA) 185 Source: Authors. agricultural services, especially those with some INFORMATION SYSTEMS. The diversity of UPUA is element of public good such as extension and often high to maximize the efficiency of re- irrigation, UPUA is often ignored. If these source use, meet market demands, and to constraints to UPUA are not addressed, there reduce risk. Off-farm employment options for may be major consequences in terms of the family labor and the possibility of hiring labor regularity and quality of food supply, poverty add to the complexity of decision-making. and gender equity, resource conservation, and Changing market structure, increased demand human health in urban areas. Removing such for food quality, and fluctuations in output public sector biases against UPUA would prices are additional dimensions of decision- encourage private sector involvement in the making. To cope with these, farmers and supply of services and inputs critical to prof- especially the poor ones, require efficient itable and sustainable farming in urban areas. agricultural information systems and sophisticated MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION managerial skills. Urban farmers are closer to LAND TENURE ISSUES. The long-term continuity of markets than are their rural farmers and have agricultural production from a given piece of an advantage in targeting specific consumer land in UPUA remains uncertain, because the segments (high income, for example) and opportunity cost of using it for agriculture is responding quickly to changes in the demands high due to demand for industrial, housing, of these, provided they have good access to and development purposes. The right to use market information. There is always a danger land for UPUA is sometimes not well defined, that resource poor farmers and disadvantaged especially when it is practiced on vacant groups in UPUA will be left behind. municipal or encroached lands. This can create conflicts and can lead to underinvestment as NEW MARKET STRUCTURES . The shares of high-value well as exploitative production practices and crops such as fruits and vegetables and live- degradation of the land. stock products are rapidly increasing in urban diets, and consumers are demanding better quality and safe foods. In response, the organi- LESSON LEARNED zational structure of urban markets, including TECHNICAL AND MANAGERIAL CAPACITY OF FARMERS AND those in developing countries, is changing. FOOD MARKETERS . Effective UPUA requires the Smallholder urban producers and small retailers provision of nondiscriminatory extension and wholesalers in urban areas typically lack services for farmers that are linked with de- resources, organization, and skill to provide mand-driven research systems. The public quality food of the standard demanded by sector can help to build and reform systems to urban consumers, or to integrate with new supply farmers with required inputs and link coordinated market structures. them to downstream markets. It can also play an active role in building the capacity of HEALTH AND ENVIRONMENTAL ISSUES. Input use, farmers and food wholesalers and retailers to especially for fertilizer and pesticides, is rela- meet emerging market demands. It can also tively high in UPUA, leading to potentially high improve the capacity of the private sector to residues in food, especially vegetables. This supply farm inputs and more effectively pro- may create health hazards for both consumers cess and market outputs. and producers, and degrade resources such as soil and underground water reserves. Farmers PROMOTE THE ADOPTION OF ENVIRONMENTALLY SOUND have little incentive to reduce pesticide use in . The application of city wastes 186 FARMING PRACTICES view of low pesticide costs, inadequate knowl- (both solid and liquid) and the large number of edge of conservation farming options (IPM for trees can help clean the city environment. example), low availability of extension services, However, to ensure that applications are not and inadequate market premiums for providing negatively affecting environmental indicators, consumers with products that have been and that they are not risking the safety of the produced using environmentally sound and food produced, effective regulatory systems are socially acceptable production practices. Farm- required. These include the quality of waste ers need technical advice to improve food applied in agricultural production, and levels of quality, and institutional innovations to monitor pesticide residue and microbial contamination agricultural practices and food standards. on food. To be effective, these regulatory systems should be based on sound technical USE OF URBAN WASTE . The use of solid waste planning, and credible monitoring systems. and wastewater in UPUA has both advan- Extension is also important to bring to farmers tages and disadvantages. It saves farmers new technologies that can ensure long-term money, and reduces environmental pollution. environmental sustainability of the system. The However, it may create microbial infections public sector can play an important role in in food, and heavy metal contamination of providing advice in planning and promoting soil, water, and food. effective supply of technical services to farmers, AGRICULTURE INVESTMENT SOURCEBOOK particularly involving the private sector and Box 4.23 South Asia: the AVRDC/CIRAD UPUA project producer organizations. In 2002, AVRDC/CIRAD initiated a 3-year coordinated project PRODUCER ORGANIZATIONS. Because of the very with national partners in Hanoi, Ho Chi Minh City, Phnom Penh, small operations, input purchase and output and Vientiane to diagnose problems and introduce technologi- marketing are typically a problem in UPUA. cal and institutional innovations in UPUA.The project has Organization of producers can benefit from undertaken an analysis of the supply of and demand food in economies of scale in markets (see box 4.23). urban and periurban areas, as well as an analysis of the vegetable, fish, and livestock production and marketing systems. These organizations can identify opportunities Other accomplishments include: and constraints, and organize funds to over- come bottlenecks. They can arrange inputs and · The development of producer organizations (POs) for organize training as new opportunity arises, improving the dissemination of technical innovations, and and can lobby to protect the UPUA from strengthening farmer access to markets by carrying out unnecessary regulations. pilot operations for vegetable and fish production systems. · Introduction of off-season tomato varieties and technolo- gies and efficient marketing systems on a pilot basis. · Analysis of the pesticide residues and lead content of RECOMMENDATIONS FOR PRACTITIONERS selected vegetables that has been supported by the UPUA must be given due importance in urban introduction of tool-kits for spot-checking of pesticide planning, encouraging its contributions in residue for selected pesticides. supplying food and engaging the labor force in · Training of farmers for off-season vegetable production food production, processing, and distribution. and integrated pest management (IPM) technologies. Other recommendations relating to investments · Improved regional cooperation to share breeding material, in UPUA include (see box 4.24): information, and literature related to UPUA. These activities and innovations are contributing to enhanced · Create an enabling environment for the safety and year round supply of food, as well as providing private sector to supply inputs and services income and employment in urban and peri-urban areas, both by providing training and information. on and off farm. Source: AVRDC/CIRAD Internal Documents. · Promote the development of responsive agricultural extension and training pro- grams to enhance farmers' ability to make · Promote reform of land tenure arrange- efficient decisions under the complex ments where this is a major constraint to 187 environment of UPUA. This would include market- oriented environmentally sustain- skill training especially on good agricultural able UPUA. Well documented land records practices for crop and livestock production, business analysis, and developing informa- tion systems at the PO level. Box 4.24 Potential investments · Encourage organization of associations in · Market analysis of the supply and demand for food and the food chain to enable farmers and small evolving marketing structures. enterprises to integrate with changing · Training inbusiness management for food retailers and market structures in cities. Involvement of wholesalers. women and disadvantaged groups in these · Promotion of innovations to produce and market safe and associations is necessary to improve social hygienic food. equity. · Awareness campaigns for consumers and producers about food safety and environmentally safe production. · Technical capacity and equipment for environmental · Introduce pilot projects on innovative monitoring, particularly with regards to high input use and methods and tools to produce, process, and applications of city wastes. monitor the distribution of hygienic and Source: Authors. safe food. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION can encourage sustainable, profitable, and equitable resource use. · Develop cost-effective water treatment and manure decomposition plants to enable productive disposal of UPUA waste with minimal environmental risks. Equipment and procedures for lead and microbial contamination will also force producers to carefully use urban wastes to avoid envi- ronmental contamination or rejection of outputs for safety reasons. SELECTED READINGS Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites. Smit, J., A. Ratta, and J. Nasr. 1996. Urban Agriculture: Food, Jobs and Sustainable Cities. Habitat II Series. New York: UNDP. IFPRI. 1998. "Does Urban Agriculture Help Prevent Malnutrition? Evidence from Kampala." Food Consumption and Nutrition Discussion Paper 45. IFPRI, Washington, D.C.* REFERENCES CITED Ali, M., and F. Porciancola. 