Agriculture and Rural Development, Forests, and Water

1
Agriculture and Rural Development,Forests, and
Water

• Strategy Implementation, Recent Trends, and new
  concepts
• KCleaver
• June 9, 2006

2
MDG1 Reducing Poverty is still mostly a rural
development issue

• Most of the poor are rural (70 on average)

3
Partly because agriculture is the Leading Sector
in Low Income Countries
Low income countries
4
High Payoffs to agriculture RD but also to
other interventions investment works.Number of
Persons Removed from Poverty for a Given Public
Investment in Agriculture versus other Sectors
5
Poverty is reduced in Indiaas crop yields
increase (investment in RD works)
6
Changes in Household Incomes in Southern India,
1973-84 (the poorest benefit from farm income
expansion)
7
Another way of looking at this the poverty
effect of a 1 pro-ductivity Gain in
Agriculture, Industry, and Services in India
8
Change in Malnourished Children Depends on
Public Investment in Agriculture, 2020 (IFPRI)
9
A problem however agricultural area expansion
has displaced forest and woodland Need
agricultural growth without area expansion
10
An opportunity being missed? Agribusiness Sector
is also Large in Developing Economies and can
pull agriculture
11
Taking an Integrated Approach to Value Chain
ManagementAnd the growing importance of private
sector investment and innovation

• Agricultural production Food industry
  Consumption

Input industry
Consumers
Producers
Food retail industry
Food process industry
Research
Ext. service
12
Decline in Commodity Prices 1979-1999
FAOSTAT2002 / GEM2005
13
But recent increases may spell change
2000-2005
GEM, 2005
14
To confront the challenges and address the
opportunities, what has the Bank done lately?

• The Banks 2002/2003 Agriculture and Rural
  Development, Forests, and Water Resources
  Strategies, contributed to renewed donor interest
  in all three sectors
• Bank advocacy for agricultural subsidy and trade
  reform starting to bite, though failure of Doha
  is a setback

15
World Bank Lending for Rural Development up

• Bank loans and credits with significant rural
  components are up
• From 5 billion in FY02 to 7 billion in FY 03
  and FY04 8 billion in FY05
• The number of projects with rural components
  175 in FY03 to 195 in FY04, 217 in FY05

16
Composition of Rural Lending

• One-third of rural lending is to the
  infrastructure sector, while the agriculture
  sector received a fifth.

17
Bank Agriculture Lending declined from 1990-2002
18
But is now increasing

• Agricultural Lending Commitments (million)

19
IBRD/IDA commitments to the agriculture sector by
subsector, FY1999- 2006 (projected), million


20
Why the decline in agriculture lending from FY90
to FY03 (increasing only in FY04 to FY06)?

• Agriculture relatively less important as new
  sectors became priority (social protection,
  development policy lending, anti-corruption,
  public administration)
• Big projects fell out of favor (for example large
  scale irrigation, integrated rural development,
  agriculture credit, commodity support through
  parastatal enterprises).
• New style projects are smaller scale (CDD,
  irrigation rehab, micro-credit, agriculture
  research and knowledge, soil rehabilitation and
  land management, land titling)
• Agriculture not the priority of Ministers of
  Finance, nor of Bank country directors
• Quality problems with agriculture projects until
  recently
• Urban group argued that rapid expansion of cities
  in developing countries, should cause a shift in
  priority to urban development

21
Quality of Banks Agriculture Projects

• Early QAG ratings for quality at entry, and
  quality of supervision for agriculture projects
  were poor
• However, quality at entry for agriculture and
  rural projects (88 satisfactory) is now only
  slightly less than the Bank (90)
• And the quality of supervision of agriculture and
  rural projects (95 satisfactory) is better than
  the Bank (90)
• Projects under implementation
• 7 of agriculture and rural development projects
  in problem status average for all Bank projects
  is 10
• 10 of agriculture and rural projects at risk
  compared to 15 for all Bank projects

22
Quality

• Closed projects
• According to OED ratings of closed projects
• Agriculture and RD (ARSB) 4 points higher than
  the Bank for outcome (87 satisfactory in FY04
  compared to 83 for all Bank projects)
• A major improvement over the 64 satisfactory for
  rural projects in the FY99-2001 period and prior.

