REACHINGTHE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT REACHINGTHE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT THE WORLD BANK © 2003 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 06 05 04 03 The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. ISBN 0-8213-5459-0 Library of Congress cataloging-in-publication data has been applied for. CONTENTS Foreword v Acknowledgments vii Acronyms and Definitions ix Executive Summary xiii Introduction 1 1. Development Context:Why A Strategy Update Is Necessary 5 2. Framework For a Renewed Rural Development Strategy 15 3. Fostering an Enabling Environment for Broad-Based and Sustainable Rural Growth 23 4. Enhancing Agricultural Productivity and Competitiveness 39 5. Fostering Non-Farm Economic Growth 57 6. Improving Social Well-Being, Managing Risk, and Reducing Vulnerability 61 7. Enhancing Sustainable Management of Natural Resources 69 8. Implementing the Strategy: Key Thrusts and Challenges 75 Bibliography 89 Annex 1: Lessons in Implementing From Vision to Action for Reaching the Rural Poor 96 Annex 2: Consultations in Strategy Preparation 98 iii Annex 3: Regional Strategy Summaries 99 Annex 4: Water 141 Annex 5: Physical and Social Infrastructure 150 Annex 6: Natural Resources 158 Annex 7: Successful World Bank Operations in Agriculture and Rural Development 166 FOREWORD v oday three out of every four of the world's poor live in rural areas.There will be T no success in the war on poverty unless we take the fight to where those people live. Yet, over the last decade lending to rural development, and especially to agriculture, has been in unprecedented decline ­ both at the World Bank and among our development partners. This situation cannot continue. We must renew our focus on agriculture and rural development.The new rural development strategy presented in this document outlines our `battle-plan' for such a renewed focus, and our commitment to reverse the downward trend in rural lending. The core of our new rural development strategy consists of a commitment to: a) focus on those that are the most disadvantaged ­ the rural poor; b) address rural areas in their entirety and promote broad-based rural growth and service provision both on- and off-farm; c) forge alliances with all stakeholders ­ with the rural poor, with governments, civil society, academics, international organizations and leaders, and with the business com- munity; and d) refine our approach to respond to changes in the ever-evolving global arena that have a direct impact upon our clients ­ including changes in trade policies, climate, agricultural science, and technology. TheWorld Bank's new strategy draws upon the lessons of our past experience and on FromVision to Action, our previous strategy published in 1997. Preparation for the new strategy began with the very people we hope to reach ­ the rural poor.We developed regional action plans and engaged in extensive dialogue with our clients, civil society organizations, the business community, academics, other international agencies and pol- icy leaders. We identified much that has changed in the global arena as a result of the ongoing process of globalization. What we have learned from our development partners in this process has been distilled into this strategy.We are pleased that during the development of this strategy we have witnessed the beginnings of a new commitment to rural and agricultural development in the international community as a whole.This revitalized commitment was amplified when more than 100 world leaders met at the World Summit for Sustainable Development in September 2002 and pledged to make rural development a priority.We share in this commitment. In addition to highlighting the need for our client countries to continue their reform agendas and give greater emphasis to rural development, we also recognize the need for policy change within the developed world. The livelihood of most rural inhabitants in our client countries is connected to agriculture, directly through farming, or indirectly through activities such agro-processing, marketing, and providing services or inputs.Thus, increasing agricultural productivity in those countries is critical to achieving rural economic growth and pover- ty reduction. Protection of the agricultural sector in OECD countries creates significant barriers to agricul- tural exports from our client countries, and hampers their ability to grow their way out of poverty through increased agricultural production. We recognize that success in rural development will require agreement among, and active support by, gov- ernments, civil society, and the private sector in both developed and developing countries. We must work together.We will assist our clients to develop their own national rural development strategies.These will be built from the ground up, enabling the rural poor to identify their own priorities and action plans.These strate- vi gies will provide critical input to the articulation of the country's poverty reduction strategy, and inform the broader policy dialogue between the Bank and our clients in terms of country assistance strategies. Among our development partners, the Bank will promote a Global Forum for Rural Development to ensure renewed attention to agriculture and rural development.The forum will serve as a focal point for action and advo- cacy,for analytical and policy work,for coordination,and co-financing.The goal will be to keep agriculture and rural development at the heart of the development agenda until we have won the war against rural poverty. James D.Wolfensohn President The World Bank REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ACKNOWLEDGMENTS Preparation of Reaching the Rural Poor was Regional Teams which organized the strategy overseen by the Rural Sector Board of the update process at the regional level and pre- World Bank, chaired by Robert L. Thompson, pared the regional strategies and action plans followed by Kevin M. Cleaver, Directors of included: Karen Brooks, Ernst Lutz (AFR); Laura Agriculture and Rural Development Department Tuck, Marjorie-Anne Bromhead (ECA); Malcolm (ARD). Messrs. Thompson and Cleaver, together Bale, Angela Chen (EAP); Mark Cackler, Luis with Ms. Sushma Ganguly (ARD Sector Coirolo, Isabelle Tsakok, Adolfo Brizzi (LCR); Manager) provided guidance throughout the Petros Aklilu, M. Salah Darghouth, Douglas W. preparation process. All members of the Lister (MNA); and Ridwan Ali, Dina Umali- Agriculture and Rural Development Sector Deininger, Jeeva Perumalpillai, Manish Bapna Board actively contributed: Joseph Baah- (SAR). Dwomoh (Africa Region), Mark D. Wilson (East Asia and Pacific Region), Laura Tuck (Europe and Technical coordination of the rural strategy Central Asia Region), Mark E. Cackler (Latin update process was undertaken by a Steering America and Caribbean Region), Petros Aklilu Committee composed of the ARD Core Team (Middle East and North Africa Region), members as well as the members of the Ridwan Ali (South Asia Region), Jean-Paul RegionalTeams listed above.Additional members Pinard, (International Finance Corporation), of the Steering Committee include: Odin Francisco J. Reifschneider (Consultative Group Knudsen (ESSDVP); John Heath (OED); Lynn on International Agricultural Research), Gershon Brown, Christin Cogley, Fernando Gonzales, Feder (Development Economics), Ridley Nelson Jason Jacques Paiement, Roland Schurmann (Operations Evaluation Department), Michele E. (ARD); and Philippe Dongier (SD). de Nevers (World Bank Institute). General guidance was provided by the ESSD Csaba Csaki (ARD) managed the Bank-wide Council, chaired by ESSD Vice President Ian rural strategy update process and the prepara- Johnson, and included: Richard Ackerman (SAR); tion of Reaching the Rural Poor. He is the prin- Hans Binswanger, Roger Sullivan (AFR); Kevin cipal author of this document, with significant Cleaver, Jane Holt (ECA); Zafer Ecevit (EAP); input from Cornelis de Haan (ARD). The Core Doris Koehn, Salah Dargouth (MNA); John vii Strategy Drafting Group also included Jock Redwood, and Teresa Serra (LCR). Of the Anderson (ARD), Harold Alderman (ARD), Council members, Kevin Cleaver (prior to his Malcolm Bale (EAP), Shawki Barghouti (ARD), appointment as Director of ARD) and Hans Derek Byerlee (ARD), Gershon Feder (DEC), Binswanger provided direct input in the strategy Antonio Nucifora (ARD), Eija Pehu (ARD), formulation. Felicity Proctor (ARD), Mona Sur (ARD), Eugene Terry (ARD), Wallace Tyner (Purdue Internal and external peer reviewers provided University), Cornelis van der Meer (ARD), and valuable comments at several stages in the draft- Alan Zuschlag (ARD). Material for specific sec- ing process. They include: Alain de Janvry tions of the strategy document was received (University of California - Berkeley), Geoffrey from Sanjiva Cooke (ARD), Louise Cord Fox (Consultant), Stanley Johnson (Iowa State (PREMPO), Abdel-Dayem Safwat (ARD), Ariel University), Joachim von Braun (University of Dinar (ARD), Merlinda Ingco (ARD), Christina Bonn), Simon Maxwell (ODI), and Bruno Vindel Malmberg-Calvo (TUD), John Nash (ARD), (Ministre des Affaires Etrangers, France). Nwanze Okidegbe (ARD), Andrea Pape- Christiansen (ARD), Patrick Verissimo (WBI), Marisela Montoliu-Munoz, (OPCS); John Todd, Melissa Williams (ARD), and Jacob Yaron (ARD). (SRM); Ridley Nelson, John Heath (OED); Odin Knudsen, Rita Hilton (ESDVP); Steen Jorgensen focus of the regional strategies. Many other (SD); Jim Douglas (ARD); Magda Lovei (ENV); organizations and individuals outside the Bank Keith Oblitas (SAR); David Forbes-Watt, Andrew contributed to the organization of the regional McMillan, Maximiliano Cox (FAO), Manfred consultations, and provided constructive oral and Shultze (Free University of Berlin), Holger Kray written comments. Because of space constraints (Consultant), Derek Poate, Doug Smith (ITAD); all it is not possible to acknowledge all of them indi- provided thoughtful comments, advice, and input vidually, but their contributions were invaluable. to the strategy. A detailed portfolio analysis, and background stud- Editorial support in the drafting of this document ies on global and regional issues, were completed was coordinated by Alan Zuschlag with assistance to support the strategy update process. The titles from Wallace Tyner, Antonio Nucifora, Andrea of these studies and their authors are listed in the Pape-Christiansen, Andrew Goodland, and bibliography of this strategy. The FAO has under- Nadine Hasevoets-Tarwater. Administrative sup- taken a study to provide an agricultural focus to port for the strategy update was provided by Reaching the Rural Poor. The overall results are Christin Cogley and Joyce Sabaya. The graphic summarized in a joint FAO-World Bank book design, layout, and typesetting of this volume was Farming Systems and Poverty: Improving Farmers' done by Patricia Hord Graphik Design. Livelihoods in a Changing World by John Dixon, Aidan Gulliver, and David Gibbon. A series of consultations held in 2001-2002 in all six Bank regions provided an opportunity for The Bank would also like to thank the governments local organizations and individuals from national of the Netherlands (Bank Netherlands Partnership governments, the private sector, NGOs, and aca- Program), the United Kingdom (DFID), France, demia to contribute the revised corporate strat- Germany, and Greece for their financial support for egy, and ensured that the Bank, its clients, and fel- the preparation of the strategy and which made the low donor agencies were in agreement on the regional consultations possible. viii REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ACRONYMS AND DEFINITIONS AAA Analytical and Advisory Activities AfDB African Development Bank ADB Asian Development Bank AFR Africa Region AI Agricultural Irrigation AIDS Acquired Immunodeficiency Syndrome APL Adaptable Program Loans ARD Agriculture and Rural Development Department AusAID Australian Aid Agency BB Bank Budget BNPP Bank-Netherlands Partnership Program CAS Country Assistance Strategy CBO Community Based Organizations CEM Country Economic Memorandum CDD Community Driven Development CDF Comprehensive Development Framework CGA Country Gender Assessment CGIAR Consultative Group on International Agricultural Research CSO Civil Society Organization DEC Development Economics and Chief Economist DFID Department for International Development EAP East Asia and Pacific Region EBRD European Bank for Reconstruction and Development EC European Commission ECA Eastern Europe and Central Asia Region ESSD Environmentally and Socially Sustainable Development ESW Economic and Sector Work EU European Union FAO Food and Agriculture Organization ix FAO/CP Food and Agriculture Organization Cooperative Program (with the World Bank) FDI Foreign Direct Investment FPSI Finance and Private Sector Infrastructure FY Financial Year GDP Gross Domestic Product GEF Global Environment Facility GTZ Gesellschaft fuer Technische Zusammenarbeit (German Aid Agency) HACCP Hazard Analysis Critical Control Point HD Human Development HDI Human Development Index HIPC Highly Indebted Poor Countries HIV Human Immunodeficiency Virus IADB Inter-American Development Bank IBRD International Bank for Reconstruction and Development ICSID International Center for Settlement of Investment Disputes ICR Implementation Completion Report ICT Information and Communications Technology IDA International Development Agency IFAD International Fund for Agricultural Development IFC International Finance Corporation IFI International Financial Institution IFPRI International Food Policy Research Institute IITA International Institute for Tropical Agriculture IMF International Monetary Fund IPM Integrated Pest Management LIL Learning and Innovation Loans LCR Latin America and Caribbean Region MDG Millennium Development Goals MIGA Multilateral Investment Guarantee Agency MIS Management Information System MNA Middle East and North Africa Region NARS National Agricultural Research System NGO Non-Governmental Organization NRM Natural Resource Management ODA Overseas Development Assistance OECD Organization for Economic Cooperation and Development OED Operation Evaluation Department OP Operational Policy OPC Operations Policy and Country Services OPCS Operations Policy and Care Services PA Poverty Assessment PAD Project Appraisal Document PAL Programmatic Adjustment Lending PCD Project Concept Document PER Public Expenditure Review PPF Project Preparation Facility PREM Poverty Reduction and Economic Management PRSC Poverty Reduction Support Credit x PRSP Poverty Reduction Strategy Paper PTI Program of Targeted Interventions QAG Quality Assurance Group QER Quality Enhancement Review R&D Research and Development RFI Rural Financial Institution RNFE Rural Non-Farm Economy RPO Rural Producers' Organization S&T Science and Technology SAC Structural Adjustment Credit SAL Structural Adjustment Lending SAP Software Administration Program SAR South Asia Region SDP Strategic Direction Paper SDV Social Development Department SECAL Sectoral Adjustment Loan SFP Strategic Framework Paper REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT SIL Sector Investment Loan SME Small/Medium Sized Enterprise SPS Sanitary and Phytosanitary SSA Sub-Saharan Africa TF Trust Funds VtoA From Vision to Action VPU Vice-Presidential Unit UNAIDS Joint United Nations Programme on HIV/AIDS URAA Uruguay Round Agreement on Agriculture USAID United States Agency for International Development WBG World Bank Group WBI World Bank Institute WDR World Development Report WIRPI World Bank ­ IFAD Rural Partnership Initiative WTO World Trade Organization WUA Water Users' Association Throughout this report, except where otherwise noted, the term "agriculture" includes all agriculturally related Bank activities (including agricultural adjustment, agricultural research and extension, agricultural credit, agro-industry and marketing, community based rural development, livestock, fisheries and aquacul- ture, forestry, agency reform, and perennial and annual crops)."Rural development" includes agriculture plus all other investment activities in the rural space, including natural resource management, rural transport, water and sanitation, telecommunications, education, health and other social services."Rural space" refers to the geographic area, including small towns designated by each country as rural. xi ACRONYMS AND DEFINITIONS EXECUTIVE SUMMARY xiii M ore than a half century of persistent efforts by the World Bank and others have not altered the