2001. "Urban and 188 Peri-urban Agriculture in Metro Manila: Resources and Opportunities for Food Production." Technical Bulletin 26. Asian Vegetable Research and Development Center, Shanhua, Tainan, Taiwan. Anh, M.T.P., H.L. Anh, and M. Ali. Forthcoming. "Urban And Peri-Urban Agriculture In Hanoi: Resources, Opportunities And Constraints For Sustainable Food Produc- tion." Technical Bulletin. AVRDC/CIRAD, AVRDC, Shanhua, Tainan, Taiwan. This Note was prepared by Mubarik Ali, with input from Gary Alex and Sam Kane. AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE circumstances, and requires time to change traditional attitudes and approaches and to demonstrate benefits (see box 4.25). A success- CONSERVATIONTILLAGE ful transition to CT farming generally requires three to five years. Conservation tillage (CT) can significantly improve rural agricultural productivity, and Key factors in the successful introduction of CT incomes. At the same time it can conserve the farming include the willingness of governments natural resource base for agricultural production, to: empower rural communities and POs; as part of an overall approach to the manage- develop effective R&E systems; support experi- ment of natural resources. Widespread adoption enced producer groups or community organiza- in Latin America and expanding use in South tions; and develop systems to secure land Asia have shown that investment in research tenure and water rights. Other facilitating and extension (R&E) systems, capacity building, factors include effective input and output and the development and distribution of neces- markets, and access to cover crop seed and sary equipment are effective means of promot- appropriate machinery. ing the use and benefits of conservation tillage. Conventional tillage practices of plowing and BENEFITS tilling the land evolved largely to control weeds. ECONOMIC. CT increases farm profitability by Although widespread, these systems have some improving land productivity through residue serious disadvantages by exposing soil to wind mulching practices that allow sowing at the and water erosion, and by incurring high optimal time, conserve moisture, and reduce energy costs for tilling operations. Production vulnerability to drought or moisture stress. CT systems using CT are becoming more common also reduces costs of labor, inputs and machin- and offer a range of benefits, such as increased ery (longer life and lower maintenance costs). land productivity, reduced production costs, In Brazil, net farm incomes increased by as and prevention of soil erosion. much as 59 percent over five years and in animal traction systems CT farming has in- creased maize yields by up to 20 percent. THE DEVELOPMENT OF CONSERVATION TILLAGE SYSTEMS ENVIRONMENTAL. CT adoption is likely to result in: 189 CT farming covers four broad, intertwined decreased soil erosion and water loss through management practices: minimal soil disturbance runoff; decreased carbon dioxide emissions and with no plowing and harrowing; maintenance higher carbon sequestration; reduced fuel of a permanent vegetative soil cover; direct sowing; and sound crop rotation. Introduction Box 4.25 Brazil: key elements of smallholder no-till systems of these practices requires a supportive social environment and institutional framework. Many for maize and bean production in Parana CT practices have evolved from farmer innova- · Use of animal traction, family labor, and limited use of tions supported by farmer-led organizations, in purchased inputs. partnership with private business. CT farming is · Biomass management with animal-drawn knife-roller and a sustainable land resource management planting with animal-drawn no-tillage planter. system that combines productivity gains and · Management of crop residues with knife-roller. increased profitability with ecosystem manage- · Use of cover crop management. ment for environmental protection. However, · Runoff control with contour bunds built with animal-drawn CT farming should not be seen as a "quick fix" moldboard plow. or a blueprint that solves all sustainability or · Planting of dwarf elephant grass on contour bunds for livestock feed. profitability problems. It is highly location- specific, must be adapted to specific farmer Source: Pieri et al. 2002. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION consumption; increased water productivity; less Box 4.26 India: impact of no-till in the Indo-Gangetic Plains flooding; and recharging of underground In the rice-wheat system conservation tillage (CT) saves up to aquifers. Other benefits are increased fertilizer one million liters of irrigation water and about 60 liters of efficiency, improved drainage, reduced water- diesel per hectare. No-till has the potential to save six-to-ten logging, and increased diversity of desirable plowing operations, reducing costs by US$50-60 per hectare as insects. In South Asia CT farming is estimated compared to conventional tillage. Reducing turnaround time to save 60 liters of diesel per hectare per year. between rice harvest and wheat planting also increases wheat yields. SOCIAL. CT initiatives are generally scale neutral, so that smallholders benefit equally (see box No-till has proven very effective in controlling weeds in wheat 4.26). Reduced labor requirements free up more because most weed germination is triggered by sunlight or by lower temperatures. Since the soil is disturbed less with no-till, time for nonfarm employment, child education, less weed seed is exposed and so less germinates. Recent data and care of the elderly. Increased stability of suggest that no-till reduces weed infestations over time, and production can increase food security. eventually no herbicides are required in some seasons. Custom machinery services allow small-scale farmers to use POLICY AND IMPLEMENTATION ISSUES no-till and reduce operating capital requirements, since fewer TECHNOLOGICAL BASE. Effective CT implementation tractor hours are needed. Farmers no longer need to maintain initiatives are based on a sound understanding bullocks all year on the farm. In Haryana in 2001, 70 percent of of technical aspects of production, including farmers who adopted no-till did not own a tractor and used custom tractor services, and 40 percent of the adopters were CT plant cover and cover crops, crop rotation, small landholders with farms smaller than two hectares. equipment and IPM. Transition problems, such as increased weed growth in direct-seeded rice, Source: Ekboir 2002. occur in early years of CT production. Devel- opment and supply of appropriate equipment and improved seed for both crops and cover crops facilitates farm-level adoption. Research systems must be able to provide solutions to varied location-specific production problems. Technologies, including biotechnology-assisted Box 4.27 Responses to common criticisms of conservation development of herbicide-resistant varieties, tillage farming and development of safer pesticides and 190 pesticide application strategies, will likely be Limited to deep soils and high rainfall conditions: Conservation tillage (CT) farming practices can be adapted to a wide range important for increasing the use of CT. of soils under semi-arid or humid tropical or temperate climatic conditions. DISINCENTIVES TO WORLD BANK INVESTMENTS. Factors that deter Bank investment in CT farming Suited only to large mechanized farms: In Brazil and Paraguay, include the often lengthy time taken to develop private entrepreneurs have made CT equipment for small and disseminate relevant technologies; high farms available in local marketplaces and enabled family farms initial investments in equipment and farmer to successfully adopt CT farming practices using animal power. training and education; deferred benefits; and In South Asia, whole villages adopted no-till wheat after rice the Bank's pesticide safeguard policies on using rental farm machinery. investments associated with increased use and Results in increased herbicide use. Full adoption of CT practices their impact on CT herbicide use. There have (cover crops, crop rotations, and integrated weed management) also been misconceptions about CT farming over a two-to-five year period can reduce weed pressure, and (see box 4.27). practitioners claim that they use less herbicide (and other pesticides) than under conventional tillage systems. CAPACITY BUILDING. Farmer organizations are key to changing traditional attitudes and practices, Source: Pieri et al. 2002. and are able to do so because of their under- AGRICULTURE INVESTMENT SOURCEBOOK standing of local conditions. CT investments Box 4.28 Priorities for conservation tillage adaptive research must strengthen such farmer organizations and extension systems, and link farmers to the · Cover crops - collection of locally available germplasm and scientific community. introduction as appropriate. · Crop residues - on-field management (both mechanical OTHER ENVIRONMENTAL CONCERNS . In some circum- and chemical) and for productive uses. stances CT farming can result in pest and weed · Integrated production and pest management (IPPM) ­ buildup, requiring increased application of limited pesticide use. · Fertilizer - mineral/organic requirements, (needs, timing, pesticides and herbicides, with negative impli- and methods of application). cations for local biodiversity and water quality. · Machinery/tool adaptation - adaptation and fine-tuning of Some farmers also burn mulch contributing to conservation tillage (CT) planters. air pollution and loss of organic matter. No-till · Integration of crops and livestock production - best crop and low-till systems may also increase growth rotations, increase biomass. of fungi in humid climates, risking contamina- · Pathways of change - on-farm test of pathways best suited tion of agricultural produce by aflatoxins and to local/zonal typology. mycotoxins, with possible loss of markets and · Land/soil benchmark - characterization of representative on-farm soils. negative impacts on human health. Research · Soil as a rooting environment - rooting depth, root investments are needed to develop systems for distribution for crops and cover crops. sustainable management of crop residues, such · Socioeconomic studies - reasons for adoption and as using drills to plant into residues, baling and nonadoption, gender considerations. removal for livestock feed, and microbial Source: Pieri et al. 2002. sprays to speed decomposition. are essential to CT farming, (see box 4.28). LESSONS LEARNED Extension programs should foster linkages Changing farming practices that have evolved among those involved, synthesizing feedback over many generations is difficult. CT is more from the field, prioritizing needs, and assisting than a switch from one technical package to with implementation of adaptive on-farm another, and demands an integrated approach research. In Brazil, CT education and training including collaborative efforts on social mobili- in university courses has been an effective zation, education and training, and marketing. means of extension. In South Asia, traveling Such action can be undertaken in discussion