23
The analytical products

• Agriculture Water issues and approaches -
  Sourcebook
• Agriculture - Directions in development
• Rural Finance - Approach Paper
• Agriculture and MDGs
• Macroeconomic links to forestry
• IPM approach paper
• Water for food - Directions in development
• Innovation in managing agriculture production
  risk in developing countries
• Innovations in rural finance
• Managing the challenges of the livestock
  revolution
• Gender issues and best practices in land
  administration projects
• Sustainable Land management

24
Analytical work at country level increasing

• Economic and sector work increasing (23 country
  Rural Development strategies and water CASs), and
  rural content of CASs improving (73 of CASs
  satisfactory from rural/agriculture viewpoint)

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CONTROVERSY 1 HOW TO STIMULATE RURAL
DEVELOPMENT IN AFRICA?
Hunger is increasing in Africa, decreasing in Asia
What do the hungry do?
North Africa Middle East
Landless Rural Poor
Latin America
40
60
22
230
South Asia
50
200
Urban Poor
Farmers Marginal Land
20
SSA
115
8
155
East Asia
Pastorists/Fishers
Rest of Asia
26
Can the Asian Green Revolution be duplicated in
Africa?
Nutrient Cereal Wheat Ri
ce Irrigation Use Tractors Production
million ha million t millions million t
Adoption ofModern varieties
M ha / area
1961 0 / 0 0 / 0 87 2 0.2 3091970 14 / 20 15
/ 20 106 10 0.5 4631980 39 / 49 55 /
43 129 29 2.0 6181990 60 / 70 85 /
65 158 54 3.4 8582000 70 / 84 100 /
74 175 70 4.8 962 Source FAOSTAT, July 2002
and authors estimated on modern variety
adoption, based on CIMMYT and IRRI data.
27
One Answer is to diversify Smallholder
Agriculture and Income in Africa
Improve basic foods
Include cash crops

• I
• Integrate livestock

• Add agro-processing

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WATER RESOURCE DEVELOPMENT WILL BE IMPORTANT IN
AFRICA

• Africa has the potential to irrigate 20 of its
  arable land
• Only 4 is currently irrigated
• Small-scale irrigation systems generally are the
  most cost- effective
• Focus on high potential countries for irrigation
  Ethiopia, Sudan, all Sahel, South Africa,
  Malawi, Botswana, Zimbabwe,

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NetherlandsVietnamJapanUnited Kingdom
ChinaFranceBrazilUnited Status
IndiaMéxicoSouth AfricaCubaBeninMalawiEthio
piaMalíBurkina FasoNigeriaTanzania
Mozambique GuineaGhanaUganda
Consumption of fertilizer nutrients per hectare
of arable land is very low in Africa (2002)
Kg/ha
600
100
200
300
400
500
0
Source FAOSTAT, July 2005
30
Part of the solution will be to build Smallholder
Input Retailer Systems

• Business development assistance
• Multiple products services
• Commercial credit lines
• Technical advisory services
• Contract service provider

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Making Markets Work for Smallholders
Storage
Inputs
Marketing
Processing
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Public-Private Partnerships
Example Smallholder Seed Sector
Foundation Seed Production
Farmer Seed Production
Germplasm Development IP
Distribution
Mainly Public Sector R D
Private enterprise, with IP licensing
Mixed NGOs, farmers assn., private growers
Private dealers, NGOs, farmers assn., private
growers
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Solving Infrastructure Problem
Kilometers of paved roads per million people in
selected countries
Km KmUSA 20,987 Guinea 637France
12,673 Ghana 494Japan 9,102 Nigeria 230Zimbabwe
1,586 Mozambique 141South Africa 1,402 Tanzania 1
14Brazil 1,064 Uganda 94India 1,004 Ethiopia 66
China 803 Congo, DR 59 Source
Encyclopedia Britannica, 2002
34
Beginnings of success in Africa?