stubborn reality of rural poverty, and the gap between rich and poor is widening. Most of the world's poorest people still live in rural areas and this will continue for the foreseeable future. The day when the goals for international development will be met is still far off in many parts of the world. What is more, with globalization, the "poverty challenge is getting bigger and harder," according to World Bank President James D. Wolfensohn. "Many of the benefits of an increasingly interconnected and interdependent global economy have bypassed the least developed countries, while some of the risks--of financial instability, communicable disease, and environmental degradation--have extracted a great price." FROMVISIONTO PRACTICE:THE The World Bank ­ to apply the lessons learned CASE FOR A REVITALIZED STRATEGY in the past four to five years while implement- ing From Vision to Action. Work on Reaching the From Vision to Action, the Bank's previous rural Rural Poor began in mid 2000. Starting with the development strategy launched in 1997, had a deci- development of regional action plans and sive influence on global thinking--but disappointing extensive consultations at the regional level, the results on the ground. In 2001 lending for agricul- new strategy was designed to respond to the tural projects was the lowest in the World Bank's local circumstances and needs of the people history (box 1). who have the greatest stake in its implementa- tion (box 2). Regionally drafted strategies The new strategy is results oriented. Reaching became the framework for the new corporate the Rural Poor stresses practice, implementation, strategy.This process was followed by intensive monitoring, and empowerment of the people it dialogs with individuals and with international, is designed to help. The strategy responds to national, and local organizations. changes in: Reaching the Rural Poor also reflects and reinforces The global environment ­ changes brought the Bank's commitment to the UN Millennium about by the forces of globalization and persist- DevelopmentGoals (www.developmentgoals.org), ent trade distortions which will be met only through increases in rural incomes and broadened opportunities for rural Client countries ­ challenges of unfinished poli- inhabitants. The strategy assigns great weight to cy reforms, decentralization, institutional devel- developing, establishing, and supporting appropri- opment, poor governance, the expanding roles ate implementation and monitoring mechanisms of the private sector and civil society, and pro- and processes at the national, regional and inter- liferating national and regional conflicts national levels. 1 Recent Bank Operations THE KEY FEATURES OF REACHING in Rural Areas THE RURAL POOR Rural investment is under-represented in the World Bank's lend- Reaching the Rural Poor will revitalize World Bank activities in rural areas by adjusting the strategic xiv ing. The Bank's lending to rural areas in Fiscal Years 1999­2001 amounted to a total of US$15 billion (about $5 billion annual- framework and formulating a program of concrete ly). This represents around 25 percent of the Bank's total lend- and attainable actions.The strategy calls for raising ing and therefore is not congruent with the greater incidence of the profile of rural development efforts and poverty in rural areas. Figures from Fiscal Year 2002 (FY02) show extending Bank endeavors to reach the rural poor. that this situation has not changed. The situation is particularly The strategy: acute for agricultural lending, which has declined markedly over the past 20 years, both absolutely and as a proportion of total Focuses on the rural poor Bank lending. Of the US$5 billion lending to rural areas in FY02, Fosters broad-based economic growth total investment in the agriculture sector (including agro-industry Addresses rural areas comprehensively and markets) was US$1.5 billion. This equates to just 7.9 percent of total Bank lending, whereas in the early 1980s it accounted Forges alliances of all stakeholders for more than 30 percent. Addresses the impact of global developments on client countries a. The term "rural areas" as used throughout this publication includes small and medium sized towns, according to the national definitions. Investment in rural Focusing on the Rural Poor areas covers investments in all sectors (agriculture, natural resource manage- Who are the rural poor? Where do they live? ment, rural transport, water and sanitation, telecommunications, education, What challenges does poverty pose in their health, and other social services). respective localities? Answers to these questions REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT are the basis for an effective rural development 2 Reaching the Rural Poor: strategy.The rural poor include the landless, indi- The Consultative Process viduals and households with few assets, small- holders, pastoralists, rural women (especially More than 2,000 people (government officials, civil society, women-headed households); ethnic minorities, nongovernmental organizations, academics, private sector, and and indigenous populations. The rural poor are donor agencies) were involved in the consultations for the rural not a homogeneous group. Understanding the strategy. Consultations involved four major stages: needs of such different groups is central to the success of the Bank's new strategy. Consultations on the regional strategies and the initial framework of the corporate strategy. Eleven regional con- Fostering Broad-Based Economic Growth sultations were held in early 2001 (Nepal, Philippines, Reaching the Rural Poor makes broad-based eco- China, Lebanon, France, Kenya, Senegal, Russia, Panama, nomic growth its primary objective. Rural poverty Belgium, and Japan). is as diverse as are the rural poor in their livelihood Consultations and seminars focused on the corporate strat- strategies, but in most of the poorest developing egy and its implementation. In 2002 a series of consulta- countries agriculture is the main source of rural tions and seminars on implementation were held in coun- economic growth.That is why improved agricultur- tries including Vietnam, Nigeria, and Ethiopia and at region- al productivity and growth are central to the Bank's al development banks. strategy for reducing poverty.At the same time, the Presentations, seminars and panel discussions at major Bank recognizes the importance of nonfarm eco- international gatherings with broad-based stakeholder par- nomic activities in rural development, so their pro- ticipation. These venues included the International Food motion is another key feature. Policy Research Institute 2020 Conference in 2001, and in 2002, the Food and Agriculture Organization Council Addressing Rural Areas inTheir Entirety Meeting, the United Nations Conference on Financing for Development, the United Nations PrepComm for the World To reduce rural poverty, the Bank must work with Summit on Sustainable Development, the European clients to address rural areas in their entirety--all Sustainable Development Conference, the 35th World Farmer of rural society and every economic, social, and Congress, the World Food Summit--Five Years Later, and environmental aspect of rural development. Past the European Rural Development Forum. approaches identified most pieces of the puzzle but Rural strategy website and internet consultations on the final failed to put them together in a way that attained draft of the strategy. A website was created early in the strat- objectives. Sustainable rural development requires egy-development process with drafts and all relevant material multidisciplinary and pluralistic approaches to posted for comment. Numerous comments were received from xv poverty reduction, social and gender equity, local academics, civil society groups, donors, governments, non- economic development, natural resource manage- governmental organizations, and private individuals. ment, and good governance. The Bank is moving away from short-term, sector-by-sector approach- es and toward coherent cross-sectoral approaches for the sustained reduction of rural poverty. when crafting future development efforts.As devel- opment progresses, all countries undergo a transi- While the poor have much in common with each tion from a predominantly rural to a more heavily other wherever they live, rural areas are distinctly urban economy. Urban and rural areas are a con- different from urban ones. For this reason, the tinuum, but they are also internally heterogeneous. approaches in addressing the needs of the rural and the urban poor must be tailored specifically to Forging Alliances of All Stakeholders each group. However, the Bank's rural strategy rec- To broaden stakeholder participation in project and ognizes that urban and rural areas are inextricably program design and implementation, the Bank is linked in the process of development and that the working with clients to overcome the shortcomings strategy must take into account the diverse range of earlier top-down, non-inclusive approaches. The of interactions between urban and rural economies Bank will work with others (governments, develop- EXECUTIVE SUMMARY ment agencies, civil society, private sector, academia) and create losers as well as winners. Finding ways in a broad-based global coalition to make the reduc- to harness the growth opportunities while manag- tion of rural poverty a major thrust for the coming ing risks and compensating losers is a challenge for decade.Through enhanced partnerships and other policymakers everywhere. Reaching the Rural Poor linkages, the development community will increase reflects the World Bank's increased emphasis on advocacy for rural development and share experi- helping countries meet these challenges, addressing ences in best practices and innovation. global issues such as international trade policy, sub- sidization of agriculture, and global climate change. Addressing the Impact of Global Developments on Client Countries The process of globalization has brought about a THE STRATEGIC OBJECTIVES OF "shrinkage" of spatial distance and a lowering of REACHINGTHE RURAL POOR transaction costs that has resulted in growing inter- dependence of the world's economies, markets, The Bank's objectives in rural poverty reduction, and people. Globalization encompasses more open and for rural development in general, are geared to international trade in goods and financial services, helping clients accelerate economic growth so that growth of multinational companies, more uniform it is shared by the poor. The strategy therefore labor and environmental standards, and growing focuses on: global sourcing in supply chains.This expanded mar- ket in goods, services, and information provides Fostering an enabling environment for broad- new opportunities for rural development and based and sustainable rural growth poverty reduction. But globalization and economic Enhancing agricultural productivity and com- liberalization carry risks as well as opportunities petitiveness Figure 1: Potential Gains from Full MultilateralTrade Liberalization (percentage of income) Agriculture and Food Other Sectors 0 1 2 3 4 5 xvi Low- and Static middle-income countries Dynamic High- Static income countries Dynamic World Static Total Dynamic Note: Static gains refer to results holding productivity constant. Dynamic gains allow productivity to respond to sector-specific export-to-output ratios. Source:World Bank, 2001f. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Fostering nonfarm economic growth 3 Bulgaria:Agricultural Sector Improving social well-being, managing and miti- Adjustment Loans I and II gating risk, and reducing vulnerability Enhancing the sustainability of natural resource Bulgaria elected a new government in 1997 with a strong commit- management. ment to market reform. The government eliminated export bans and controls on profit margins on agriculture and food products, eliminat- Fostering an Enabling Environment for ed most import quotas and duties on cereals, and liberalized markets. Broad-Based and Sustainable Rural Growth The Bulgarian adjustment program had the full support of the elect- An appropriate macroeconomic policy environ- ed government and Parliament. ment and a supportive institutional framework are essential to growth and poverty reduction and for World Bank provided sector adjustment loans were designed to pro- the success of World Bank supported activities in mote efficiency in the agricultural sector, generate rural jobs, raise liv- the rural sector. ing standards, and enlarge consumer choice by: World-wide trade policy reform. Because so Promoting a land market, including restitution of 80 percent of many of the poor derive their livelihood directly the designated land area and enactment of several administrative or indirectly from agriculture, developing coun- measures to facilitate land transactions tries have a huge stake in the full integration of Developing a private grain market by privatizing the grain agriculture under multilateral trade rules. A marketing agency and limiting the state grain reserves to agreed major reason both for the limited growth of amounts agricultural trade and for the inability of devel- Privatizing state agricultural enterprises, including agreed numbers oping countries to enlarge their share of this of grain mills, seed, and food industries trade is high protection in the large markets of the industrial world. High subsidies and other Privatizing irrigation systems through decentralization by forms of trade protection impair developing transferring management of operation and maintenance to water countries' ability to compete in global markets user associations on at least 100,000 hectares with farmers from the industrial world.They also Improving agricultural financing according to agreed criteria encourage surpluses that have been sold on world markets, depressing world prices and Liberalizing trade in most agricultural products undermining the potential contribution of agri- Improving forest legislation and increasing community-based culture to global prosperity. participation in forest management. xvii The potential economic welfare benefits of global agricultural trade reform for the developing world are estimated at US$140 billion annually. For the The World Bank will continue to assist its clients in developing countries, the impact of agricultural improving their own trade policies using the system trade liberalization by the industrial countries alone of multilateral trade rules to expand their trade, amounted to more than 50 percent of the official thereby enhancing their development prospects. development assistance given to developing coun- The Bank's comparative advantage is that it can tries in 2001 (figure 1). These countries are the combine trade policy analyses with significant developing world's largest potential market for expertise for a comprehensive view of the ways agricultural products. Considering the potential for agricultural trade liberalization, globalization, and significant increases in income in developing coun- market integration can promote growth and rural tries from agricultural trade, it is crucial that the development.This capacity can be used to support industrial countries liberalize their agricultural mar- better agricultural and trade policies through: kets by removing trade barriers to open market access for developing countries' products and by Increased advocacy for trade liberalization in phasing out subsidies. both industrial and developing countries EXECUTIVE SUMMARY Mainstreaming agricultural trade liberalization Sound policy environment in developing countries. and trade-capacity development in the Bank's The developing countries, too, have work to do if country assistance and operations they want to gain long-run benefits from trade liber- Facilitating capacity building through technical alization.Their domestic policies must allow domestic assistance and training on trade-related issues producers to respond to changing domestic and for- Increased assistance in the area of standards and eign conditions. The World Bank will continue to sanitary and phytosanitary regulations assist its clients in their efforts to improve their own Conducting analytical work at both global and policy environment for rural development and there- country levels to identify key areas for future by enhance their development prospects (box 3). policy reform. The nature and degree of the reforms will be influ- enced by the extent of agricultural