seminars were effective in bringing farmers to 191 groups and seminars, and through field visits. see CT systems in operation, and to hear other farmers' experiences with the systems. The two main driving forces behind the development and adoption of CT are farmers CT systems take considerable time to imple- faced with acute and highly visible land ment, with a lag between investment and degradation, and a few innovators who realization of tangible results. This means that realize that radical changes to farming prac- in the initial stages of CT introduction signifi- tices are required. A CT development strategy cant support (subsidized equipment, local can create the conditions to capitalize on meetings) may be required until benefits experiences of initial innovators and regional become apparent and sufficiently compelling agents for change, such as farmers, technical for stakeholders to independently support the specialists, private input sector, and extension system. Planning should provide for phase-out agents, to promote the spread of CT innova- of such incentives, particularly subsidies. tions through a network of local, state, and national POs. RECOMMENDATIONS FOR PRACTITIONERS Adaptive research systems guided by the Implicit in CT activities is that governments concerns of farmers and other interest groups. and other major stakeholders give priority to MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION to local problems identified by farmers and Box 4.29 Potential investments the wider community. · Farm and community group organization and orientation to conservation tillage (CT). · Involve local manufacturers in the develop- · Research systems for adapting CT technologies to local ment and manufacture of required equip- conditions. ment that is within the budget of farmers. · Extension systems that support the design, manufacture, Farmers must be shown how equipment and distribution of required equipment. works and allowed to experiment with it. · Seminars, meetings, and demonstrations of CT equipment and practices. · Pay special attention to the integration of · Support for institutions to improve rural financial services and land administration systems. crops and livestock in CT systems. A particu- · Support workshops and study tours for private sector lar challenge is the development of rotational equipment manufacture, input supply, and services. grazing patterns on cover crops that do not · Grant programs to encourage socially and environmentally jeopardize the sustainability of CT systems. beneficial practices where market forces fail to do so. Source: Authors. · Use targeted, short-term subsidies to sup- port small farmer testing and adoption of no-till practices. appropriate policies and coordinated interventions that help to achieve more rational land use, improve land management SELECTED READINGS practices, and develop an updated knowledge Asterisk (*) at the end of a reference indicates and information base. CT investments should that it is available on the Web. See Appendix 1 (see box 4.29): for a full list of Websites. · Ensure that implementation plans account Alberta Reduced Tillage Linkages. Alberta for context-specific attributes of the envi- Update on Direct Seeding. Direct Seeding ronment (slope, soil type, water resources). Factsheet Summaries. http:// Establishing a geographical database may www.reducedtillage.ca/ be helpful for this purpose. directseedingfactsheets.html. · Identify and train innovative and entrepre- Ekboir, J., K. Boa, and A. A. Dankyi. 2002. 192 neurial leadership, and stimulate a coopera- Impact of No-Till Technologies in Ghana. tive approach involving all interest groups. Economics Program Paper 02-01. Mexico, D.F.: CIMMYT.* · Ensure private sector participation in machinery supply, chemical and informa- Hobbs, P., and R. Gupta. 2002. "Resource tion supply, sponsorship of farmer organi- Conserving Technologies for Wheat in Rice- zations, financing, research, and extension. Wheat Systems." In J. K. Ladha, ed., Im- proving the Productivity and Sustainability · Develop effective coordination and com- of Rice-Wheat Systems: Issues and Impact. munication mechanisms and networks to Proceedings of an International Symposium share ideas and knowledge between held at the 2001 Annual Meetings of the farmers and interest groups. Farmer-to- American Society of Agronomy, Crop farmer contact is often the most cost- Science Society of America, and Soil Sci- effective means of communication. ence Society of America, Oct. 22, Charlotte, N.C. Madison, Wisc.: American Society of · Develop research systems with an on-farm Agronomy, Crop Science Society of research perspective that provides solutions America, Soil Science Society of America. AGRICULTURE INVESTMENT SOURCEBOOK Hobbs, P. R., Y. Singh, G. S. Giri, J. G. Lauren, and J. M. Duxbury. 2002. "Direct-Seeding and Reduced-Tillage Options in the Rice- Wheat Systems of the Indo-Gangetic Plains of South Asia." In S. Pandey, M. Mortimer, L. Wade, T. P. Tuong, K. Lopez and B. Hardy. Direct Seeding: Research Issues and Opportunities. Proceedings of the Interna- tional Workshop on Direct Seeding in Asian Rice Systems: Strategic Research Issues and Opportunities, January 25-28, Bangkok, Thailand. Philippines: International Rice Research Institute.* FAO. Intensifying Crop Production with Conser- vation Agriculture. http://www.fao.org/ag/ ags/AGSE/Main.htm. REFERENCES CITED Ekboir, J., ed. 2002. Developing No-Till Pack- ages for Small-Scale Farmers. Mexico, D.F.: CIMMYT. Pieri, C., G. Evers, J. Landers, P. O'Connell, and E. Terry. 2002. "No-Till Farming for Sustain- able Rural Development." Agriculture and Rural Development Working Paper. World Bank, Washington, D.C. This Note was prepared by Sam Kane with inputs from the Sustainable Agriculture (SASKI) ThematicTeam of the World Bank. 193 MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION AGRICULTURE INVESTMENT NOTE led to concerns over risks to human health, the environment, and food quality. In some cases, particularly where chemical inputs are subsi- INTEGRATED PEST dized, pesticides have been over-used and the MANAGEMENT long-term sustainability of agricultural systems has been undermined. IPM is seen as a way of Integrated pest management (IPM) practices achieving sustainable agricultural production have produced substantial environmental and with less damage to human health and the economic benefits in various agricultural environment, while at the same time increasing systems. Introducing IPM requires a coordi- incomes in rural areas. nated strategy of enhancing management skills of producers, awareness of food chain opera- tors and consumers, an appropriate regulatory INVESTMENT IN IPM and policy environment, and economic incen- IPM is essentially a diverse mix of manage- tives for incorporating external benefits of ment practices used to keep pest incidence improved practices into farm-level decision- below economically damaging levels. These making. Training and capacity building at the include targeted and judicious use of synthetic level of the individual producer and service pesticides, biological control, and other provider is essential. nonchemical means (see box 4.30). In addi- tion to this mix of technical options, IPM The use of chemical pesticides in agriculture focuses increasingly on enhancing farmer has produced impressive yield gains, but has skills to use agro-ecological knowledge to manage production ecosystems. Application of IPM tools and tactics is therefore highly Box 4.30 Integrated pest management technical toolbox situation- and location-specific. Integrated pest management (IPM) combines natural forms of control, taking advantage of ecological relationships in the Investment in public IPM research has yielded agricultural system, with economically derived rules for returns comparable to research on other agri- application of pesticides with low toxicity to minimize negative cultural technologies. Recently, the Bank's effects on human health, beneficial organisms, and the environ- competitive research grants programs have ment. Nonchemical methods of pest control, include: channeled substantial funding into IPM-related 194 research. Pest-resistant seed varieties developed · Biological control. Use of natural enemies of crop pests through genetic modification techniques add (beneficials), such as parasites, predators, and insect pathogens, and environmentally friendly chemical interven- new technological options to the IPM toolbox. tions such as pheromones and feeding attractants and biopesticides. Constraints to IPM adoption include a lack of · Cultural and crop or livestock management controls.Tissue incentives for participatory multidisciplinary culture, disease-free seed, trap crops, cultivation, refuge research, a gap between scientific IPM infor- management, mulching, field sanitation, crop rotations, mation and user-friendly management systems grazing rotations, and intercropping. and extension materials, and unfavorable · Strategic controls. Planting location, timing of planting, and timing of harvest. national policies, especially pesticide subsidies. · Genetically based controls. Insect- and disease-resistant In addition, in some cases such as rice, a varieties and root stocks. critical proportion of farmers must adopt IPM Biologically based pest control strategies may often be feasible practices to avoid pest invasion in IPM plots only in the long term. In such cases, rationalization of existing from neighboring non-IPM fields. Future patterns of pesticide use may be the first step toward making priority should be given to action-oriented more sustainable pest management. research, involving individual farmers and farmer groups in technology use, participatory Source: Sorby, Fleischer, and Pehu 2003. research, and technology evaluation. AGRICULTURE INVESTMENT SOURCEBOOK R&E investment alone is unlikely to result in Box 4.31Turkmenistan: biological control broad-based adoption of IPM systems, which tend to be complex and management-intensive. Since 1998, the Government ofTurkmenistan has reestablished Mass media campaigns and social marketing its biological control scheme for cotton production, a scheme can shape the awareness and behavior of that had been nearly abandoned. Biological control was pesticide users. In Vietnam the simple message introduced in the early 1980s after chemical pesticides became "do not spray early in the season" was success- ineffective and residues, especially persistent organochlorine ful in changing commonly-held perceptions compounds, were found in water, soil, and