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  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 WDI, 2002

  4. High Payoffs to agriculture R&D; but also to other interventions: investment works.Number of Persons Removed from Poverty for a Given Public Investment in Agriculture versus other Sectors IFPRI studies by Fan et al

  5. Poverty is reduced in Indiaas crop yields increase (investment in R&D works) Datt and Ravallion, 1998

  6. Changes in Household Incomes in Southern India, 1973-84 (the poorest benefit from farm income expansion) Hazell and Ramasamy, 1991

  7. Another way of looking at this: the poverty effect of a 1 % pro-ductivity Gain in Agriculture, Industry, and Services in India Thirtle, et. al., 2002

  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 FAOSTAT, 2002

  10. An opportunity being missed? Agribusiness Sector is also Large in Developing Economies and can pull agriculture Holt and Pryor, 1999

  11. Taking an Integrated Approach to Value Chain Management;And the growing importance of private sector investment and innovation Agricultural productionFood industryConsumption Input industry Consumers Producers Food retail industry Food process industry Research Ext. service

  12. Decline in Commodity Prices; 1979-1999 …… FAOSTAT, 2002 FAOSTAT2002 / GEM2005

  13. …… But recent increases may spell change; 2000-2005 FAOSTAT, 2002 GEM, 2005

  14. To confront the challenges and address the opportunities, what has the Bank done lately? • The Bank’s 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. Agricultural Lending Commitments ($million) But is now increasing

  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 Bank’s 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)

  25. 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 115 155 8% East Asia Pastorists/Fishers Rest of Asia

  26. Can the Asian Green Revolution be duplicated in Africa? NutrientCerealWheat Rice IrrigationUse Tractors Productionmillion 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 author’s 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

  28. 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,

  29. NetherlandsVietnamJapanUnited Kingdom ChinaFranceBrazilUnited Status IndiaMéxicoSouth AfricaCubaBeninMalawiEthiopiaMalíBurkina 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

  31. Making Markets Work for Smallholders Storage Inputs Marketing Processing

  32. 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

  33. 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 114Brazil 1,064 Uganda 94India 1,004 Ethiopia 66China 803 Congo, DR 59Source: 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 R&D, 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 Bank’s 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: Government’s land distribution programs are usually political and don’t 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. Government’s 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? World Water and Food to 2025, 2002

  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. Kenya: variability & shock Climate/rainfall Variability & Economic Growth Risk of recurrent drought Natural legacy: extreme climate variability

  45. Economy-wide impacts Rainfall & GDP growth: Zimbabwe 1978-1993 Rainfall & GDP growth: Ethiopia 1982-2000

  46. Water storage in m3/cap 7,000 6,150 Water storage and the poverty trap 6,000 4,729 5,000 4,000 3,255 2,486 3,000 2,000 1,406 1,287 746 1,000 43 0 Laos Africa Brazil South China Ethiopia North Thailand America Australia • Stable pop. & GDP, raising Ethiopia’s storage to South Africa (12% of USA) ~ 6 X GDP • Or 5% of GDP for over 100 yrs

  47. Average income levels & irrigation intensity in India Irrigation can lift rural poor out of poverty 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….

  49. An Emerging Deal on the Nile… Egypt: water security; hydro/gas substitution, flood/ drought/ sediment mitigation Sudan: major flood/ drought/ sediment mitigation, irrigation, power, navigation… Ethiopia: major hydropower generation, watershed management, irrigation, storage, FDI… 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)