• Examples of good recent projects include
• Irrigation rehabilitation and Water User
  Associations in Mali and Nigeria
• Natural disaster mitigation in Southern Africa
  (maybe)
• Bringing the private sector to agriculture
  services in Senegal
• Rural financial services in Ghana and Tanzania
• Community participation in agriculture service
  management in Kenya, Ethiopia, and Tanzania
• Commodity risk mitigation in Tanzania using
  insurance instruments, and in Malawi using hedge
  instrument
• New Fisheries Investments in Guinea Bissau,
  Senegal
• Rockefeller Foundation use of retail outlets to
  sell inputs
• Agriculture policy reform in Uganda and Mali

35
Controversy 2 Reforming Development Assistance
to Agriculture and Rural Development

• Increase coordinated donor support for African
  investment in RD, land reform, irrigation, food
  security, soil improvement, infrastructure,
  non-farm rural enterprise, high value
  agriculture.
• Donors to support community driven development,
  private sector and other non-government efforts,
  not just government programs
• Donors to help countries reduce vulnerability to
  shocks safety nets, including by improving food
  aid delivery mechanisms, introduction of market
  based approaches
• Help with market reforms, while advocating tariff
  and subsidy reform in own (industrial) country
• Donor support to be sustained for longer periods
• More vigorous support for Global Donor platform
  and expanded country pilots?

36
Controversy regarding food insecurity and food
self-sufficiency

• Food Aid as solution for malnutrition and hunger
• Pro if food availability is insufficient (e.g.
  humanitarian emergencies), donors should send
  food to save lives food is human right
• Con Food aid is a disincentive to invest in
  agriculture and reduces farmers income in the
  recipient country and food aid disrupts
  marketing channels (prevents market development)
• School Food Programs
• Con earlier intervention from pregnancy to the
  1st two years of life is more effective in
  dealing with under-nutrition in children. School
  feeding is too late.
• Pro easiest and fastest way to get food to
  children
• Agricultural biotechnology - GMOs
• Pro (1) food nutritional benefits, (2)
  increased production, (3) reduced post-harvest
  losses, (4) health benefits (China Bt cotton)
  (The Bank generally supports this position)
• Con (1) environmental risks and expensive, (2)
  innovation has most benefited large farmers,
  (3) lack of capacity to regulate in many
  developing countries

37
Controversy on Trade and Subsidy reform

• Developing countries agricultural exports to
  rich countries have stagnated, as has
  agricultural trade between developing countries
• TRADE FLOWS

38
Largely because Agricultural Tariffs Remain Much
Higher Than Manufacturing tariffs in virtually
all countries
39
The Trade solution?

• All research agrees on the need for industrial
  countries to remove agricultural trade protection
  and agricultural subsidies to stimulate
  developing country agri. trade
• But industrial countries have not done it. What
  needs to be done to get this industrial country
  policy change?
• Should developing countries also reduce
  agricultural trade protection and agricultural
  subsidies, despite industrial country resistance?
  
• Pro this would reduce food prices to consumers
  and stimulate agricultural trade between
  developing countries thereby stimulating agric.
  Growth (the Banks position)
• Con this would invite dumping of agricultural
  products by industrial countries (many
  developing countries hold this view)

40
Land Tenure Controversy

• Issue land quality and size are typically highly
  unequal in distribution. Are land re-distribution
  programs the answer (recent programs in South
  Africa, Zimbabwe, Eastern Europe and past
  programs in Latin America)?
• One view re-distribution of land will help poor
  farmers. Otherwise marginal farmers will stay
  marginal, poor and hungry
• Another view Governments land distribution
  programs are usually political and dont succeed.
  Best is to invest directly in small farms and
  encourage investment in rural non farm enterprise
  to create employment
• The Bank has found that market based approaches,
  land registration and tenure security systems
  work well. WB has 1 billion portfolio
  (Salvador, Honduras, ECA, East Asia)

41
Controversy Does government intervention in
agriculture markets actually make sense based on
failure of private sector to invest in mktg and
agro-business?