food.The breakup of the centrally planned economy of the Soviet Union led to a and contributed to significant reduction in deterioration of the rearing facilities for predators to control pesticide use. insect pests in cotton. Since 1998, the government rehabilitated insect rearing facilities (primarily forTrichogramma and Bracon), and introduced cost recovery from farmers.With over 90 BENEFITS percent of cotton crop protection now under biological control, Adoption of IPM practices can reduce pesticide there are greatly reduced environmental and health risks. costs, increase production, and reduce damage to the environment and human health. Concerns Source: Schillhorn van veen et al. 2000. focused on groundwater pollution, pesticide poisonings, loss of biodiversity, and negative effects on soil health, provide strong justification technologies such as improved seeds or chemi- for public sector investment in IPM (see box cals. Extension services play a key role in pro- 4.31). Increasing food quality and safety stan- viding IPM information, though the complexity dards have specific implications for pesticide of some IPM approaches requires a heavy residues in agricultural products. However, emphasis on teaching agro-ecological concepts developing the certification systems and the as a basis for farmer adoption of IPM practices. necessary monitoring capacity can be a major hurdle to attaining this market access. Investment COST/BENEFIT ISSUES . Attention to economic in this area is critical. Evidence on cost effective- viability of IPM investments is particularly ness on IPM is mixed. Most analysts suggest that important in large-scale extension and training IPM programs contribute to a decline in pesticide programs. Extrapolating costs and potential use but labor costs may increase. benefits based on pilot project experience may Box 4.32 Pakistan: incoherent policies constrain IPM 195 POLICY AND IMPLEMENTATION ISSUES adoption PERNICIOUS EFFECT OF SUBSIDIES. Efforts to promote IPM often must struggle against the legacy of Adoption of IPM in Pakistan is still in its infancy, despite policies aimed at promoting pesticide use as a significant investment in R&E.The government sees IPM as a key means of modernizing agriculture. Such poli- element of agricultural policy, yet deregulating imports of cies, ranging from explicit subsidies to prefer- generic pesticides has improved farmer access to inexpensive ential tariffs and foreign exchange regimes to chemicals. Emerging pest resistance due to misuse of pesticides chemical-oriented agricultural R&E services, led to a decade-long decline of productivity in the cotton sector, in which poor rural women, who pick cotton as their serve to reduce the cost of using chemical only source of income, were most affected by the health pesticides and can seriously undermine IPM impacts of increasing insecticide use. Reviving the cotton adoption (see box 4.32). Promoting input economy has been the main motive behind changes in market pricing that reflects the true costs pesticide policy. After thorough analysis of the economics in the associated with production and consumption is pesticide subsector, and consultation with all relevant stakehold- critical to encouraging IPM adoption in areas ers in 2001, a comprehensive national IPM program was where it can be beneficial. designed, including farmer training, tightening regulatory control, and removal of pesticide subsidies. TIME LAG FOR ADOPTION . IPM skills and practices do Source: FAO/UNDP/Government of Pakistan 2001. not spread as easily as information embedded in MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION However, the number of cases where these Box 4.33The Farmer Field School concept for IPM training criteria are met is limited. The Farmer Field School (FFS) approach stressing experiential learning of fundamental agro-ecological principles evolved in the 1980s in Southeast Asia to address the problem of LESSONS LEARNED insecticide overuse. Excessive use of broad-spectrum insecti- NEED FOR COMPREHENSIVE APPROACH . In many cides in irrigated rice, stimulated by the lack of pest resistance countries, IPM interventions have been planned of early high-yielding varieties, was disrupting the ecosystem without a clear understanding of pest manage- thus affecting farmer's yields and profits. FFS farmers, trained in ment problems. IPM initiatives are often "add- weekly sessions throughout the cropping season, conducted ons" to regular R&E projects, and tend to be hands-on experimentation in the field. Capacity building for extension staff and farmer groups has been central to pilot isolated activities. A comprehensive approach projects for IPM training in FFSs in over 25 countries. to pest management, integrating interventions within an IPM national strategic plan, is pre- While the FFS model might be a promising approach to ferred. Coordinated interventions based on promoting participatory IPM, after mixed experience with identifiable targets and benchmarks are likely large-scale projects in Indonesia andVietnam, there are serious to be more effective than isolated activities. reservations as to the advisability of financing FFS programs on Verification of IPM outcomes (for example, a large scale through public extension services. Large-scale reduction of pesticide use) is more important programs have proven financially unsustainable and had than simply measuring inputs such as the insignificant impacts on pesticide use and IPM diffusion (Feder, Murgai, and Quizon 2003). number of farmers trained. Source: Authors. IPM TRAINING. Participatory training and exten- sion are important to changing attitudes of overestimate training impacts and underesti- farmers and their service providers. One such mate costs, as these investments in human approach--the Farmer Field School (FFS)--has capital development may produce benefits only received particular attention (see box 4.33). An in the long term. Program initiatives must alternative strategy targets IPM for cropping assess expected and actual changes in produc- systems with significant potential to reduce tion costs, yields, output prices, and pesticide inefficient pesticide use and raise farm income, use and the sustainability of these changes. In for example cotton and horticultural crops. In addition, yield variability is likely to increase, cropping systems with a low level of external and farmers must have access to tools for inputs, integrating IPM messages into a pro- 196 managing production risks. gram to promote overall good agricultural practice is more effective than focusing on pest ROLE OF GENETICALLY MODIFIED ORGANISMS (GMOS). control alone. Training for input suppliers, Varieties resistant to pests and diseases, possi- extension agents, financial services providers, bly developed through use of biotechnologies, and produce buyers is important to develop the have potential to eliminate the need for mul- overall IPM knowledge system. tiple applications of pesticides. Biosafety issues and impacts on the overall ecology are contro- NEW MARKET OPPORTUNITIES . In global markets, versial, and must be addressed in considering maintaining competitiveness requires producers the use of GMOs. to be sensitive to changing consumer prefer- ences regarding product quality. This provides LONG-TERM SUSTAINABILITY . IPM initiatives will be new opportunities for cooperation between most successful in situations where there is producers and the private sector. However, overuse of chemicals for pest control, and where IPM is to be used to increase product where supportive R&E systems and policy and value, supporting certification systems must be regulatory frameworks are in place. Also, established to assure downstream participants economic viability is enhanced where markets (including retailers and consumers) that IPM place a premium on IPM-produced products. principles have been followed (see box 4.34). AGRICULTURE INVESTMENT SOURCEBOOK RECOMMENDATIONS FOR PRACTITIONERS Box 4.34 Options for cooperation with the private sector Given the lessons emerging from past experi- ence, investments related to IMP should (see High-value niche markets for tropical products grown in an box 4.35): environmentally and socially responsible manner are a fast- growing market segment (for example,"sustainable" coffee). · Promote policy changes required to allow Integrated pest management (IPM) is an indispensable tool for the emergence of undistorted input markets delivering a good-quality product through a "sustainable" that price pesticides at levels reflecting the production process. Private firms developing specialty product lines are good partners for local authorities, farmer associations, true economic and environmental costs of and NGOs. production and consumption of chemically- based pest control inputs. IPM programs may support the development of the biopesticide industry, which is still small, but relevant to crops · Develop a sound research base for devel- with limited markets that are neglected by large pesticide oping and supporting IPM technologies and producers. Cooperation with the chemical industry can be management systems. rewarding, as both the public and private sector share an interest in reducing pesticide overuse, and in promoting · Address the larger institutional and policy resistance management strategies. Initiatives for "Safe Use" of toxic chemicals have been started by the pesticide industry and environment issues governing pesticide use, sometimes supported as public-private partnerships. before focusing on knowledge transfer to extension agents and farmers. Source: Authors. · Develop a reliable information base on trends in pesticide use and productivity of CABI Bioscience. Sustainable Agriculture: pest management systems to support Promoting an Integrated Approach to Food design of a sound pest management strat- Security and Productivity. http://www.cabi- egy. bioscience.org/Html/ SustainableAgriculture.htm. Identify likely changes in markets and prices and production options, including the CGIAR. The Systemwide Program on Integrated potential for adding value through certifica- Pest Management. http:// tion of compliance with IPM standards. www.spipm.cgiar.org. 197 · Include stakeholders from agriculture, Farah, J. 1994. "Pesticide Policies in Developing environment, and health sectors in activities Countries: Do They Encourage Excessive to build consensus on approaches to use of Use?" Discussion Paper 238. World Bank, IPM (Fleischer and Waibel 2003). Washington, D.C.