trade and subsidy reform in the industrial countries. The Bank's policy agenda will focus on: 4 Latvia: Agricultural Development Project and Rural Development Project Improving the macroeconomic framework for agricultural and rural growth by correcting Latvia's emerging private rural economy has received support remaining biases in the macroeconomic envi- from the Agricultural Development Project (ADP) and the Rural ronment Development Project (RDP). Espousing the principles of nondiscriminatory taxation and reform credibility in both theory No commercial banks in Latvia were interested in serving small and practice private farmers when ADP was launched in Fiscal Year (FY) 1994. Supporting an enabling policy environment for The Agricultural Finance Company (AFC) was set up with a squad agricultural trade and market access by reduc- of mobile credit officers who took financial services to the farm- ing trade barriers and anti-export bias in order ers instead of waiting for them to come to a site, often far to promote growth in agricultural trade, by away. The idea of "taking the bank to the clients" eased farm- ers' transportation problems. In four years, with only 42 staff widening access to foreign markets, by reducing members, AFC approved US$43 million for 2,860 subloans, with protection for nonagricultural goods, and by high repayment rates at around 93 percent. The loans were developing policies to minimize the effects of offered at market interest rates in the local currency, Lat, and declines in world commodity prices on farmers U.S. dollars. The AFC, now merged with a commercial bank in Introducing sound food and agricultural poli- Latvia, continues to serve the rural population. cies; supporting the development of effective markets for agricultural inputs, outputs, and xviii The RDP supports a wide variety of rural entrepreneurs. Approved services; removing obstacles to effective mar- in FY98, the project was directed at helping the government ket operations build its rural policymaking capacity in preparation for mem- Designing and targeting safety nets that direct- bership in the European Union. One of the RDP's innovations was ly protect the poor, particularly rural dwellers the "special credit line" with a government bonus of a match- Assisting in the establishment of complementa- ing grant for small farmers and rural entrepreneurs borrowing ry legal and regulatory frameworks that sup- for the first time. First-time borrowers received a small portion of the loan as a bonus after they had fully repaid their loan. port private enterprises Some 1,300 of these small loans have been made, each for a Improving the operation of land markets and maximum of US$4,000 equivalent. Most of these loans went to land administration, promoting land reform for rural, nonfarm entrepreneurs--tourist services, hairdressers, tai- countries with inequitable land distribution, and lors, doctors, and other service providers--and only 20 percent promoting equal access to secure land holding, to farmers. Repayment performance is outstanding at around 98 especially by women. percent. The RDP also successfully introduced participatory approaches to rural development by creating Local Action Good governance and institutions. Good gover- Groups. Two group leaders received a United Nations Award of nance and institutions are indispensable for sound Excellence for community-led development. rural development; poor governance inhibits devel- opment. Overcentralized institutional structures char- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT acteristic of many government administrative systems To ensure new and innovative approaches, the also sap the effectiveness of development invest- Bank will strengthen its support for the develop- ments and policies. That is why, based on empirical ment of financial products and institutions that fill evidence,the Bank has made institutional reform cen- the special needs of poor rural clients. This will tral to its new strategy. include financial instruments for income generation and reduction of financial risk and recognize the In the decentralization process, local governments multiplicity of potential delivery mechanisms, sup- must be given sufficient fiscal resources to discharge pliers, and users of rural financial services (box 4). their new responsibilities. Political decentralization is To this end, the Bank will: also necessary, as it promotes accountability and gov- ernance reforms at the local level. This is especially Continue to expand its menu of instruments in important for rural areas because most rural people rural finance and test them for effectiveness, have had a weak political voice at the national level. replicability, and sustainability Continue to support provision of credit to farm The Bank will encourage governments to concen- and rural nonfarm enterprises where market trate on: providing public goods; establishing legal, failures inhibit the flow of liquidity, while observ- administrative, and regulatory systems that correct ing sound market development approaches and for market failures; facilitating efficient operation of discipline in financial intermediation the private sector; and protecting the interests of Work to narrow gaps in knowledge about the the disadvantaged. Decentralization offers great relation between financial services and poverty. scope for improving delivery of public sector func- tions. Facilitating further decentralization in rural areas is an important part of the policy agenda 5 The Agricultural Growth ­ outlined in the strategy.To promote the develop- Poverty Reduction Connection ment of effective institutions for rural develop- ment, the Bank will support: A 1 percent increase in agricultural GDP per capita led to a 1.6 percent gain in the per capita incomes of the poor- Strengthening of local administrative capacity est one fifth of the population in 35 countries analyzed.a Transfer of responsibility for services to the administrative level closest to the users A 10 percent increase in crop yields led to a reduction of Enhanced accountability for public administra- between 6 percent and 10 percent in the number of peo- ple living on less than US$1 a day.b In Africa, a 10 per- tion at every level cent increase in yields resulted in a 9 percent decrease in xix Participatory approaches, including increased the same income group. political space and participation in decision- making bodies for women Wheat prices would have risen 34 percent, and rice prices Economies of scale in government functions 41 percent, more between 1970 and 1995 in the absence Appropriate private sector involvement in the of international agricultural research. delivery of public services, with public The average real income of small farmers in southern India accountability. rose by 90 percent and that of landless laborers by 125 percent in 1973­1984, as a result of the "Green Rural financial services. To achieve broad-based Revolution."c economic growth and reduce vulnerability, people and enterprises in rural areas need access to Sources: a. C.P. Timmer, 1997. How Well Do the Poor Connect to the Growth financial services. Many developing countries have Process, Consulting Assistance on Economic Reform Discussion Paper 178 (Cambridge, Mass.: Harvard Institute for International Development); b. Irz , L. Lin, no formal financial institutions to provide services. C. Thirtle, and S. Wiggins, "Agricultural Productivity Growth and Poverty Supply-driven agricultural credit has proven Alleviation," Development Policy Review 19(4): (2001); c. P. Hazell and C. unsustainable and unsuccessful and is no longer Ramasamy, 1991. The Green Revolution Reconsidered: The Impact of High-Yielding supported by the Bank, although many countries Rice Varieties in South India (Baltimore, Md.: Johns Hopkins University Press). still use it. EXECUTIVE SUMMARY Enhancing Agricultural Productivity Increasing the productivity of water use and Competitiveness Supporting agricultural diversification, especially With so many poor rural residents and changes in into high-value products the agricultural sector--compounded by the dete- Strengthening farmer-to-market linkages riorating natural resource base--agriculture has Enhancing food safety and addressing competi- never been more important than it is today in tiveness through quality control and supply achieving Bank goals. International experience has chain management demonstrated the direct relation between agricul- Applying differentiated strategies to fit various tural growth and rural poverty reduction (box 5). farm types Agricultural development also induces economic Supporting the development of physical and growth in other rural sectors by generating services infrastructure. demand for inputs and providing materials for pro- cessing and marketing industries. Future Bank activ- A Refocused Agenda for Agriculture ities will therefore focus on: The new agenda set by this strategy expands and refocuses the Bank's existing support program for Providing an enabling policy and institutional agriculture with a number of important new fea- environment to foster agricultural growth tures.These include shifting the emphasis from: Supporting sustainable intensification of pro- duction through the use of new technologies a narrow agricultural focus to a broader policy Enhancing the quality of food produced context--including global factors; Encouraging, partly through demand-driven a focus on crop and livestock yields to market extension services, more efficient use of farm demands and incomes; inputs and reduction of post-harvest losses staples to high value crops; primary production to the entire food chain; 6 Underlying Factors of Success in a single farm type approach to heterogeneity; Agricultural Development public to public-private partnerships, including community driven development; Policies must neither discriminate against agriculture nor give it avoidance of issues to a head on approach special privileges. This means, for example, that agriculture (biotechnology, forestry, water). should be taxed lightly, using the same progressivity and instru- ments as for other sectors. Policy and institutions. Reaching the Rural Poor treats agriculture as the leading productive sector xx The economy should be open, employment-sensitive, and oriented toward smallholders. within the rural economy and closely linked to non- farm activities.The strategy recognizes that the pro- The importance of external markets, including specialty and duction of staple foods is the main source of niche markets, should be fully recognized and exploited. income for many poor rural households, but that-- Foreign direct investment should be recognized as an integral to get out of the poverty trap--they must diversify part of the agricultural development process. into livestock, higher value crops, and nonfarm activ- Land reform is essential where land is very unequally distrib- ities.The Bank's experience has shown that agricul- uted. tural investments are more effective if set within Rapid technological progress is needed, and both the private and appropriate policy and institutional environments public sectors have important roles in research, extension, and with adequate infrastructure and market develop- financing. ment. In their design, future Bank­supported activi- Rural areas need substantial investment in education, health, and ties in agriculture will incorporate successful aspects infrastructure, such as roads. of the lessons learned (box 6). The needs of women--a neglected group of farmers and farm laborers--must be built into programs. Agricultural science and new technology. Beyond providing an enabling policy and institu- tional environment, Bank support for agriculture REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT will stress sustainable intensification through the rehabilitation of existing irrigation systems, and application of science. Since most high potential participation by farmers and other private agricultural areas have reached the limits of their investors in management. exploitable land and water resources, much of their future growth in productivity depends on inputs of Market expansion and diversification. Markets knowledge. Public and private investments in sci- are now the driver for agricultural growth. Food ence and technology will receive continued Bank retailers and processors today source from around support.The Bank will also invite global policy dia- the world. Consumer demands and market and log to ensure fair access to new technologies and trade liberalization are opening new niches and will continue to provide leadership and financing to specialized markets for agricultural produce, offer- the system operated by the Consultative Group on ing farmers an opportunity to diversify into high- International Agricultural Research (CGIAR), a value, high-quality items such as fresh fruit and veg- major provider of international public goods in agri- etables, fish, and flowers. Therefore, the Bank will culture. The Bank remains committed to helping focus on strengthening farmers' connections to developing countries assess, explore, and safely use markets through supply-chain management struc- biotechnology and other new technologies and to tures, improving product quality, establishing promote environmentally sustainable pest manage- appropriate post-harvest systems, and assisting ment systems (box 7). clients in refining methods of product certification and improving food safety. Agricultural extension services. To bring new technology to farmers, agricultural extension servic- Farm-type tailored strategies. Better technology, es are crucial and can also play an important role in access to inputs, and product markets improve delivering information on rural development, busi- poor farmers' income-earning capacity. But they do ness development, and marketing. In the poorest it in different ways, depending on farm types, pro- countries, government will have a role in financing duction systems, and market opportunities. Future extension. Elsewhere, the private sector, nongovern- mental organizations, and universities can compete to provide extension services subject to periodic 7 Mali: IPM Special Initiative-Capacity review by local institutions. Building and Policy Reform Water productivity. Water is becoming a scarce Cotton is a basic higher value crop and a main source of and precious commodity, and agriculture is a major export revenues for Mali. About 90 percent of Mali's pesticide xxi user. Getting "more crop per drop" is therefore imports are used on cotton. In the 1990s, due to pesticide essential. Future investment priorities for agricul- resistance and inappropriate use, pesticide costs crept up tural water use will concentrate on making existing steadily while yields stayed flat or declined. Evidence of occu- pational health problems and pesticide residues in food systems more productive, because irrigation man- mounted. Based on a comprehensive status report produced by agement is often poor and the potential for con- a local research institution and a stakeholder policy workshop, structing new irrigation systems is limited.This will an Integrated Pest Management (IPM) Special Initiative was require: ensuring the integrity of infrastructure, for developed. The Initiative takes a problem-focused view, cutting example, repairing leaks in irrigation canals; across project components. addressing adverse environmental impacts; provid- ing demand-driven irrigation to improve the liveli- Policy reform elements include expanding participatory farmer hoods of poor producers; and improving manage- training for IPM, strengthening regulatory controls, building ment and cost-effectiveness. Irrigation and capacity for monitoring environmental and human health drainage development and improvements will be impacts, and adjusting fiscal and economic incentives (eliminat- viewed in the context of integrated watershed and ing hidden subsidies for cotton and food crop pesticides, pro- viding sustainable funding for regulatory and training activities catchment systems. Bank­supported investments by eliminating import duty exemptions for pesticides). in irrigation will be on a smaller scale than in the past, with the emphasis on water use on farms, EXECUTIVE SUMMARY productivity increases therefore depend on tailor- more narrowly defined production and market ing technologies to specific groups of farmers in environments. Accordingly, the Bank is committed to using a different strategy for each major farm type: commercial, family, and subsistence. Extension 8 Peru: Roads Bring Markets and advisory services will be strengthened and to the Rural Poor broadened to address the knowledge and man- agement services needed by farmers and other New roads in the Sierra countryside, built under the Peru Rural rural households.To link farmers to input and tech- Roads project, have made the outside world and its markets more nology providers, strong producer organizations accessible for the area's 3 million poor. and community-driven groups should work toward and increasingly function in an inviting envi- The program's design was innovative with a strong poverty focus, ronment for private investment. grassroots participation, and collaboration among key players-- the Ministry of Transport and Communications, the Inter-American Physical and services infrastructure. Farms, Development Bank, the World Bank, and more than 20 non- households, and other components of rural sys- governmental organizations. An institutional collaborative frame- tems need a minimum bundle of rural infrastruc- work was set up to make the most of each stakeholder's best ture services to function efficiently. These basics talents. include: The program reduced the isolation and facilitated the integration of the beneficiary communities, enhanced economic opportunities, An adequate supply of safe drinking water. and spurred local entrepreneurship. More than 11,000 km of rural Unsafe water is a major contributor to diar- roads were rehabilitated, and 32,300 seasonal unskilled, and 4,700 rhea, a frequent cause of death among children permanent, jobs were created in 410 local road maintenance in rural areas. enterprises. This innovative partnership program received a 2001 Health and education infrastructure. Clinics and World Bank President's Award for Excellence. schools are needed to ensure quality health care and education. Transportation infrastructure and services. 