• Pro Governments are the main instruments of
  change in conservative societies. Governments
  investments in agricultural research, extension,
  education, credit and infrastructure are vital
  for development in rural areas leading to
  income growth and nutrition improvement.
• Private sector does not risk investing
  significantly in developing country mktg and
  input supply
• Con Governments botch it. Leave it to the
  market, or to public-private partnerships.
  Agriculture increasingly demand driven by
  consumer through supermarket or other market.
  Government supply driven marketing and processing
  increasingly un-responsive. Governments to
  enable market development, and invest in
  complementary infrastructure, regulation, safety
  standards, R D.

42
Controversy Water Consumption projected to
Increase during 1995 to 2025. Will it be
resolved through investment, or conservation, or
better management, or all three? And what impact
climate change?
43
Per capita water availability is a problem, to
be exacerbated by climate change
16
Africa
14
12
10
Thousand m3
World
8
Asia
6
4
2
MEast NAfrica
0
1960
1990
2025
44
Climate/rainfall Variability Economic Growth

• Risk of recurrent drought

Natural legacy extreme climate variability
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Irrigation can lift rural poor out of poverty
Average income levels irrigation intensity in
India
Income per capita
48
Nile Basin Initiative

• 10 countries Burundi, D.R. Congo, Egypt,
  (Eritrea), Ethiopia, Kenya, Rwanda, Sudan,
  Tanzania, Uganda
• 300 m people (600m 2025)
• Extreme
• poverty 4 of 10 poorest
• climate variability and climate change impact
• landscape vulnerability
• Very limited infrastructure.

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Eastern Nile 170 million conflict historical
tension nothing flows
Eastern Nile peace, trade, joint investment, ?
prosperity
50
Tropical forests disappearing rapidly despite
donor investment, NGO advocacy, regulatory
reform. How to stop this?

• Huge expansion of World Bank activity in Forests
• Renewed IFC commitment From 45 million in FY01
  to 300 million in FY05
• Strong donor partnerships and have been formed
• PROFOR financed 22 forest activities in FY04
• WWF-WB alliance 90 forest activities with targets
  for protected areas being met
• Targets for sustainable logging likely to be met
• Bank engagement in Congo Basin, Brazil, Russia,
  India, China, Honduras, and forest lending
  increasing ( 319 m in FY05 and 06) .
  Increasingly using community owned and managed
  forests, in partnership with forest service and
  logging industry
• But controversy remains NGOs find too much
  logging, illegal harvesting, agricultural
  encroachment
• Issue are we on the right track, but need much
  more funding and commitment for forest projects
  and programs to have impact?
• Or is there a fundamental flaw in the approach?
  Are the NGOs correct that banning logging in much
  wider areas and banning agricultural incursion is
  likely to have bigger impact?
• New Concept of Avoided Deforestation (with the
  Nature Conservancy using carbon offset funding)

51
What to do about rural finance given the
failure of agriculture credit loans through state
owned banks

• Financial cooperative / credit union system
  developed.
• Kyrgyzstan, Moldova, Georgia, Azerbaijan, Albania
• Specialized rural finance institution founded
• Kyrgyzstan, Lithuania, Mauritania
• Linking commercial banks to village level
  financial associations
• Moldova
• Leasing
• Kazakhstan, Uzbekistan, Romania, Pakistan,
  Uganda, Madagascar
• Restructuring of State-Owned Agricultural Banks
• Mongolia, Tanzania, Latvia
• Product Offerings
• Develop loan products appropriate for specific
  purposes (short-term, group loans, longer-term
  flexible agricultural loans)
• Simple and easily accessible savings products
• insurance products
• Creating Effective Demand
• Matching grants for asset creation
• Offer of savings facilities to create equity
• Support all along the supply chain