* · Invest in IPM training of farmers and Gallagher, K. D. 1999. "Farmer Education for extension workers, adopting a demand- IPM." Sustainable Developments Interna- driven approach to target training inputs to tional, International Edition 1.* address producers' pest management problems, and to respond to emerging Box 4.35 Potential investments market opportunities. · Policy analysis and strategy development. · Research on pests and diseases. SELECTED READINGS · Training of extension staff and other service providers. Asterisk (*) at the end of a reference indicates · Training of individual farmers and farmer groups. · Awareness campaigns among farmers, consumers, and that it is available on the Web. See Appendix 1 food chain operators. for a full list of Websites. Source: Authors. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION Global IPM Facility. http://www.fao.org/ This Note was prepared by Gerd Fleischer (GTZ) with globalipmfacility/home.htm. inputs from the Sustainable Agriculture (SASKI)Thematic Team of the World Bank Integrated Pest Management Collaborative Research Support Program (IPM CRSP). http://www.ag.vt.edu/ipmcrsp/index.asp. Murray, D. L., P. L. Taylor. 2000. "Claim No Easy Victories: Evaluating the Pesticide Industry's Global Safe Use Campaign." World Development 28 (10): 1735-1749.* REFERENCES CITED FAO/UNDP/Government of Pakistan 2001. "Policy and Strategy for Rational Use of Pesticides in Pakistan. Building Consensus for Action." Food and Agriculture Organiza- tion, United Nations Development Programme, Government of Pakistan. United Nations Systems in Pakistan Publicaions No. UN-PAK/FAO/2001/02, Islamabad 2001. Feder, G., R. Murgai, and J. B. Quizon. 2003. "Sending Farmers Back to School: The Impact of Farmer Field Schools in Indone- sia." Policy Research Working Paper 3022. World Bank, Washington, D.C. Fleischer, G., and H. Waibel. 2003. "Pesticide Policy and Integrated Pest Management." In 198 K. M. Maredia, D. Dakouo, and D. Mota- Sanchez, eds., Integrated Pest Management in the Global Arena. Wallingford, U.K.: CABI Publishing. Schillhorn van Veen, T. W., D. A. Forno, S. Joffe, D. L. Umali-Deininger, S. Cooke. 1997. Integrated Pest Management: Strate- gies and Policies for Effective Implementa- tion. Environmentally Sustainable Develop- ment Studies and Monographs Series 13. Washington, D.C.: World Bank. Sorby, K., G. Fleischer, and E. Pehu. 2003. Integrated Pest Management in Development: Review of Trends and Implementation Strategies. Agricul- ture and Rural Development Working Paper 5. World Bank, Washington, D.C. AGRICULTURE INVESTMENT SOURCEBOOK AGRICULTURE INVESTMENT NOTE both organic and inorganic plant nutrients for optimal production of cultivated crops, forage, and tree species, while conserving the natural INTEGRATED NUTRIENT resource base essential for long-term MANAGEMENT FOR sustainability. Nutrient flows occur at different SUSTAINING SOIL scales in any agroecosystem, and soil nutrient PRODUCTIVITY budgets for a given area and time can be calculated by the difference between the nutri- Future food and fiber must be produced on ent inputs and outputs (see figure 4.3). Large existing agriculture land, with less negative soil nutrient surpluses can lead to environmen- impacts on natural resources and the environ- tal pollution, whereas persistent soil nutrient ment than in the past. The timely supply, deficits usually indicate nutrient mining. efficient use, and careful monitoring of nutri- ents in integrated crop, forage, and tree pro- Effective INM involves four interrelated strategies: duction systems offer the potential for signifi- cant improvement of efficiency in plant nutrient · Conservation and efficient use of native soil use. Farmers, researchers, and other stakehold- nutrients. Conservation practices help to ers need to be more actively involved in the reduce loss of nutrients from generation and use of the knowledge required agroecosystems due to surface water flows for integrated nutrient management. and from erosion of soil by wind and water. Vegetative barriers minimize off-farm Although science-based agriculture has made transport of dissolved nutrients, dust, and major contributions to both the quantity and sediments, and deep-rooted plants act as quality of the global food supply, the rate of nutrient safety nets, intercepting leached yield increase for major food crops has begun nutrients from the root zone and returning to slow in recent years. In many parts of the these to the soil surface via litter fall, world, agricultural production increases have mulch, or as green manure. In general, been accompanied by significant degradation conserving existing nutrient resources is of natural resources including nutrient deple- easier and cheaper than replenishing and tion on agricultural lands. rehabilitating degraded resources. Integrated nutrient management (INM) is an · Recycling of organic nutrient flows. Return- 199 approach that involves the management of ing crop residues and/or animal manure to FIGURE 4.3 NUTRIENT FLOWS IN AGROECOSYSTEMS Inputs Outputs Mineral fertilizers Harvested crop parts Organic manures Crop residues Atmospheric deposition Plant Leaching Biological nitrogen-fixation Gaseous losses Sedimentation Water erosion Source: Smaling 1993. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION cropland is important for system one example of an INM practice that also sustainability. Composting crop residues contributes to IPM. Integration of nitrogen- and animal manures enhances the utiliza- fixing species into cropping systems diversi- tion efficiency of easily lost nutrients such fies inputs/outputs and reduces risk on as nitrogen. Converting linear flows (lost both economic and ecological fronts. from the system) of organic nutrients to cyclical flows (returned to the system) can · Addition of plant nutrients. The nutrient reduce the need for external nutrient content of highly weathered soils is very inputs. There are related potential price low. In most cases, the export of nutrients benefits in organic product markets. Live- in harvested products results in one or stock are important for processing crop more plant nutrients becoming limiting. In residues, adding value to farm outputs, the humid tropics, calcium and phosphorus improving labor efficiency, and providing are often limiting for crop growth and manure. productivity. Appropriate amounts of lime and nutrients are essential to optimize plant · Enhancing biological nitrogen fixation and root growth, enhance the efficiency of soil biological activity. Nitrogen fixing crop, added nutrients, and avoid soil degradation forage and tree/shrub species scavenge (see box 4.36). Although inorganic fertiliz- nitrogen from the soil and/or fix nitrogen ers such as limestone and rock phosphate from the atmosphere when soil levels are are consistent with organic agriculture, below plant requirements. Most nitrogen- inorganic fertilizers are often the most fixing plant species also form symbiotic efficient means of adding soil nutrients. In relationships with mycorrhizal fungi that many places (such as in Africa) they are improve soil aggregation, nutrient and essential for improving productivity to water use efficiencies, and protect the plant levels that will then enable adoption of roots from a variety of pathogens. This is wider INM practices. In the past, the cost of soil and crop sampling Box 4.36 Soil nutrient recapitalization and nutrient analyses made site-specific fertilizer application recommendations prohibitively Researchers estimate that the croplands of many smallholder expensive for most agricultural programs. Blan- farmers, especially in Africa, have become depleted of the ket fertilizer recommendations were common, 200 nutrients that are removed by crop harvests. Published but blanket application of fertilizers is often estimates from 40 African countries indicate a net negative annual balance of 22 kg of nitrogen, 2.5 kg of phosphorus, and uneconomic and can lead to pollution. Recent 15 kg of potassium per hectare of cultivated land.To meet advances in plant nutrient decision support increasing demand for food, soil scientists have recommended a models, improved access to high-resolution major capital investment to replenish soil nutrients in Africa. satellite images, and the improved interpretation Social scientists, however, caution against blanket nutrient of crop and soil spectral signatures make site- recapitalization as nutrient deficit statistics are based on limited specific recommendations possible. datasets, and fail to account for nutrient variability and transfers at the farm and watershed level. Furthermore, many socioeco- nomic and institutional factors influence farm management decisions. For example, smallholder farmers in western Kenya BENEFITS are gradually but significantly improving both crop yields and The reduced erosion and increased cycling of soil fertility because of the availability of locally repackaged organic residues in INM can increase or at least one to five kg bags of fertilizer that they can afford, transport, maintain native soil organic matter levels, and and use on selected crop fields.As crop yields and input-output thus improve both nutrient and water retention markets improve, they invest further resources for more capacity of the soil. Soils with around three fertilizer nutrients and improved seed. percent soil organic matter content and dy- namic soil fauna populations generally have Source: Anderson et al. 2002. better soil structure, water infiltration, soil AGRICULTURE INVESTMENT SOURCEBOOK aeration, and plant root growth than soils with assessed to facilitate and promote the wide- lower organic matter. Improved soil water spread adoption of INM practices. INM pro- infiltration and retention significantly reduces grams need to consider also the impacts on surface flow of water, soil erosion, and nutrient water and air pollution, siltation, salinization, removals, and also minimizes the risk of down- biodiversity impacts, carbon sequestration and stream flooding. greenhouse gas mitigation in research programs. INM can reduce plant requirements for inor- FERTILIZER,SOIL AND PLANT TESTING LABORATORIES , - . ganic nitrogen fertilizer, and reduced use of Accurate information on the nutrient composi- purchased fertilizer nutrients can result in a tion of available fertilizers and site-specific significant saving of scarce cash resources for application recommendations are important to small farmers. INM practices can also signifi- INM, which relies on a good understanding of cantly reduce the emissions of greenhouse nutrient contents and flows. Consequently, gases (nitrous and nitric oxides). Excessive there is a need for reliable soil, plant, and applications of nitrogen fertilizer can result in nutrient input testing facilities that can provide increased leaching of nitrates into ground low-cost testing services to farmers in the initial water, increasing health risks to newborn stages of INM adoption. Opportunities exist for infants and cancer risk in adults. Organic use of properly tested and treated urban waste nutrient flows cycled through the return of and sludge, and these and local rock phos- organic residues as compost, manure, and/or phates need to be tested to ensure that materi- mulch have significant implications for conserv- als with high concentrations of heavy metals or ing soil fauna biodiversity. toxins are not supplied to farmers. Public laboratories (especially for soil testing) are often inefficient, inaccurate and poorly man- POLICY AND IMPLEMENTATION ISSUES aged, whereas private laboratories are relatively PRECISION FARMING. For large-scale farming, there rare and costly. Country-specific strategies are has been significant private sector investment in needed to establish and maintain accurate fertilizer-based nutrient delivery and tracking analytical laboratory capacity. systems. This has resulted in precision farming that uses satellite-based global positioning PRICE, TRADE AND TAX POLICIES. Fertilizer prices for systems on tractors and harvesters to monitor many tropical smallholder farmers, especially in and manage soil, plant, and grain nutrients by Africa, are more than double the prices paid by 201 location in the field. Most smallholder farmers farmers in industrial countries. Crop prices are in the tropics, however, will need public sup- also too low or too unstable to allow farmers to port for participatory, multidisciplinary R&E profitably invest in nutrient replenishment of services to apply INM principles to the varied their depleted or degraded farmlands. Public infrastructure, soil, and climatic conditions of policy needs to seek ways of reducing high their farms. This will require extensive local fertilizer prices to farmers through more effi- adaptive testing of technologies supported by cient marketing systems, but rarely should comprehensive databases on soil characteristics, consider introducing subsidies. crop nutrient use and productivity, organic and inorganic fertilizer properties, and market prices. LABOR SUPPLY . Labor markets can be constraining as INM often requires more labor inputs than RESULTS TAKE TIME . Benefits from INM are often do systems relying solely on inorganic fertiliz- seen only in the medium to long term, and in ers. Labor supply is affected by the dynamics many cases the benefits are to populations of labor markets and the impact of disease living downstream of INM practitioners. Costs (HIV/AIDS, for example). Appropriate tools and and benefits of INM practices should be moni- machinery for small farmers, that can be locally tored and quantified at farm and landscape levels produced, refined, and maintained, can signifi- so that appropriate premiums and taxes can be cantly reduce the drudgery of field work and MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION facilitate the adoption of labor-intensive INM tenure security helps in accessing financial practices. Excellent examples of such tools can services to improve farmers' access to credit for be found in the cover crop and conservation these investments. tillage systems of southern Brazil. INFRASTRUCTURE AND SERVICES . INM strategies are adapted to many situations, but are most likely LESSONS LEARNED to thrive in an environment in which support- FARMER LEARNING . Adding fertilizer nutrients will ing infrastructure and services exist and agricul- not be enough to improve and sustain crop ture can be profitable. Roads are needed to productivity. It is essential to also engage bring in appropriate inputs and take out mar- farmers in the diagnosis and design of farm and ketable products. Farmers must also have watershed nutrient management and facilitate access to market information and INM knowl- farmer learning. As farmers become familiar edge obtained from productive research sys- with INM principles, they begin to innovate tems and extension information services. Good with different strategies in their own environ- information services and other means to help ments (see box 4.37). manage risk provide a basis for farmer innova- tion and adoption of INM. INORGANIC FERTILIZERS . In most tropical soils and integrated cropping systems, inorganic fertiliz- LEGUMES AND ADAPTED SPECIES. Legumes are central ers must supplement organic nutrients. On to the INM strategy, and leguminous species degraded soils, inorganic nutrients are needed that combine moderate seed yield with high to prime the biological potential of native root and leaf biomass (and thus have a low vegetation to produce the organic inputs prior harvest index) can help farmers meet house- to the adoption of INM strategies. The availabil- hold food needs while improving soil fertility. ity of appropriately formulated fertilizers at accessible prices is important for increasing the SOIL MICROBES. The selection and use of adapted use of these nutrient sources by smallholder soil microbes (rhizobia and mycorrhizal fungi), farmers. together with the active manipulation of soil macrofauna ("soil engineers"), organic residues, PROPERTY RIGHTS . Land and resource tenure rights and modest levels of inorganic nutrients, can influence the relative values of land, labor, and promote significant synergistic responses in capital. Secure tenure is important in providing plant growth and yield. 202 incentives for investment in land resources, soil nutrient buildup, erosion control, perennial crops, and other critical elements of INM. Land RECOMMENDATIONS FOR PRACTITIONERS Investments designed to facilitate widespread adoption of sustainable INM practices will need Box 4.37 Nutrient budgeting tools: NUTMON to consider the (see box 4.38): A consortium of African and Dutch research institutes has worked with farmers in Sub-Saharan Africa to establish a · General environment for agricultural program called NUTMON to monitor farm level nutrients. profitability. INM investment planning must Participating farmers know that land productivity has been assess adequacy of infrastructure (roads, declining for years, and that continuous cropping, loss of communications, markets), financial ser- nutrients in harvested products, and manure shortages are to vices, and technical support, and structure blame. NUTMON increases farmer awareness of the role of INM programs accordingly. soil nutrients, and gives them a tool to assess nutrient balance on the farm. Researchers have documented changes in crop · Policy and price environment. Fertilizer management as a result of NUTMON. pricing policies as well as regulations Source:Vlaming, Gitari, and van Wijk 1997. governing environmental impacts of agri- AGRICULTURE INVESTMENT SOURCEBOOK cultural production (such as pollution Box 4.38 Potential investments from overuse of fertilizers) affect accept- ability of INM innovations, and need to · Policy analysis and formulation and regulatory system be assessed in program planning. development relevant to fertilizers and soil fertility management. · Knowledge base. R&E information sys- · Training and extension to facilitate farmer access to tems are central to INM. NGOs and knowledge on integrated nutrient management (INM) and farmer organizations can be allies in advocacy and information campaigns. · Soil-plant, and fertilizer testing facilities and incentives for promoting INM technologies, but sound private investment in testing facilities. research and soil/plant/fertilizer testing · Participatory research on soil nutrient management, laboratories are essential backups. including site and crop-specific fertilizer use recommenda- tions. · Regional fertilizer purchasing, mixing, and local repackaging. SELECTED READINGS · Processing of urban waste and sludge for use as soil Asterisk (*) at the end of a reference indi- amendments. cates that it is available on the Web. See · Transportation infrastructure. · Systems for environmental services payment (including Appendix 1 for a full list of Websites. quantifying on-farm and off-farm costs and benefits of INM). Department for International Development. Source: Authors. Soil Fertility and Nutrient Management. http://www.odi.org.uk/keysheets/ green_7_soil_fertility_and_nutrient_mgt.html. Netherlands: Dutch Association of Fertilizer Producers. Havlin, J. L., S. L. Tisdale, W. L. Nelson, J. D. Beaton. 1998. Soil Fertility and Fertiliz- Anderson, J., M. Blackie, M. Eilitta, E. ers: An Introduction to Nutrient Manage- Fernandes, N. Sanginga, E. Smaling, and D. ment. 6th ed. Upper Saddle River, N.J.: Spencer. 2002. "A Consultative Review of Prentice Hall. the Rockefeller Foundation's Activities to Improve and Sustain Soil Fertility in East Integrated Plant Nutrition Systems (IPNS) and Southern Africa." The Rockefeller Compendium. http://www.fadinap.org/ Foundation, N.Y. ipns/ipnscompendium/documents.htm. 203 Vlaming, J., J. N. Gitari, and M. S. van Wijk. International Fertilizer Industry Association. 