9 Madagascar: Rural Nonfarm Without roads and railroads, farmers cannot Investment Benefits the Poor send their produce to markets outside their localities, and trade cannot expand. Aqualma, a shrimp-processing and export company in a remote Information systems. Marketing today depends corner of Madagascar has become one of the country's top pri- on adequate information about what people xxii vate enterprises, with exports of US$26 million in 2000. want, at what price, and who can supply it. Adequate and dependable energy supplies. Established in 1992 with support from the International Finance Energy is essential for virtually all activities in Corporation, the company has had a profound impact on the local rural areas. economy and living conditions. Of Aqualma's 1,200 employees in 2001, 80 percent had never previously held a wage-paying job. Adequate infrastructure of every type is impera- tive for agricultural and rural development. The Employees and local villagers gained access to education and health services through the primary school and clinic established Bank thus intends to enhance its support to by the company. The project generated many connections with clients' efforts to put in place the basic physical small local enterprises during the construction and operational and social infrastructure for rural economic phases. growth (box 8). Future plans include expanding production on a new site, for Fostering Nonfarm Economic Growth which a community development plan and a conservation man- If poverty is to be reduced, a flourishing agricul- agement plan to protect biodiverse habitats are being developed. tural sector is essential in most developing coun- tries, but agriculture alone cannot do the whole job. Rural communities also need nonfarm REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT income-producing activities. Nonfarm activities, planning and coordination of supply chains from often with linkages to agriculture and natural input suppliers, primary producers, traders, and resources, have important multiplier effects processors, to retailers. Competitiveness depends (box 9). They are also an important source of on effective and flexible logistics and low transac- employment for rural women. Developing effec- tion costs within the chain.The public sector's role tive support to the rural nonfarm economy is is to create adequate conditions for the develop- therefore an essential part of the Bank's rural ment of efficient private sector supply chains, pro- strategy.The Bank will work with clients and oth- mote investment in physical infrastructure, and ers to exploit current opportunities, seek new support effective subcontracting systems and ones, and tackle the removal of barriers that quality inspections through appropriate legal exclude rural people from diversified employment frameworks and enforcement systems. and business activities. Its interventions will address the institutional support needed by a Support micro-, small, and medium enterpris- diversified rural economy at the national, subna- es. The development of small rural enterprises tional, community, and local levels. requires first and foremost a good investment cli- mate. This will be promoted through assessment Strengthening skills and organization capital. and policy dialog. Especially in rural areas, the The Bank will support future labor market and development of small and medium enterprises enterprise development in rural communities. (SMEs) is inhibited by lack of a skilled labor force Skills needed range from functional literacy and and public and private financial, technological, and numeracy, to specific labor-market skills, to mana- other services.The Bank will promote SME devel- gerial and administrative skills for enterprise opment by supporting commercial business development, including market assessments and development services (box 10), and, through small detection of business opportunities. Close atten- and medium enterprises, efficient service delivery, tion will be paid to women's demands and needs. especially in rural infrastructure services. Research links growth in nonfarm activities to declining poverty for both male- and female- headed households, but the drop is faster for 10 Kenya: Entrepreneurs Build Market for woman-headed households. Trade, professional, Business Services and other common interest associations, and cooperatives will also be promoted. The Kenya Micro and Small Enterprise Training and Technology Project, an innovative World Bank project with xxiii Promote local economic development and a rural component, has been using vouchers since 1998 to intersectoral linkages. Recognizing that many enable small, local rural entrepreneurs to purchase skills ministries and private players share sectoral and management training. As a demand-side instrument, responsibility for the rural economy, the Bank will the voucher project departs from the old approach of sup- porting public training institutions. Now, diverse suppliers support formation of cross-ministerial and other are packaging their services for rural entrepreneurial working groups nationally and locally, with both clients. Skilled craft workers have emerged as the leading public and private participation. Such groups at providers of training. Local private agencies handle vouch- the subnational and local levels should address er allocation. local-level competitiveness and the wider enabling environment of both the farm and nonfarm sec- More than 25,000 vouchers have been issued, 60 percent tors and identify and seek means to remove bar- of them to women entrepreneurs. Among training recip- riers (legislative, regulatory, taxation, infrastruc- ients, employment and income have increased 50 per- ture, and financial). cent. The project subsidizes up to 90 percent of the cost of each voucher, but cost-sharing percentages rise with sec- Strengthening the supply chain and product ond and third vouchers. Rural entrepreneurs now frequently purchase training without vouchers from providers who linkages. Trends in consumer markets, quality have demonstrated the value of their services. requirements, and competition require better EXECUTIVE SUMMARY Improving Social Well-Being, Managing 11 Some Management and Coping and Mitigating Risk, and Reducing Strategies for Crop-Related Risk Vulnerability To improve social well-being and minimize the vul- Providing more and better information. Sound nerability of the rural poor, the Bank will endeavor information on markets, weather, and technologies can reduce to improve access to nutrition and health services, uncertainty in a risky world. help mitigate the effects of HIV/AIDS, increase Insurance. Insurance is a device that allows the insurer to access to rural education and improve its quality, pool risks among many clients in return for a fee or premi- and help improve food security for the rural poor. um. New mechanisms for insuring against commodity price To achieve these objectives and foster broad-based risks are being explored in a donor-supported initiative oper- growth and sustainable management of natural ated out of the Agriculture and Rural Development resources, the Bank will also promote inclusiveness Department of the World Bank (the Commodity Risk and removal of barriers that exclude individuals on Management Program). Still experimental, price insurance the basis of gender or ethnicity from economic and arrangements will operate--possibly in conjunction with social opportunities. credit instruments--to reduce downside risk to both lenders and small-scale borrowing producers. To overcome some of Health and nutrition. The Bank will stress govern- the problems associated with traditional crop insurance, the World Bank and several partners are testing novel rainfall- ments' obligations to ensure that resources for based insurance policies. The International Finance health care reach the rural poor.The Bank will also Corporation is investing in a global facility to develop weath- emphasize the importance of improving dietary er-index insurance in emerging economies and financing the quality and micronutrient status. Supplementation establishment of a weather-based insurance scheme in and fortification, including biofortification through Morocco. The Bank is testing a weather-based insurance purposeful plant breeding, are important strategies scheme for poor pastoralists in Mongolia. to combat micronutrient deficiencies. Contract marketing. Marketing arrangements allow farmers in many countries to reduce price risks for com- HIV/AIDS. HIV/AIDS is threatening the progress modities not yet produced or for inputs needed in the future. made in agricultural and rural development in the The most important alternatives, from a risk-management past 40 years, particularly in developing countries perspective, include cooperative marketing with price pooling where 95 percent of the infected population live. and forward contracts for commodity sales or input delivery. Combating the disease is therefore a core element of the Bank's strategy to support rural development, Income diversification. To reduce fluctuations in especially in Africa. The Bank gives high priority to xxiv income, a variety of cropping practices, investments in live- stock and nonfarm income, and migration can help farmers stopping the spread of HIV/AIDS, helping communi- diversify their income sources. Traditional risk-coping strate- ties cope with its impacts, and mainstreaming gies may also serve this function. HIV/AIDS issues in Bank operations. Rural education. Universal primary education with gender equality and quality improvements will be the Bank's top priority in education. In addition, the Bank Recognize and support labor mobility. Migration will promote literacy and training opportunities for and labor mobility are essential aspects of eco- unschooled rural youth and adults and ensure that nomic development, job creation, and poverty investments in agricultural and vocational training reduction.Therefore the Bank will support policies programs are in line with current needs. It will also that increase mobility through information on, for support development of curricula appropriate to example, labor legislation, communications, and the needs of rural and agricultural populations and skills development as well as on welfare and enti- piloting of new approaches to private education. tlements. Particular attention will go to policies that minimize the potential for social tensions and envi- Food security and risk. As articulated in the ronmental damage. World Development Report 2001 on poverty, a REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT workable strategy for reducing poverty must gram for vulnerable children or health programs for enhance security by reducing the risk of natural, pregnant women. The Bank is also emphasizing financial, and health shocks and by enabling house- strengthening informal support programs building holds to mitigate their consequences. But policies, upon traditional rural community structures. institutions, and investments still have to be Although these informal safety nets frequently fail designed and adapted to directly manage, reduce, in times of shared hardship, this risk may be or counteract the special risks of rural residents, reduced with support from government. particularly the poor. In addition to deepening the understanding of household and community risk Social inclusion. An important priority of the and vulnerability, the Bank is promoting new poli- rural strategy is to help make institutions more cies and instruments for managing and coping with responsive to the rural poor, thereby improving risk (box 11). In doing so, it will seek to avoid social well-being and reducing vulnerability. Bank potential market distortions and disincentives from activities in this area focus on institutional reform to risk management. Instruments that can play a role establish minority rights and opportunities and to in this strategy include new types of insurance strengthen the political voice of women, refugees, based on weather rather than yield outcomes and ethnic minorities, the landless, and the disabled. It is novel mechanisms for commodity price insurance. now widely acknowledged that one of the most New instruments being assessed for their effective- critical factors in revitalizing rural development is to ness include market-based financial products not raise the productivity of women farmers. In most yet readily accessible to many of the poor--such as of the developing world, women do most of the forward contracting, hedging, and pool pricing.The agricultural work. Women are usually in charge of Bank is also exploring ways to help poor people household food security, yet in some areas they are learn about and use insurance and to reduce costs constrained in their access to, and ownership and for primary insurers and reinsurers. control of productive resources such as land and finances. Decentralized development efforts such Targeted transfers are one way of reducing income as community driven development (CDD) offer and health uncertainties for the poor and vulnera- the potential for increased community participation ble. However, such programs face special challenges in all aspects of rural developent as well as offering in rural areas due to difficulties in defining targeting greater inclusion of all social groups in rural deci- criteria, collecting beneficiary contributions, and sion making. administering programs in sparsely populated com- munities with undeveloped infrastructure. The Enhancing Sustainability of Natural xxv poorest countries, the ones that need poverty pro- Resource Management grams the most, also have the greatest need to be Agriculture, as a heavy consumer of natural selective to avoid compromising macroeconomic resources--especially water and soil nutrients-- stability or reducing investment in human and phys- has an obligation to play a commensurate role in ical capital. their conservation. Many producers are already concerned about the deteriorating land and water World Bank­supported programs and policy base in their areas, and public awareness of envi- advice are based on the experience that many tar- ronmental issues adds urgency to the search for geted food security programs are more cost-effec- solutions to conservation issues--many of them tive than generalized food subsidies. Today, food global in nature. Increasing the efficiency and sus- insecurity for most households boils down to lack tainability of water use in agriculture and improving of access or purchasing power for an adequate diet