52
The livestock Revolution is underway with
increasing consumption of livestock products, and
consequent problems

• Spatial concentration of livestock around urban
  areas has led to
• Large areas with Nitrogen and Phosphate
  overloads, causing water and air pollution
• Closer contact between men and livestock causing
  emergence of new diseases (Avian Flu)
• Large population of highly vulnerable livestock
  (Foot and Mouth Disease)
• Exacerbated by weak enforcement of environmental
  and health regulations, and non-vaccination
• Proposed actions
• At global level
• Increase awareness of environmental and public
  health issues, stressing global public good
  element, and interest of developed countries in
  protecting their own livestock from diseases
  spilling over from developing countries
• Strengthen international disease alert systems
  and explore alternative disease control systems
• At national level
• Develop planning, regulatory and incentive
  systems, which bring livestock production more in
  line with absorptive capacity of surrounding
  eco-systems
• Strengthen veterinary services, emergency
  preparedness

53
Land degradation continues despite donor and
government investment

• Land degradation problem is severe and growing
  with negative impacts on productive lands and
  ecosystem services.
• Climate change is likely to severely reduce land
  and water productivity in many countries
  (especially Africa) and result in further land
  degradation.
• Significant practice gap and huge scope to
  apply existing best practice to address land
  management problems in all regions.
• Lack of land ownership, poor access to knowledge
  and lack of appropriate incentives are major
  factors constraining best practice uptake.
• Make rehabilitation of degraded lands a poverty
  reduction priority and introduce land rehab
  projects
• Develop and implement innovative knowledge (best
  practice) dissemination mechanisms for land users
  and policy makers.
• Develop and implement incentives for good land
  management such as payments for ecosystem
  services (e.g. carbon sequestration, biodiversity
  conservation) to facilitate uptake of best
  practices and to promote synergies with
  adaptation to climate change, biodiversity
  conservation, and watershed resilience to
  environmental and economic shocks
• Introduce land administration projects more widely

54
SUMMARY of Corporate Priorities in the three
sectors

• Promote market driven development
• Trade Liberalization and agricultural subsidy
  reduction
• Introduce an enabling agriculture policy and
  regulatory environment (including standards
  setting) for private invest
• Targeted support for private sector and market
  development through entire market chain, up to
  supermarkets build demand side
• Work more effectively with IFC agro-business and
  forest teams as well as the private sector and
  other donors
• Empower rural people, including farmers
• Land security and redistribution (community based
  land reform, land registration and titling)
• Decentralized and accountable public services
  (ICT, regulatory)
• Capacity building for local groups and farmer
  organizations (WUAs, herders associations, trade
  associations)
• Reducing risk and vulnerability for farmers and
  the supply chain broadly
• Nutrition and household food security
• Rural finance
• Invest in activities which create off-farm rural
  work (agro industry, agricultural services, rural
  infrastructure

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Priorities continued

• Develop water resource management strategies at
  country, basin, and project levels. Expand new
  style irrigation and drainage, and rural water
  investments including efficiency of water use,
  env. and social concerns, private investment in
  water
• Invest in infrastructure, education, rural
  energy, and health through public-private
  partnerships
• Support international agriculture research
  through CGIAR and other partners, and in
  partnership with NARs. Pluralism, competition,
  contracting, demand driven
• Sustainable management (and recovery) of land
  resources
• Forestry Continue protected area targets,
  expand forest certification, pursue good logging
  practices, incorporate forest concerns in
  development policy lending, and pursue forest law
  enforcement expand IFC involvement
• Implement the new fisheries strategy
  (conservation of ocean fisheries and coastal
  marines, support small scale local fisheries,
  develop aqua-culture

56
World Bank Corporate Challenges in Agriculture
and Rural Development

• Further progress needed in getting agriculture,
  rural development, forests onto the bigger donor
  agenda (PRSPs, CASs, PRSCs, lending program),
  particularly in Africa
• Balancing multi-sector and development policy
  lending which includes RD with sector
  investment
• Use wider variety of instruments (grants, trust
  funds, other donors, NGOs, Global Programs,
  private sector)
• Scale up better (we drop good projects at project
  completion)
• Can we deliver an expanded lending agenda with
  stagnating staff levels in the agriculture and
  rural development family, and in partner
  organizations?
• Agriculture, RD, forests and water could be a
  pilot for improved business planning for global
  programs. Can we operate like a Bank-wide
  product group, or will we continue to be
  fragmented into separate mini regional and anchor
  ARD groups?