1997. "Farmers and Researchers on Their http://www.fertilizer.org. Way to Integrated Nutrient Management." ILEIA Newsletter 13 (3): 6. Vanlauwe, B., J. Diels, N. Sanginga, and R. Merckx, eds. 2002. Integrated Plant Nutri- This Note was prepared by Erick Fernandes with input from ent Management in Sub-Saharan Africa: the Sourcebook team. From Concept to Practice. Wallingford, U.K.: CABI Publishing. REFERENCES CITED Smaling, E. M. A. 1993. "Soil Nutrient in Sub- Saharan Africa." In H. van Reuler and W. H. Prins, eds., The Role of Plant Nutrients for Sustainable Food Crop Production in Sub-Saharan Africa. Leidschendam, MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION INNOVATIVE ACTIVITY PROFILE · Establish commercially independent Fruit Development Corporations to market fruit in local, distant, and export markets. CHINA: FRUIT PROMOTION IN THE MID-YANGTZE · Provide a demonstration model for fruit production that could be applied else- Only about 137 million hectares of China's 960 where. million hectares of land are arable. Farming systems are intensive with heavy use of inputs. The project was designed to develop unused Foodgrains occupy about 70 percent of total and underutilized hilly areas into productive cropland and, although intensive farming has high-value citrus production. It emphasized the allowed China to meet its basic food needs, the extension of already existing research results to government's central concern in recent years farmers, community participation in investment has been stagnating grain production. One and operation, and an integrated approach element of the agricultural strategy involves along the value chain from selection of better exploring ways to increase use of uplands and varieties to market-enhancing postharvest other underused areas to expand productivity treatment. Villagers participated in both the of nonstaple food and commercial crops to land terracing and planting, and soil conserva- meet demand, increase farmer incomes, and tion measures, such as terracing, contour reduce the pressure on land suited to produc- planting, and use of green cover crops, were tion of grains. introduced to improve environmental condi- tions. The new and better varieties included What's innovative? Focusing on bringing hillside lands, some with longer harvesting seasons, allowing traditionally considered uncultivable,into sustainable greater production in off-peak months and production systems to increase farmer incomes ­ consequently higher prices. New irrigation, by using improved technologies and commercial planting, and postharvest technologies were solutions along the entire value chain. adopted. Grading, packaging, and storage facilities were installed, and independent PROJECT OBJECTIVES AND DESCRIPTION commercial corporations set up to market the The main objectives of the Mid-Yangtze Agri- output. cultural Development Project were to increase the production, productivity, and marketability Farmers were responsible for contributing to 204 of fruit production in low-income areas of the investment in orchard development through Sichuan, Hubei, and Chongqing, and thus uncompensated labor during terracing, plant- increase incomes and alleviate poverty. The ing, growing, and harvesting. The county project was designed to provide a demonstra- governments of the project area, which re- tion model for the development of hilly waste- ceived IDA funds, passed on orchard develop- lands into orchards. Specific objectives were to: ment costs, such as for terracing and technical services, to project farmers as 10-year loans at · Develop 12,000 hectares of new orchards and commercial rates of interest. rehabilitate 2,500 hectares of existing orchards. Commercial Fruit Development Corporations · Increase the provincial agriculture bureau's (CFDCs) invested in and managed modern ability to: identify, propagate, and distribute treatment, packing, and storage facilities, and healthy, disease-free planting materials; purchased fruit from farmers. They sell the fruit institutionalize virus indexing and budwood purchased from farmers in local, distant, and registration programs; provide technical export markets, although farmers are free to assistance for R&E programs, and training use other distribution channels. Provincial Fruit for managerial and technical staff. Development Corporations provide marketing AGRICULTURE INVESTMENT SOURCEBOOK services, such as market information, and · Cooperation among the Ministry of Agricul- interprovincial and export trading services to ture, provincial and local governments, and the CFDCs on a commission basis, but the research institutes is essential to effective CFDCs are also free to use other channels, such implementation. as Foreign Trade Corporations and direct export sales. · Implementing agency staff must have strong technical skills relevant to program operations. BENEFITS AND IMPACTS · Household income increased dramatically, The project has applicability to other regions of for example, orange growers income the world that need to expand production to increasing by Y13,000 to Y26,000 depend- fragile hillside lands, or to reduce soil erosion ing variety of orange grown. while still improving production on these lands. If the baseline characteristics of the Chinese · Income generating activities and employment example (labor surplus, government support, opportunities for participating farm families market demand) are used as a guide, such a have increased with 13,000 extra jobs during project could be applied to other similar regions. construction and implementation. PROJECT COUNTRY: CHINA · Large numbers of nonproject farmers now use technologies developed under the Project Name Mid-Yangtze Agricultural Develop- project. It appears that acreage of new ment Project orchards developed by farmers outside the project area amounts to four to five times Project ID P003541 that in project orchards. Project Cost US$130.8 million · Soil erosion has been reduced through introduction of terracing and planting of Dates FY1991 ­ FY 1997 vetiver grass for stability. In one example, eroded acreage has been reduced from 48 Contact Point Rapeepun Jaisaard percent in 1990 to only 13 percent in 1995. The World Bank, 1818 H Street NW,Washington, D.C. 20433 Telephone : (202) 458-4057; email 205 Rjaisaard@worldbank.org LESSONS LEARNED AND ISSUES FOR WIDER APPLICABILITY The project, providing demonstration models for the development of waste hilly lands into orchards, has proven highly satisfactory. Key lessons learned include: · Participation of farmers with a sense of owner- ship from the beginning made a big difference in how the project was implemented. · A strong research and scientific base drawn from domestic and international experi- ence, and the involvement of a science and technical committee, were essential to the success of this project. MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION INNOVATIVE ACTIVITY PROFILE value. It thus built a project design based on participation, decentralization, and linking research and technology institutions to farm- INDIA: COMMUNITY ers. Under Sodic I, approximately 64,000 ORGANIZATION FOR SODIC hectares of barren lands were brought under LANDS RECLAMATION green cover for the first time. Sodic II seeks to use the approaches tested in Sodic I to in- Uttar Pradesh State in India has about 17 crease agricultural productivity in ten districts million hectares under cultivation, and accounts of Uttar Pradesh. Essential elements for sus- for 10 percent of India's net sown area and 25 tained land quality improvements were de- percent of the total irrigated area. It produces fined to include community participation and nearly 20 percent of India's food grains. A ownership, rehabilitation of drains, improved major concern in the state is the declining irrigation management, and increased re- productivity of food grains, especially of rice search on appropriate technologies. The and wheat. This is mainly due to water-induced research-extension link was also found to be land degradation (salinization, sodification, weak and was to be strengthened through groundwater depletion), and loss of soil fertility community-based mechanisms. Important with the sustained removal of nutrients associ- components relating to participation and the ated with more intensive cropping and the characteristics of these include: inappropriate use of heavily subsidized nitrog- enous fertilizers. · The on-farm development and land recla- mation component focuses on beneficiary- What's innovative? Making participation a necessary led, on-farm reclamation efforts. condition for sustainable land reclamation and de- velopment by investing heavily in participatory pro- · The technology dissemination component cesses, community mobilization and organization, establishes a community-based, demand- before and during implementation. driven system, building on the successes of the pilot project in developing grassroot PROJECT OBJECTIVES AND DESCRIPTION organizations and their participation in The main objectives of the Uttar Pradesh Sodic supporting technology dissemination. Lands Reclamation Projects (Sodic I and Sodic II) were to: · Human resources development and institu- 206 tional capacity building of support services · Develop models for environmental protec- focuses on staff training and institutional tion and improved agricultural production strengthening in the Panchayats (village through large-scale reclamation of sodic governance institutions), NGOs, and ex- lands. ecuting government agencies. · Strengthen local institutions to manage such · Adaptive research verifies and refines schemes. available technologies to suit the specific needs of local farmers, and to bring about · Contribute to poverty reduction of the sustainable increases in the productivity of families concerned. sodic lands through reclamation. Support for additional research on improving cost The Sodic I pilot took the approach that for effectiveness and efficiency of land recla- any physical investments in the land to lead mation is made available through a Com- to effective reduction in sodicity, the invest- petitive Agricultural Research Fund acces- ments would have to be partnered and sible to both the private sector and na- owned by a community that recognizes their tional institutes. AGRICULTURE INVESTMENT SOURCEBOOK Beneficiary participation occurs through tar- ties in project implementation is essential. geted project interventions including: An important ingredient for motivating beneficiaries was that they were able to see · Formation of Water User Groups (WUGs) returns in a short period by participating in consisting of 10-15 farmers responsible for the project. a pump set and shared wells. WUG forma- tion is supported by local NGOs that are · Joint partnership with all organizations that also supported through project activities have key roles in project implementation (capacity building). helps to ensure that they are fully support- ive and complete their functions on time. · Establishment of Site Implementation Committees comprised of two members · Public corporations/societies have more (one male and one female) from every flexibility than line departments. sodic landholder household, in combina- tion with WUG representatives and indirect · Capable NGOs are important for forming, beneficiaries such as school teachers and training, and supporting farmer groups. local leaders. These committees have a mandate for resolving conflicts, monitoring PROJECT COUNTRY: INDIA progress, selecting resource people and trainers, and maintaining infrastructure. Project Name Sodic Lands I and II Project ID Sodic Lands I: P009961 and Sodic BENEFITS AND IMPACTS Lands II: P050646 Yields of rice and wheat doubled as compared to original project estimates, wage rates Project Cost Sodic Lands I: US$ 80.2 million doubled, and land values increased by a factor and Sodic Lands II (org.): US$286.6 million of