irrigation system performance are key strategic and lack of complementary inputs such as safe conservation goals. Ensuring sustainability of inten- water to maximize the nutritional impact of the sive agricultural production systems will take, as a food eaten. Food assistance may be given to fami- priority, careful management of natural resources, lies (rather than individuals), but any food assistance especially in fragile production environments. To should be a part of a comprehensive nutrition pro- promote conservation and restoration of natural EXECUTIVE SUMMARY assets in rural areas, the Bank has developed guide- an impact, such efforts must be aligned with nation- lines and strategies for the environment, forestry, al development strategy processes and supported and water. Devoted entirely to sustainable devel- by high-quality and focused analytical work by client opment, The World Development Report--2003 countries, the Bank, and other development part- was released at the World Summit on that topic in ners.The main thrust of this joint effort will be to August 2002.The Bank will link rural development, strengthen the voice of the rural poor in national especially in agriculture, to effective sustainable planning processes. The Bank will recommend the resource management.The Bank's objectives in this participation of all stakeholders in rural areas and regard include: foster a holistic approach reflecting the multisec- toral dimensions of a sustained drive to reduce Reducing desertification and other types of land poverty. The Bank will provide analytical work to degradation deepen and expand the understanding of rural Improving water management areas in client countries. The improved analytical Enhancing sustainable fisheries management platform will be a foundation for better decision- Sustaining production of forest products while making on resource allocation--and more effective protecting the environment advocacy by rural representatives in client coun- Protecting biodiversity tries, members of the Bank's rural development Incorporating knowledge about climate change staff, and other development partners. into rural development planning. Scaling-up innovations and successful invest- The strategy promotes innovative approaches to ments in rural development Reaching the Rural using natural resources most efficiently to meet Poor pays close attention to identifying and scaling- agricultural productivity goals while protecting the up good-practice investments both within coun- long-term productivity and resilience of natural tries from pilot initiatives and from one country to resources. Such approaches take into account the other countries or continents (Box 12). interactions among soil, water, solar energy, plants, and animals as well as the social and economic Scaling-up good practices must become an integral well-being of the people who use these resources. part of national rural development strategies. Good practices are acquired after years of development experience and often gained through pilot projects. STRATEGY IMPLEMENTATION Innovation through pilot projects will therefore also The new strategy provides guidelines and focal points be supported. Effective intervention--with its xxvi for maximizing the results of World Bank support to socioeconomic and gender impacts--must be clients' rural development efforts. The approach is locally validated and adapted. Scaling-up does not flexible, action oriented, and client driven.The goal is mean the Bank will apply the same approach every- to transform rural development activities in the Bank where. Innovative methods of learning and infor- from compartments of sector departments and divi- mation sharing among countries and development sions into a coherent, multisectoral effort, supported partners need support. Mechanisms for capturing, by internal budgetary and planning frameworks con- validating, disseminating, and adapting good prac- ducive to efficient implementation. tices have to be developed concurrently. Key les- sons learned from this process and good and inno- KeyThrusts in Implementation vative practices will be shared with development partners as an essential part of this effort. Raising the profile of rural development in national policy. The Bank will support the devel- Improving the impact of bank operations in opment of locally organized national rural develop- rural areas. To improve the impact of projects at ment strategies and capable client-country institu- completion and the quality of project and program tions that articulate and work to fulfill the needs of preparation, major attention will be given to identi- rural inhabitants, specifically the rural poor.To have fying and sharing improved procedures to sharpen REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT the focus on poverty and the long-term develop- 12 ment impact of Bank­supported rural operations. Possible Areas for Scaling-Up and This will include reviewing both the quality Innovation enhancement and assessment of projects for their Policy and institutions pro-poor features, as well as supporting new and Agricultural policy reform innovative work addressing both poverty impacts Development of rural strategies and sustainability of interventions. The Bank has Institutional reform and capacity building established a task force to improve the guidelines Participatory planning on the different aspects of project sustainability now being applied throughout the Bank and their Agricultural productivity and application. The task force will work closely with competitiveness ongoing Bank-wide initiatives to enhance poverty Land reform and administration impacts and the alignment of rural interventions Research and extension with the Millennium Development Goals. Information technology--marketing and knowledge Pursuing the bank's global and corporate prior- Irrigation and drainage Support for producer organizations and ities. High-quality, high-impact operations to user groups reduce rural poverty will require continuing inter- Food safety and agribusiness national commitment to key global public goods and a constant awareness of their connections to Nonfarm rural economy rural poverty.This can be done by ensuring that: the Rural finance, including microfinance interests of the rural poor are safeguarded in an Development of the rural nonfarm economy including increasingly global world; new and appropriate businesses technology for poor farmers and rural communi- Private sector role in service delivery ties is readily accessible; and the poor countries can Infrastructure and local economic deal with the challenges of global climate change. redevelopment, including small towns The Bank will help build the capacity of client coun- tries so they can take full advantage of opportuni- Strengthening social services and reducing risk and vulnerability ties in the ongoing Doha Round of trade negotia- Rural health and education service provisions tions of the World Trade Organization. The Community-driven development and district programs Consultative Group on International Agricultural Social inclusion with focus on women and girls Research complements the Bank's efforts to enable Commodity, climate, and disaster risk xxvii developing countries to realize their full agricultur- management al technology and production potential.The Bank's Emergency reconstruction current support for the CGIAR will be broadened to programs to meet the new challenges in science Sustainable natural resource and technology for the benefit of poor farmers in management developing countries. Soil fertility Watershed development Community natural resource management Operational Levels for Implementation Community forests Reaching the Rural Poor outlines the framework for Fisheries action at three different levels of current Bank operations. The corporate strategy provides the conceptual menu of interventions and instruments that may underpinnings and macroeconomic foundation work under different country conditions and as well as the overall implementation thrusts. performance indicators that the Bank can use to Based on the Bank's track record and analysis of gauge its progress in aligning its resources and best practice, the corporate strategy identifies a promoting rural development. The corporate EXECUTIVE SUMMARY ated framework for actions at the individual 13 Regional Priorities country and subregional levels. At the country- program level, the strategy emphasizes strength- ening of the analytical underpinnings for country The six regional action plans reflect rural development agen- dialog and a framework and incentives for das fully consistent with the overall Bank rural development improving cross-sectoral support to poverty strategy. Each has a poverty reduction focus and a multi-sec- reduction interventions in the context of the toral approach with increased emphasis on the private sector, yet they all maintain a region-specific character. The Country Assistance Strategies (CASs). diversity in these plans is a major strength of this undertak- ing. The Africa action plan places major emphasis on the Within countries, the national rural development institutional foundation for reducing rural poverty. It advo- strategies will be locally developed and driven, cates support for government efforts to decentralize, and reflecting national priorities for rural areas and enhance the participation of rural communities. The East agriculture.The process of national dialog, togeth- Asia and Pacific regional plan calls for financing pro- er with these national strategies, will guide the grams that directly attack poverty through targeted produc- rural development aspects of the CASs, as well as tivity enhancing investments in very poor areas. The the Poverty Reduction Strategies, and provide the Europe and Central Asia region focuses on sustain- specific demand for further Bank operations. able rural productivity growth and the completion of the tran- sition process in the rural areas. In the Latin America and Caribbean region, the action plan puts special Strategy implementation relies heavily on stimulating emphasis on rural and urban dynamics, and adopts a Local the demand for rural development from the two Economic Development approach to addressing rural develop- main groups of decisionmakers, the clients and the ment built around increased participation of local actors Bank-country teams.At the client level, the Bank will including local and sub-national governments, private sector support the preparation of national rural strategies and organizations of civil society. The Middle East and that integrate the needs of the rural poor in nation- North Africa action plan places a high priority on ration- al policy dialogs. At the level of the country teams alizing water management and policies. The focus of the and other decisionmakers, it will seek to improve the South Asia regional action plan is the enhancement of quality and the impact of Bank operations in rural human and social capital development in rural areas, as well areas by sharpening the focus on poverty, using the as decentralization. Major gender concerns across the regions most appropriate instruments, seeking economies of are women's illiteracy, lack of access to social services, eco- nomic infrastructure and resources. scale, and scaling-up investments that have proven effective in reducing rural poverty. Several donors For further details, see: From Action to Impact: the Africa Region's Rural Strategy have indicated their interest in cooperating with the xxviii 2002; Reaching the Rural Poor in East Asia and the Pacific Region 2002; Reaching Bank. Though probably slower to materialize, an the Rural Poor in Europe and Central Asia 2002; Reaching the Rural Poor in the approach that relies on stimulating demand and Latin America and the Caribbean Region 2002; Reaching the Rural Poor in the monitoring lending trends closely is more appropri- Middle East and North Africa 2002; South Asia Strategy and Action Plan for Rural Development 2002. ate to the country-driven nature of Bank programs, and more sustainable in the long term, than relying on preset lending targets. strategy also provides a vehicle to convey the What the Bank Needs to Change Bank's message on rural development to external partners and audiences and garner interest and Enhancing bank-wide multi-sectoral cooperation collaboration of partners around rural poverty in the rural space. One of the greatest challenges reduction efforts. will be to ensure that rural poverty is truly reflected in Bank-supported programs and operations in the The regional action plans, built upon local con- manner and form envisaged in this strategy. Each sultations, differentiate region-specific needs in level of the Bank decision making structure must line with the overall message of the corporate become an integrated part of the implementation strategy (box 13).The plans provide a differenti- process.This will entail new and innovative relations REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT between all Bank units active in rural areas. The bilateral agencies--that national and global poverty implementation of this strategy also requires that reduction targets will not be met unless poverty in operations in rural space are designed in a multi-sec- rural areas is reduced. Understanding what it takes toral fashion and that self-standing sectoral opera- to meet the needs of the rural poor has never been tions are coordinated within an overall strategy. closer, as many agencies have recently taken stock of Specific regional organizational arrangements are their experiences and redefined their approaches proposed to improve coordination of activities in the and commitments to poverty reduction in rural rural space and to achieve the strategy's objectives. areas. The further development of relations with These arrangements would operate within the international partners aimed at improving the distri- framework of existing management structures. bution of labor among the various partners is based on the Bank's and the partner's specific comparative Improving the application of instruments. advantages. Coordinated support to client countries Addressing rural poverty in a comprehensive fashion for the development of national rural development requires that an evolving set of instruments, with the strategies, in conjunction with Poverty Reduction right focus, are applied to Bank operations in rural Strategies and Country Assistance Strategies, will be areas.The balance between the different instruments a major focus of the Bank's interactions with inter- is a complex implementation issue. There is clearly national partners. no one "golden rule" as to the optimal distribution between different Bank instruments of programmat- Improving linkages to the private sector and ic, adjustment or investment lending, or between civil society. Increasing links and improving rela- economic, social or natural resource outcomes. tionships with the private sector and civil society Nevertheless, some general directions for Bank within a country framework are among the top pri- operations in rural areas are: orities for the Bank in each region.The Bank's links to representatives of civil society and nongovern- The diversity of needs within rural areas between mental organizations have increased dramatically regions, countries, and sub-country regions over the past ten years. Internet websites and requires the use of a broad set of instruments information sharing now provide the opportunity supporting a number of sectoral interventions, for increased direct dialogue and interaction within the framework of the Country Assistance between the Bank and NGOs. The consultation Strategies. process on regional action plans and the new cor- porate framework for the rural strategy proved to Traditional investment projects will continue to be a valuable and productive means of enhancing xxix play an important role, however they should be relationships with both large numbers of NGOs as blended with the new type of operations such as well as with the private sector across all regions. In the Learning and Innovation Loans, the Adaptable a rapidly globalizing world, links with multinational Program Loans, and the Poverty Reduction companies that have an impact on rural develop- Support Credits, etc., according to country ment are also essential. requests and new conditions; Monitoring Implementation Progress and The broader use of new instrument modalities, Managing Risks. such as programmatic lending, should be pur- This strategy presents a program for revitalizing sued after careful assessment of lessons from Bank activities in rural areas and increasing the field experience and assurance of an adequate effectiveness of the Bank's work in reducing rural rural focus. poverty. Reaching the Rural Poor pays close attention to monitoring and evaluation of strategy imple- Improving linkages to development partners. mentation. The targets and benchmarks will be There is growing consensus among international used against the current baseline for evaluating development partners--including the Bank, FAO, progress over a five-year period. The IFAD, EC, regional development banks, and major Implementation Monitoring framework is designed EXECUTIVE SUMMARY around results-based management principles, expressed as inputs, outputs, outcomes, and impacts. The Bank's Agriculture and Rural Development Sector Board will work closely with senior Bank management to ensure alignment of the rural strategy implementation framework with emerging Bank work on results-based management. Several risks are inherent in implementing the strategy. Some of these depend on events that are beyond the control of the Bank and of the coun- tries concerned.The main risks perceived are: Not all sectors operating in rural areas take up the challenge of rural poverty reduction. The necessary institutional arrangements, incen- tives framework, and appropriate staff skills mix are not addressed. The opportunities do not materialize for the institutional learning and innovation that are expected to emerge in the context of a sharp- ened focus on programmatic lending operations. The Bank, its country partners, and other stakeholders cannot mobilize country buy-in to intensifying emphasis on attacking rural poverty. The client countries do not achieve long-term growth and do not address issues related to enhanced and more equitable access to assets for all. The successful implementation of the new strat- xxx egy is a challenge for both the Bank and for its clients and partners. The Bank recognizes that it cannot work alone. It will deepen relationships with client countries, strengthen existing alliances and forge new ones with other development partners, the private sector and organizations of civil society to broaden the understanding of rural development issues, share experiences, build capacity, and mobilize the necessary resources to overcome rural poverty. