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Why Do IFIs Invest in Cotton?

The Role of International Financial Institutions in the Production and Marketing of Cotton in Central Asia The Cotton Sector in Central Asia: Economic Policy and Development Challenges 3-4 November 2005, London. Why Do IFIs Invest in Cotton?. Economic Development: prominence within the economy

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Why Do IFIs Invest in Cotton?

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  1. The Role of International Financial Institutions in the Production and Marketing of Cotton in Central AsiaThe Cotton Sector in Central Asia: Economic Policy and Development Challenges3-4 November 2005, London

  2. Why Do IFIs Invest in Cotton? • Economic Development: prominence within the economy • Environmental Amelioration and Social and Human Development: widespread environmental and social maladies associated with irrigated cotton cultivation • Poverty Reduction: potential for more significant improvement in rural incomes accrued from efficient, sustainable cotton production than from the cultivation other field crops

  3. Caveats • Heuristic paper intended to encourage discussion at a conference. •  Conclusions concern only IFI projects concerning cotton in Central Asia; not a comprehensive analysis of IFI strategy and projects

  4. Policy Objectives • Stabilize • Privatize, liberalize, and marketize • Decentralize • Ameliorate • Alleviate

  5. Investments • Remove subsidies, distortions, and excessive transfers • Reform land rights • Restructure production cooperatives into private farms • Eliminate production quotas/goszakaz • Introduce alternative input supply • Introduce integrated pest management • Liberalize input and farmgate prices • Establish farmgate linkage with world markets • Improve classing of cotton • Privatize and refurbish cotton ginneries

  6. Investments (cont.) • Reform and create banks and credit • Encourage collateralization • Improve water management practices • Rehabilitate water management infrastructure • Facilitate Irrigation Management Transfer (WUAs) • Reform agricultural institutions • Make research and extension responsive to user needs

  7. Integration into National Development Strategies • Poverty Reduction Strategy Paper process involving IMF and WB: expression of will of Government and IFIs; prominent concerns with cotton and outline of projects as part of strategy •  National development strategies: more limited scope of reform; state discretion greater; more attention to “hardware” and less to “software”

  8. Design • Loan: portfolio, size, conditionalities, cost recovery • Components: “hardware” and “software” • Implementation arrangements • Post-project sustainability and replication

  9. Execution • Management from headquarters: ADB centralized; WB more autonomous Task Team Leader •  Project Implementation Unit: experience; relationship with Government; post-project roles of staff •  International consultants: “world experience;” area knowledge and interaction with local staff and Government •  External factors: local and central governments, world market, macroeconomic factors •  “Harmonization”

  10. Outcomes • Most still ongoing • Agriculture projects have long-term outcomes: in-project M&E or Implementation Completion Report results not a good measure of success/failure • Mixed results: examples of Cotton Sub-Sector Project, RESP, Ak Altin

  11. Recommendations • Integration into National Development Strategies • Design • Execution • Measurement of Results

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