four. By the end of the first project, cropping intensity had increased from 62 to 222 percent, Dates Sodic Lands I FY 1994 ­ FY 2001 wheat and rice yields had reached 2.7 and 3.0 and Sodic Lands II FY 1999 ­ FY tons per hectare, respectively, and more than 2006 one million people had directly benefited from project activities. Contact Point J. A. Perumalpillai-Essex and Paul 207 Sidhu The World Bank, 1818 H Street LESSONS LEARNED AND ISSUES FOR WIDER NW,Washington, D.C. 20433 Telephone: (202) 458-9057; APPLICABILITY email: Success has been attributable to: flexibility in Jperumalpillaies@worldbank.org project design; strong commitment of project and Paul Sidhu: management and staff; strong beneficiary psidhu@worldbank.org participation facilitated by effective use of NGOs as supporting and motivating agencies, and a systematic approach to a full reclamation package including beneficiary involvement, construction of drains, on-farm development, application of chemical amendments, and crop production. Some of the key lessons learned include: · Mobilization and involvement of communi- MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION INNOVATIVE ACTIVITY PROFILE to shrimp and fish culture the rest of the year. As a result, shrimp yields were low (average below 300 kilograms per hectare), reflecting INDIA: INCOME GENERATION poor infrastructure, low density of stocking, THROUGH AQUACULTURE inadequate water exchange, lack of feed, and low level of technology. The project's shrimp The fisheries subsector contributes only about component supported the first attempt to 2.4 percent of India's agricultural GDP, and less introduce the technologically advanced semi- than one percent of total GDP. However, intensive shrimp culture. fisheries are important in providing employ- ment to an estimated nine million people For shrimp aquaculture, the project brought predominantly from poorer coastal communi- together entrepreneurs to work with beneficia- ties. Furthermore, fisheries contribute to im- ries from the weakest socioeconomic sections proved nutritional standards and foreign ex- of the community (with a ratio of 3 entrepre- change earnings. The development of fresh and neurs to 7 beneficiaries). Pond site and infra- brackish water aquaculture has been necessary structure development account for 73 percent for India to continue to meet its growing of total project costs and involved development domestic needs and maintain its position in the costs of about US$11,000 per hectare. Close export markets. coordination between shrimp production, hatcheries, and feed suppliers was important. What's innovative? Using technical assistance to build Other activities financed include credit for fishing cooperatives and to reform the regulatory private entrepreneurs for establishment of and institutional practices needed to improve the support infrastructure and services (hatcheries, efficiency and poverty impact of inland fisheries man- nurseries, feed mills, ice plants, individual aged by small farmer-owned cooperatives. quick freezing machinery) and initial working capital for stocking ponds and feed to benefit PROJECT OBJECTIVES AND DESCRIPTION poorer farmers. The participating state govern- The overall project objective of the Shrimp and ments constructed basic infrastructure and Fish Culture Project was poverty reduction common facilities on state-owned lands, and through employment from increased shrimp recovered costs through lease charges. and inland fish production, tapping underutilized intertidal areas and inland water Although individual ponds are owned by 208 bodies. Interventions included: individual beneficiaries, the interlinkages in the system required coordinated management · A brackish water shrimp component (three through an association of pond owners. Tech- states and about 80 percent of project nical assistance and training to promote devel- costs). opment of fish cooperatives was an important aspect of the project. Some of the ponds were · An inland fisheries component (four states leased to the private sector firms to provide and about eight percent of project costs). opportunities for improved technology access and transfer to the community farmers. High · Project management, including environ- investment needs, the ongoing need for in- mental management and training (about 12 tense management and coordinated decision- percent of project costs). making, and high risk aversion of poor farmers made the system complex, and required the In the past almost all shrimp culture was based project to focus on developing solutions for on a traditional, extensive shrimp culture these problems. system, with ponds frequently used for paddy cultivation in the rainy season, and converted Overall, the project focused on reform and AGRICULTURE INVESTMENT SOURCEBOOK capacity building of the cooperatives; reform sector overall. It has been learnt that project of regulations and lease and management impact is enhanced by: practices; strengthening of the cooperative position vis-à-vis large contractors and down- · Maximizing participation of the poor stream water user associations; increase in through clear selection processes and cooperative members' knowledge of the detailed information. ecosystem, natural cycle of species and catch management; and capacity building for in- · Providing in-service training to fisheries creased market orientation. extension officers, especially in the areas of physical planning, optimizing fish produc- tion, marketing, and business management. BENEFITS AND IMPACTS Specific impacts included: fish catch increased · Initiating accurate monitoring of fish/shrimp by up to 250 percent; in Bihar, Andhra Pradesh, yields, and feeding this information back and Orissa, approximately 15,000 members of into planning to ensure fair rental charges the 118 project-assisted cooperatives are by state governments. engaged in rearing fingerlings and marketing fish; cooperative membership has expanded to Aquaculture systems need to be guided by include women; and per capita income of appropriate policies embedded in a functioning fishermen has risen by between Rs6,000 to regulatory framework. Aquaculture develop- Rs13,250. ment must be accompanied by support from institutions capable of addressing collateral However, following the mid-term review the problems, such as displacement of existing number of shrimp farm sites was reduced to fishermen and health and sanitation problems. six from 13, largely due to: the identified A similar approach could be replicated in other shrimp sites proving to be impractical on freshwater and intertidal areas, though addi- detailed technical surveys; and private sector tional work would be required to refine the developments overtaking project develop- program model for use in other situations. ments. Subsequently support services to infrastructure (shrimp hatcheries, ice plants and PROJECT COUNTRY: INDIA feed mills) were also reduced. This reflected the low demand resulting from a lower num- Project Name Shrimp and Fish Culture Project 209 ber of project-assisted shrimp production farms, and private sector investment in sup- Project ID P009921 porting infrastructure and service provision, reducing the need for project investment. Project Cost US$41.3 million Dates FY 1992 ­ FY 2001 LESSONS LEARNED AND ISSUES FOR WIDER APPLICABILITY Contact Point Harideep Singh The project highlighted the potential for suc- The World Bank, 1818 H Street cessful community-based semi-intensive shrimp NW,Washington, D.C. 20433 culture. However, the technology and invest- Telephone (202) 458-1380; email hsingh4@worldbank.org ment intensiveness of the farms, complexities of management at group level by risk-averse farmers, environmental impact and resource linkages between farms, and the need for effective supply chains for an efficient industry, pointed to the need for follow-on work at an industry and watershed level to develop the MODULE 4: INVESTMENTS IN SUSTAINABLE AGRICULTURAL INTENSIFICATION 5 INVESTMENT IN SUSTAINABLE NATURAL RESOURCE MANAGEMENT FOR AGRICULTURE 211 I n recent years, increases in agricultural productivity have come in part at the expense of deteriora- tion of the natural resource base on which farming systems depend. It is urgent that this trend be reversed, by encouraging farmers to adopt more sustainable methods of farming that will have long- term benefits in environmental conservation and development of sustainable livelihoods. Public sector investments are critical to reversing trends in degradation of natural resources. Specific objectives for sustainable natural resource management (NRM) include: improving agroecosystem productivity; conserving biodiversity; reducing land degradation; improving water management; ensuring the sustainability of forests; managing the sustainability of wildlife and fisheries; and mitigating the effects of global climate change. NRM refers to the processes and practices relating to the allocation and use of natural resources. Sustainable NRM optimizes the use of resources to meet current livelihood needs, while maintaining and improving the stock and quality of resources so that future generations will be able to meet their needs. NRM decisions are made at various levels--house- Over the last 40 years as food production has hold, farm, community, national, and global. This doubled, agricultural production systems have Module focuses on off-farm investments and activi- expanded, with significant impacts on the ties at the local and community level that have direct natural resource base (see figure 5.1): implications for sustainable agricultural systems. Farm-level practices or technologies with a benign or · The amount of agricultural land going out positive effect on the natural environment are of production each year due to soil erosion outlined in the Sustainable Intensification Module. is about 20 million hectares, and approxi- mately 40 percent of the world's cropland is now degraded. RATIONALE FOR INVESTMENT Agricultural production systems depend on · Irrigated agriculture consumes about 70 natural resourcesæland (over 55 percent of non- percent of the total volume of fresh water forest land), water (about 80 percent of total fresh used by humans, resulting in major envi- water), biodiversity, forests, pastures, and wildlife. ronmental consequences: salinization, Farm activities can also have major impacts on lowering of water tables, waterlogging, and the quality and availability of these resources well degradation of water quality, with subse- beyond the boundaries of the production system quent impac