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT INTRODUCTION 1 I n 1996 theWorld Bank began developing a comprehensive rural development strategy entitled From Vision to Action (World Bank, 1997). Approved by the Board in March 1997, this strategy identified rural poverty reduction, improvement in the well-being of rural people, and the elimination of hunger as the main strategic objectives in the Bank's rural development activities. From Vision to Action, provided a solid conceptual foundation for the Bank's rural development activities and resulted in a new generation of rural development programs. In general, however, implementation of From Vision to Action has not brought about the anticipated results. Bank lending for projects in the rural space during rural society and both farm and non-farm aspects of FY99-01 was approximately 25% of total Bank lend- the economy.The Bank is convinced that five critical ing. This includes lending to agriculture, which in components of a rural development strategy will FY01 was the lowest in the Bank's history, both in contribute most to accelerated growth in rural absolute and percentage terms. A similar trend can economies and, consequently, to measurable pover- be seen in most other international agencies.This is ty reduction: a) fostering an enabling environment particularly disconcerting when 75% of the people for broad-based sustainable rural growth b) enhanc- who live on less than one dollar per day live in rural ing agricultural productivity and competitiveness; c) areas, and most of them are farmers.The Bank will fostering non-farm economic growth; d) improving not be successful in its overall poverty reduction social well-being, managing risk, and reducing vul- objective unless it helps reduce rural poverty at an nerability; and e) enhancing sustainable manage- accelerated rate. ment of natural resources. The Agriculture and Rural Development This document outlines a holistic and spatial Department, in close cooperation with the regions approach that tackles some tough and long-ignored and other sector units active in rural areas, has pre- issues and also addresses old issues in new ways. pared an updated rural development strategy to Most importantly, it recognizes that while top- revitalize IBRD/IDA activities in rural areas by: a) down, non-inclusive approaches in the past, such as adjusting the strategic framework; and b) formulat- integrated rural development, identified most of ing a program of concrete and implementable the necessary pieces of the puzzle, they failed to actions. This revision of the strategy responds to put them together in a way that resulted in suc- changes in the development context: cessful attainment of the Bank's objectives. While the main focus of the strategy is on rural poverty in the global environment, especially to changes reduction, at the same time it includes key ele- brought about by the forces of globalization and ments of a strategy for the food and agriculture remaining trade distortions; sector. This sector remains a crucial and central component of rural growth and it is vital to success in client countries, especially the challenges of in reducing rural poverty. unfinished policy reforms, decentralization, insti- tutional development, still inadequate gover- The revised action-oriented strategy provides nance, the increased role of the private sector guidelines and focal points for enhancing the effec- and civil society, as well as the rising number of tiveness of the World Bank's rural development 2 conflicts; and efforts. Strategy implementation is based on four main thrusts: within the Bank and especially through lessons learned in the past five years in the implementa- Raising the profile of rural development in tion of From Vision to Action. national policy. The world confronts major challenges in rural Scaling-up innovations and successful invest- development as it enters the 21st century. Most of ments in rural development. the world's poverty is in rural areas, and will remain so, yet there is a pro-urban bias in most countries' Improving the impact of Bank operations in development strategies, and in their allocation of rural areas. public investment funds. Rural people, and ethnic minorities, in particular, have little political clout to Pursuing the Bank's global and corporate priorities. influence public policy to attract more public invest- ment in rural areas.The Bank recognizes that, to be The implementation of the strategy will transform successful in reducing rural poverty, the Bank must rural development activities in the Bank from a focus on the entire rural space, meaning the entire compartmentalized activity of various sector REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT departments and divisions, into a coherent, multi- Each chapter in this volume deals with a major sectoral discipline, supported by conducive internal building block of the revised rural development budgetary and planning frameworks necessary for strategy. Chapter One presents an overview of a more efficient implementation.The new approach the current development context, which provides is flexible, action-oriented, and client-driven. The a foundation for the revision of the Bank strategy. strategy provides a platform for locally-owned Chapter Two outlines the conceptual foundation, and participatory, national priority-setting. Within objectives, and strategic priorities of the revised that context it allows for a substantive rural rural development strategy. Chapter Three dis- development contribution to Comprehensive cusses the enabling policy and institutional envi- Development Frameworks (CDFs), Country ronment for broad-based rural growth. Chapter Assistance Strategies (CASs), and country-owned Four provides a discussion of the Bank's renewed Poverty Reduction Strategy Papers (PRSPs). It also approach to agricultural productivity and compet- creates a framework for multi-sectoral cooperation itiveness. Chapter Five concentrates on fostering in client countries, within the Bank, and among non-farm rural economic growth. Chapter Six international donors. enumerates the improvement of the social well- being of rural peoples, managing risk, and reducing The basic foundations of the updated strategy are vulnerability. Chapter Seven focuses on fostering the six regional action plans.1 Each of these was sustainable natural resource management. prepared by a regional team of cross-sectoral oper- Chapter Eight deals with the implementation ational staff.The regional action plans indicate some thrusts and provides a framework to monitor shared overall priorities that are reflected in the implementation progress. corporate strategy even though the sequencing of the priorities may differ for specific regions.A series Annexes to the strategy provide more in-depth of nine regional consultations involving representa- analysis of the issues discussed in the corporate tives of the respective governments, private sector, strategy. Annex One gives a review of lessons NGOs and academia were organized to ensure learned from the implementation of the Bank's that the Bank, its clients, and fellow donor agencies previous strategy From Vision to Action. Annex Two are in agreement on the focus of the strategy and provides an overview of the consultation process that they have had the opportunity to contribute that led to the new strategy. Annex Three includes to its formulation. summaries of the regional strategies. Annex Four focuses on water in rural development.Annex Five A detailed portfolio analysis and a number of presents background material on physical and 3 studies on both global and regional issues were social infrastructure. Annex 6 concerns natural commissioned to support this process. These resources. Annex 7 gives examples of successful studies provide a rich empirical foundation for the World Bank operations in agriculture and rural regional action plans and the corporate strategy. development.Throughout the main text in this vol- Other sectoral strategies dealing with environ- ume there are references to further information ment, forestry, water, and private sector develop- available in these annexes. ment were considered in creating a coherent rural development strategy. A rural strategy semi- nar series was organized to discuss the findings and conclusions of the most important back- ground studies. These seminars also provided an opportunity for the rural staff to interact with some the world's leading experts on rural devel- opment and poverty reduction. The Bank's Rural Weeks in 2001 and 2002 provided a forum for in- depth discussion of the emerging strategy and its implementation within the Bank's Rural Family. INTRODUCTION ENDNOTES 1 From Action to Impact: the Africa Region's Rural Strategy 2002; Reaching the Rural Poor in East Asia and the Pacific Region 2002; Reaching the Rural Poor in Europe and Central Asia 2002; Reaching the Rural Poor in the Latin America and the Caribbean Region 2002; Reaching the Rural Poor in the Middle East and North Africa 2002; South Asia Strategy and Action Plan for Rural Development 2002. 4 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT DEVELOPMENT CONTEXT: WHY A STRATEGY UPDATE IS NECESSARY 1 5 imply put, a revision of the rural development strategy is necessary because the S environment in which the Bank operates has changed. Globalization opens new doors and poses new threats.The needs of client countries have evolved, as has the way the Bank approaches its mission of "fighting poverty with passion." This section briefly describes the nature and importance of some of these changes at the global, client country and Bank level, and focuses on the developments since the Bank's rural development strategy From Vision to Action was adopted in 1997. THE EVOLVING GLOBAL CONTEXT While global production has grown faster than demand, hunger and malnutrition persist.This enigma Persistent Poverty and Food Insecurity has been addressed by many eminent economists One of the most frustrating moral contradictions who conclude that hunger is less strongly related to of our time is the persistence of poverty. More the level of food availability than to household than a billion people are desperately poor. The income, or as Amartya Sen puts it, the "entitlement" number of people living on less than $1 per day has to sufficient resources to purchase enough food to declined only slightly in the 1990s, and best esti- live (Sen, 1981b). mates indicate that 1.2 billion persons still live below that poverty line (World Bank, 2001b). The persisting high share of poverty and food inse- Other social and poverty indicators over the same curity in rural areas has important implications for period demonstrate that some regions are a long public policy and in the design of any strategy for its way from the day when the goals for international reduction (Binswanger and Landell-Mills, 1995). development will be met. Because of the geographic dispersion of the rural poor, it is more expensive on a per capita basis for central governments to provide them with public infrastructure, social services, and safety nets equiva- 1.1 Who Are the Rural Poor? lent to those provided to urban residents. A willing- ness to spend more public resources targeted to the rural poor, and decentralizing decision making to To craft an effective rural development strategy focused on the rural localities and communities are first steps, but these poor requires a clear understanding of who the rural poor are, where are limited by a lack of political voice and influence they live, and the challenges posed by the prevailing poverty levels in their respective habitats. This is because the rural poor are not a in many rural areas. homogeneous group, and behind the aggregate numbers are the vari- ous diverse entities that make up the rural poor. They could be broad- Globalization ly classified into five categories: a) the landless (those without any crop The concept of globalization captures the growing land); b) those with a low asset base, or smallholders (farmers with interdependence and linkages of the world's up to two hectares of cropland); c) pastoralists (those who are not economies, markets, and people. It concerns more settled in any specific area and who derive most of their income from open international trade in goods and financial pastoral livestock); d) rural women (especially women-headed house- services, growth of multinational companies, more holds); and e) ethnic minorities and indigenous populations. uniform labor and environmental standards, and 6 growing global sourcing in supply chains. In the con- Source: Okidegbe, 2001 text of rural development and poverty reduction, globalization presents both emerging challenges Poverty is predominantly a rural phenomenon. and new opportunities. The process of globaliza- Approximately 75% of the poor reside in rural areas, tion, including increasing inter-linkages across coun- and the rural poor will outnumber their urban coun- tries, lower transaction costs, and expanded trade, terparts for at least another generation (Alderman, financial, and information flows, provides some of 2001). By most quality-of-life indicators, people living the key ingredients for rural development and in rural areas, on average, have a lower quality of life poverty reduction. But globalization and economic than urban residents (Box 1.1). Rural public services, liberalization carry with them risks.There are win- as measured by per capita public expenditure are ners and losers in globalization, and the challenge approximately one-half that of urban areas. for policymakers is to provide adjustment assis- tance or at least partially compensate losers. There is a disturbing paradox in recent develop- ments: the existence of pervasive malnutrition in a Urbanization and Demographic Shifts world of abundant food supplies. Growth in global Despite higher rural birthrates, between 2000 and food production over the past four decades has 2030 virtually all net population growth in the world more than kept pace with growth in population. will be concentrated in urban areas,as a result of con- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT tinued rural migration to urban centers. This migra- itive and negative. Climate change will affect food tion is driven by the desire for higher incomes.The production, ecosystem function, and farmer vulner- pace of urbanization will be most rapid in developing ability in many areas of the developing world, espe- countries, where the urban population is forecast to cially in Africa and parts of Asia.These changes are increase from 1.94 billion to 3.88 billion in the next likely to have a disproportionate impact on the thirty years. Rapid urbanization has been accompa- poorest countries, and the poorest people within nied by increasingly strong links between rural and those countries, thereby exacerbating inequities in urban economies, and the dichotomy between rural health status and access to adequate food, clean and urban is beginning to blur. Rural households are water and other resources. more and more likely to participate in non-farm employment opportunities available in small towns Clearly the concerns over environmental degrada- and cities. Seasonal employment in urban areas, and tion and global climate change and their links with remittances from household members working in rural poverty and agricultural development are well urban areas, frequently enable rural residents to sup- placed. Continuing to neglect vulnerable areas plement their agricultural incomes. Resulting changes where many of the world's poor live will only make in intra-household division of labor also affect the sta- degradation and misery worse--continuing pres- tus of women. In an area of male out-migration ent trends is simply not a long-term option. women may manage the entire farm often without legal ownership of the assets. In other areas, off-farm The Revolution in Biological and employment is an income-generation opportunity Information Sciences for women.The interdependence of rural and urban economies and strong linkages at household levels Biotechnology based on molecular biology is gener- implies that effective policies to reduce rural poverty ating revolutionary advances in genetic knowledge also need to be concerned with growth and eco- and the capacity to change the genetic makeup of nomic development in urban centers, and particular- crops and livestock, which have the potential to ben- ly with the linkages between smaller cities and mar- efit poor producers and consumers. Despite this ket towns in more isolated areas. potential, the complex issues of biosafety and food safety, bioethics, and accessing proprietary science for Growing Scarcity of the Rural Natural the benefit of the poor must be addressed.Also, early Resource Base with Global Climate Change adopters may incur significant risk. Although biotech- Whether the world continues to be able to feed nology strategies will vary with each country's tech- itself depends in large part on the condition of the nological capacity and level of agricultural commer- 7 world's natural resource base in the future, and this cialization, all countries need some amount of invest- depends, in part, on whether poverty will be greatly ment in public-sector research and regulatory frame- reduced. Poverty and environmental degradation works.The biotechnology revolution in agriculture is are closely linked, often in a self-perpetuating spiral only beginning and presents policy makers with a where poverty accelerates environmental degrada- unique set of challenges. There are ethical, safety, tion and degradation exacerbates poverty. Poor health, and property rights issues.Yet the promise of people live at the margin of subsistence and are this technology to assist in coping with increasing more vulnerable to adverse events than others. food demand is enormous--so large that the chal- Concern by policy makers over environmental lenges mentioned above must be addressed. degradation is driven by growing scarcity and con- tinued degradation, in both developed and devel- New information and communication technolo- oping countries. gies (ICTs) with lower costs combined with the increasing literacy and sophistication of farmers have There is consensus among climatologists that the the potential to revolutionize rural information sys- global climate is changing. There is, however, con- tems, providing more and better information siderable controversy over the nature and extent directly to farmers, extension agents, agribusinesses, of climate change, and potential impacts, both pos- and other intermediaries.Application of ICTs in rural DEVELOPMENT CONTEXT: WHY A STRATEGY UPDATE IS NECESSARY areas may increase the flow of information of all NGOs) has become a major force in international types, and facilitate market transactions, changes in development. The civil-society organizations par- employment, emergence of new industries, and ticipating in international development serve a social development,but such advances are dependent variety of functions ranging from service provision upon telecommunications reaching remote rural to advocacy on issues as diverse as water, forestry, areas and diverse populations, including rural women. food security, human rights and humanitarian assis- tance. It is recognized that NGOs/CBOs can be effective in reaching poor communities and CHANGES IN CLIENT COUNTRIES remote areas at low cost, as they are more inclined to identify local needs and promote par- Progress in Policy Reform: Unfinished Agenda.The ticipation, and that engaging these groups in proj- past decade has seen much progress on policy and ects and policy dialogue can improve project institutional issues throughout the developing design, implementation and sustainability. world, yet the policy reform agenda in many coun- tries is still far from complete. Developing countries' Continuing Regional and Local Conflicts. The own policies may: a) create terms of trade unfavor- past decade has been characterized by the resur- able to agriculture; b) have higher levels of protec- gence of conflicts in several regions. Most of the tion against agricultural imports than developed physical and economic damage resulting from countries; c) have a prevailing urban bias in public these conflicts takes place in the poorest areas of expenditures; and d) create an unattractive envi- the countries and regions involved. Many of the ronment for private economic activity. recent conflicts have been fought over the use of certain natural resources or have an ethnic origin. Governance: Decentralized and Improved, but These conflicts bring additional hardship to the still Inadequate. In the past decade, there has rural population, particularly women, who are the been increasing recognition among development most vulnerable to their negative impacts. stakeholders that good governance is crucial for achieving sustainable development and poverty reduction. This recognition has brought about CHANGES WITHINTHE BANK improvement in many aspects of governance, but the impact of these improvements has been rela- The changing global environment has also shaped the tively limited in rural areas. Bank and its approach to development.This change 8 has become especially pronounced in the period Increased Role of the Private Sector. One of since the Bank's last rural development strategy, From the most visible signs of change in client countries Vision to Action was completed five years ago. is the increased role of the private sector in rural development, and the growing recognition that New Approach to Development Assistance new jobs in the private sector will do the most A new approach to development assistance, the towards reducing rural poverty.The incentives for "Comprehensive Development Framework" private investment depend greatly on the enabling (CDF) was initiated by the Bank and the develop- environment. Markets are the vehicle for rural ment community.The CDF builds on lessons con- economic development and allow for specializa- cerning development aid effectiveness, such as the tion and diversification into new products. need for social inclusion, better governance, and However, markets can be inefficient because of understanding of the complementary roles of civil externalities, difficulty in achieving economies of institutions, the private sector, and donors. It offers scale, asymmetric information, non-excludability, an opportunity to approach rural development and excessive transaction costs. challenges holistically, by catalyzing local initiatives, taking a long-term perspective on development, Increased Role of Civil Society. In recent years and focusing on coordinated "country-driven" civil society (including local and transnational strategies among development partners. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT The Bank's Strategic Framework Paper (SFP) iden- Action sought to integrate rural development more tifies two main pillars of the Bank's assistance to closely into CASs.To implement those thrusts, the clients in fighting poverty: (a) building a climate for main priority actions included increasing economic investment, jobs, and sustainable growth; and (b) and sector work, enhancing knowledge manage- empowering poor men and women to participate ment and agricultural research programs, and in development.Together these pillars embody the strengthening alliances with other international key elements of sustainable development.The SFP organizations, for example, FAO and IFAD. In terms also calls for selectivity: (i) within countries based on of major outcomes, the Bank was to be seen by the CDF principles; and (ii) across countries, guided 2000 as the world leader in the fight against rural by income, poverty, and performance æ focusing on poverty, to have significantly contributed to freer countries where the overall policy environment and fairer world trade in agriculture, and to have favors aid effectiveness; and (iii) at the global level, based on clear linkages to the Bank's core institu- tional objective, its leveraging and catalytic effect, and a balancing of resources and risks. Millennium Development Goals 1.2 (1990-2015) Sharpened Poverty Focus One of the most visible changes in the Bank over 1. ERADICATE EXTREME POVERTY AND HUNGER the past several years has been the increasing Halve the proportion of people with less than $1 a day poverty focus combined with a growing emphasis Halve the proportion of people who suffer from hunger on meeting the Millennium Development Goals (MDGs) articulated in 2000 (Box 1.2). In late 1999 2. ACHIEVE UNIVERSAL PRIMARY EDUCATION finance ministers of World Bank and IMF member Ensure that boys and girls alike complete primary countries called for Highly Indebted Poor schooling Countries (HIPCs) to draft Poverty Reduction 3. PROMOTE GENDER EQUALITY AND EMPOWER WOMEN Strategy Papers (PRSPs) as a condition of HIPC Eliminate gender disparity at all levels of education debt relief. In Bank practice, these PRSPs have become central to the preparation of Country 4. REDUCE CHILD MORTALITY Assistance Strategies (CASs) for all IDA countries. Reduce by two-thirds the under-five mortality ratio 5. IMPROVE MATERNAL HEALTH MIXED RESULTS IN IMPLEMENTING Reduce by three-quarters the maternal mortality ratio 9 FROM VISIONTO ACTION 6. COMBAT HIV/AIDS, MALARIA AND OTHER DISEASES The Bank's performance in rural development dur- Reverse the spread of HIV/AIDS ing the past several years can be best analyzed in 7. ENSURE ENVIRONMENTAL SUSTAINABILITY light of the main principles and objectives set out Integrate sustainable development into country policies by From Vision to Action. It was expected that From and reverse loss of environmental resources Vision to Action would revitalize the lending program Halve the proportion of people without access to for rural areas into a vibrant, broad-based, and potable water broadly focused high-quality rural development Significantly improve the lives of at least 100 million program.The major thrusts of From Vision to Action slum dwellers were clear: the Bank's rural development strategy would shift from a narrow agricultural focus to a 8. DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT broader rural development approach, incorporat- Raise official development assistance ing long ignored issues such as land reform and Expand market access Encourage debt sustainability nutrition, and finding new ways to address old issues, such as rural financial services and commu- source: www.developmentgoals.org nity driven development. Above all, From Vision to DEVELOPMENT CONTEXT: WHY A STRATEGY UPDATE IS NECESSARY revitalized rural development in a number of Main Outcomes under-performing countries. In conjunction with From Vision to Action has had a significant influence on From Vision to Action, at the request of the Bank's global thinking on rural development, induced a President, a special action program was launched in stronger participatory approach in Bank rural lending fifteen focus countries, and a budget allocation from and non-lending activities, and, within the agricultural the Strategic Compact was made available to sup- sector, promoted a broadening of the scope of lend- port rural development in these countries. ing. Moreover, the current portfolio, in terms of the mix of instruments, and key quality aspects, has improved, although there has been a slight decline in FY01. Valuable experiences in critical investments 1.3 Bank Operations in Rural Space affecting the livelihoods of the poor have also been (FY99-01) gained.The improvements in project quality achieved under From Vision to Action provide a strong platform Total annual average investment in rural space: $5 billion, [$2.7 from which to launch Reaching the Rural Poor and billion IDA (46% of total IDA) and $2.4 billion IBRD lending (17% move to "scaling-up" quality rural operations. of total IBRD) Share of total investment in rural space: SAR 41%, AFR 39%, MNA While significant progress in rural development has 38%, and EAP, ECA and LCR between 16% and 23% been made, major challenges still lie ahead.The revi- talization of the lending program for rural areas into INSTRUMENTS (PERCENT OF NUMBER OF PROJECTS WITH ANY INVEST- a vibrant, broad-based, and high-quality rural devel- MENT IN RURAL SPACE) opment program has not materialized. Although the Eighty-five percent of the Bank's APLs include investment in rural role of the private sector was recognized, little was space (this is equal to 55% of all APL lending) done to support the non-farm private sector. Rural Sixty-eight percent of the Bank's LILs include investment in rural needs are still not adequately taken into account in space (equal to 55% of all LIL lending) national and Bank decision-making processes. Many Ninety-eight percent of projects with components in rural space are internal and external constraints to multi-sectoral Investment lending approaches to rural poverty reduction still exist. Eighty-three percent of Emergency Recovery projects include invest- Finally, the agricultural development portfolio has not ment in rural space yet met the 80% satisfactory development outcome Seventy-one percent of Financial Intermediary Loans include invest- rating at completion, as targeted by From Vision to ment in rural space Action. The quality of the poverty focus, and the sus- 10 Twenty-six percent of the rural space projects used community-driv- tainability and quality of the institutional development en approaches (FY01) still leave much to be desired. Reaching the Rural Poor will address these concerns. One particular concern POVERTY ORIENTATION is the strikingly low resource allocation to support Twenty-nine percent of lending focused predominantly on poor peo- rural women. In the 2001 rural portfolio, 23% of the ple ["focused operations" (see footnote 6)], 52% involved broad projects addressed gender issues, but only 2.8% of actions, which improve services and opportunities, including for the funds were allocated towards gender-responsive poor people ("inclusive operations") and 19% covered overall pol- components (World Bank, 2002b, FY01 Rural icy changes, such as sound economic management, governance and Portfolio Review). social policies ("enabling operations") Sixty-five percent of lending on `focused' operations is from IDA Trends in Lending for Rural Development sources, compared to 49% and 42% respectively, of lending While From Vision to Action did not set specific lend- towards `inclusive' and `enabling' operations ing targets, the underlying assumption was that Only sixty­one percent of the IDA interventions in rural space were lending for rural development would grow. labeled with the PTI flag* However, the contrary has occurred. While there *A project is identified as a Program of Targeted Intervention (PTI), if it has a specific are no long-term trends available for total lending in mechanism for targeting the poor, and/or the proportion of the poor among project ben- rural areas, a special analysis carried out for this eficiaries is significantly larger than their proportion in the overall population. review showed that in FY99-01 (aggregated), the REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Bank invested $15 billion (about $5 billion annually), Vision to Action was launched. Between FY96-98 and or 25% of its total lending, in rural space1 (Box 1.3) FY99­01, lending for agriculture declined by more Out of the $5 billion annual World Bank invest- than 30%.The decline was particularly strong in EAP, ments in rural space, more than half were IDA SAR, and ECA, which experienced an average drop investments ($2.7 billion in FY99, and $3 billion in of 40%-50%, over that period. LCR declined by FY01). Projects coded for urban development are about 13%, while AFR and MNA showed increases 11% of total lending.The remaining national opera- of 15% and 74%, respectively, over this period. tions cannot be spatially attributed, but experience Preliminary results for FY02 confirm this decline indicates that these operations are predominantly (Box 1.4).This cannot be explained by the shift away focused on city dwellers. Taking these two factors from the costly and outmoded agricultural and rural together, lending to rural space as a proportion of operations of the past. Part of the decline in rural overall Bank lending is not congruent with the lending is due to the perceived burden of safeguard greater incidence of poverty in rural areas. OED policies for projects predominantly in rural space. also reported a rural under-representation in invest- ment (World Bank 2001c). According to prelimi- nary analysis, this situation has not changed for FY02. Using comparable methodology, total invest- Current Bank Operations in Rural 1.4 ment in rural space in FY02 amounted to about $5 Space ­ FY02 Update billion (or 25% of total lending) (Box 1.4). Total investment in rural space in FY02 was US $5 billion, Lending for agricultural activities declined dramat- or 25% of total lending. Of this, $3.2 billion was IDA invest- ically as a proportion of total Bank lending, from ments (40% of total IDA), and US $1.8 billion IBRD lend- about 31% in 1979­81 to less than 10% in FY00 ing (15% of total IBRD) and FY01 (Figure 1.1).The reasons for this decline are many; and some are, in fact, positive. A clearer Instruments: Adjustment operations, 17%; Investment, 83% understanding of public and private roles, market Total investment in the agriculture sector (including agro- functioning and the need for institution building industry and markets was US $1.5 billion (or 7.9% of total resulted in a shift away from big (but unsuccessful) Bank lending). Lending to the Crops sub-sector amounted to investments in public infrastructure and government 32% of Agriculture Sector lending, while Irrigation and bureaucracies, to more effective inputs into com- Drainage received 22%, and Agriculture Markets and Trade prehensive rural institution building, which requires received 14%. These figures were derived using the new less funding. For example, comparing the nature and project coding system introduced in July 2002. 11 scope of lending approvals from FY79­81, with those of FY99-01, the largest declines are in the sec- tors of (a) perennial crops and agro-industry, Rural Space Lending and the Millennium because of the shift away from support for paras- Development Goals2 tatal enterprises, (b) agricultural credit, because of a In undertaking the rural portfolio review, efforts shift away from targeted credit, (c) irrigation and were made to align ongoing (FY99-01) activities to drainage, because of the shift away from large new the MDGs (Table 1.1). The bulk of lending in rural irrigation schemes to institution building and opera- space (46%) is allocated towards Goal 1, poverty tion and maintenance; and (d) agriculture adjust- reduction and the elimination of hunger. Support to ment operations, because of a much more gradual social sector goals total 18% of overall rural space approach in the Bank's policy dialogue in the sector. lending, with Goal 2 of primary education receiving 8%, and Goals 4­6, the health sector related goals, at It is highly unlikely that the Bank will revert to 10%.3 The current information management sys- those types of investments, and it therefore also tems, however, are not yet adequately refined to unlikely that the Bank will attain those levels again. align or attribute fully the Bank's contributions to the However, there has been further decline in agricul- MDGs. For example: lending towards Goal 1 tural lending over the past five years, since From includes all economic activities, access to, and quality DEVELOPMENT CONTEXT: WHY A STRATEGY UPDATE IS NECESSARY of, infrastructure and assets and may not be exclu- agement has spoken on the need for freer trade in sive to the poverty reduction objective. Similarly, several international fora. The Bank's impact systematic tracking of lending to rural women remains limited, however, as the Bank has no direct (MDG 3) has not been possible with the present influence over OECD countries in addressing such portfolio analysis tools. Bank-wide systems are now issues as subsidies and market access. being put in place to achieve better alignment and it is anticipated that the work undertaken in FY99- Why From Vision to Action Did Not 01 will form part of the baseline for monitoring the Completely Succeed rural sectors' contribution to the MDGs. Earlier approaches to rural development often involved significant government intervention fre- Improved Leadership Role of the Bank quently leading to inefficiencies, reduced institutional in Rural Development sustainability and pricing and marketing policies that The Bank has made progress toward achieving a were adverse to farmers. From Vision to Action rec- leading international role in rural development ognized the deficiencies in these approaches and as was envisaged by From Vision to Action, as it has attempted to find new avenues for rural develop- significantly influenced thinking on the holistic ment assistance. Approaches such as community nature of rural development, decentralized deci- driven development, pluralistic rural service provi- sion making, and greater stakeholder participation. sion and support to producer organizations Several international agencies developed similar emerged and have been piloted. The major chal- strategies afterwards. lenge for the future is to scale up the best practices among these pilot projects. In regard to developing fair and freer trade and increased access to OECD markets for client coun- Why did the envisaged rural development program tries, the record has been disappointing. The Bank not materialize? Why were the results under From has not taken a forceful position on this until Vision to Action mixed? The Bank has analyzed this recently, when more active support to client coun- question thoroughly. Some reasons are associated tries in their preparation for WTO negotiations has with decision making at the client level. Earlier polit- been offered. Additionally, the Bank's senior man- ical interests in rural development (for example Figure 1.1: IBRD/IDA Agriculture Sector Approvals, FY70-01: 12 FY01 $ million; Percent ofTotal Bank Approvals 3 year moving average (Agricultural) 3 year moving average (Agricultural as a % of total Bank) 6,000 45 40 5,000 35 4,000 30percent million 25 $ 3,000 20 FY012,000 15 10 1,000 5 0 0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT securing food for urban areas) have now been met departments of the Bank, , it was not integrated into in most regions, and more focus should be placed the strategies of most Bank client countries.The lack on the neglected political voice of the rural poor of baseline data and clear outcome indicators for with appreciation for the ethnic, age, and gender From Vision to Action limited the value and impact of diversity of this group.The PRSP process offers new the monitoring and review processes. opportunities to get the needs of the rural poor better recognized. A preliminary review of the first Other reasons for the mixed results of From Vision set of PRSPs and Interim PRSPs prepared during to Action are more internal to the Bank and are 2000 and 2001 showed that in all these docu- mainly concerned with relative costs, resource lev- ments, rural development was stated as a priority els, and resource allocation mechanisms. Over the (Cord, 2001a). However, the actions were often past few years, the Bank has been called to attend narrowly defined and tended not to address the to an expanded mandate, thus increasing competi- broader needs of rural development. The involve- tion for resources. Against this background, rural ment of agencies often considered to be champi- projects are perceived as more costly, more com- ons of rural development in the PRSP processes plex, riskier, and smaller and slower disbursing. In such as the Ministries of Agriculture or Rural addition, staff responded to an apparent decline in Development, rural NGOs, and community based demand from client countries for rural operations. groups was felt to be weak. Annex 1 presents the major achievements and les- Systematic implementation of From Vision to Action sons learned of From Vision to Action as derived did not last long.With the exception of Africa, after from OED's rural strategy review (World Bank, the initial adoption of the strategy, it was never 2001c), the Rural Portfolio Review, and internal deepened and taken forward by the regions.While deliberations within the rural sector units within this strategy was reasonably well known within rural the Bank. Table 1.1: Alignment of Rural Space Lending of the Rural Portfolio with the MDGs (FY99-01) ($m) Millennium Development Goals Total Bank Total Bank IDA IDA Lending Lending ($m) % ($m) % 13 Goal 1. Eradicate extreme poverty and hunger 6,998 46 3,215 40 Goal 2. Achieve universal primary education 1,134 8 751 9 Goal 3. Promote gender equality and empower women1 n/a n/a3 n/a n/a Goal 4. Reduce child mortality2 178.5 1 132 2 Goal 5. Improve maternal health2 178.5 1 132 2 Goal 6. Combat HIV/AIDS, malaria and other diseases 1,251 8 729 9 Goal 7. Ensure environmental sustainability 1,289 8 689 9 Goal 8. Develop a Global Partnership for Development 2,421 16 1,340 17 Rural Space investment ($m) FY99-01 directly aligned to MDGs 13,450 88 6,989 88 Contributing to multiple goals 1,768 12 981 12 Total Rural Space Investment ($m) FY99-01 15,218 100 7,970 100 Notes: 1 The portfolio review ranked this activity but did not differentiate funding allocated. 2 The portfolio review marked Key Components supporting the two Goals (5 and 6) in a combined manner. Due to the methodology used, it is not possible to allocate the actual shares of lending to these Goals.The lending amount for the Key Component has therefore been divided arbi- trarily and allocated equally to the two Goals 3 This can be calculated at 3% using a different data set. DEVELOPMENT CONTEXT: WHY A STRATEGY UPDATE IS NECESSARY ENDNOTES 1 In this report, the term "rural space" includes small and medium sized towns, according to the national definitions and applies to all sectoral investment i.e., social sectors as well as agriculture, natural resources management, infrastructure etc, in rural space. 2 Source:The Rural Portfolio Review FY2001 Investment Profile of the World Bank's Rural Portfolio--Synthesis Document. The document provides further details on the analysis and the lending breakdown. 3 When using only the Bank's sector codes and methodology used for defining rural space against Goal 2--achieving universal pri- mary education--a share of some 49% of total Bank lending was estimated as allocated to rural space and for the combined health sector Goals (Goals 4­6) some 54% of Bank lending was estimated to be allocated to rural space. 14 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT 2 FRAMEWORK FOR A RENEWED RURAL DEVELOPMENT STRATEGY 15 his chapter presents the overall approach of the World Bank's strategy in reaching T the rural poor and reducing poverty in rural areas. At the outset, it must be recognized that reducing poverty requires a strategy flexible enough to be adapted and adopted by individual regions, countries, and even sub-regions within countries.This chapter also describes the Bank's priorities in rural policy and institutional development. While building on previous strategies, the new strategy has five distinct features: Focusing on the poor. The Bank is moving Addressing impact of global developments on to holistic pro-poor rural development and client countries. The Bank is placing increased the enhancement of returns to labor, land emphasis on global development issues, including and capital. international trade policy, the subsidization of agriculture and global climate change. Fostering broad-based growth. While reaf- firming its commitment to agriculture as the These features are threaded throughout the strat- main engine of rural economic growth, the Bank egy discussion that follows. recognizes the importance of non-farm eco- nomic activities and the private sector. A HOLISTIC APPROACHTO RURAL Addressing the entire rural space. The Bank is DEVELOPMENT WITH A FOCUS ON moving to cross-sectoral approaches for the POVERTY REDUCTION longer term--and away from short-term sector- by-sector approaches--yet addressing directly The Bank's revised rural strategy focuses on the shortcomings of earlier top-down, non- improving the well-being of rural people and inclusive approaches. reducing rural poverty in the widest possible sense. Figure 2.1 provides a conceptual overview of this Forging alliances of all stakeholders. The Bank strategy revision. Rural poverty focus entails much is increasing broad-based stakeholder participa- more than increasing the average income of rural tion in design and implementation, away from populations--it envisages improving the quality of working mainly with central governments in rural life. Accordingly, the Bank's vision for the project and program design. developing world is one in which: Figure 2.1: Organization of the New Rural Development Strategy Context: Global Challenge Regional Strategies Lessons Learned 16 Mission: Rural Poverty Reduction Strategic Fostering an Enhancing Encouraging Improving Social Enhancing Sustainable Objectives: Enabling Environment Agricultural Non-Farm Rural Well-Being Managing Management of for Broad-Based Productivity and Economic Growth Risk & Reducing Natural Resources Rural Growth Competitiveness Vulnerability Actions: Implementation Strategic Partnerships Overall Thrusts Regional Action Plans REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Rural residents enjoy a standard of living and a THE RURAL-URBAN INTERFACE IN quality of life that is not significantly below that RURAL DEVELOPMENT available to urban residents. The poor have much in common with each other Rural communities offer equitable economic wherever they live. Nevertheless, rural areas opportunities for all of their residents regardless around the world share a number of characteristics of income, status, gender, or ethnicity. that are distinctly different from urban areas. For this reason it is necessary to examine the specific Rural communities become vibrant, sustainable approaches required to address the needs of the and attractive places to live and work. rural and urban poor separately. The Bank's rural strategy recognizes that urban and rural areas are Rural areas contribute to national development inextricably linked in the process of development, and are dynamically linked to urban areas. and that the strategy must take into account the diverse range of interactions between urban and Rural areas adapt to on-going economic, social, rural economies when crafting future development cultural, environmental and technological change. efforts. All countries experience a transition from a predominantly rural to a more heavily urban char- The overall vision of the new strategy, which has acter of their economies as development pro- been endorsed by the Bank's clients via a number of gresses. Urban and rural areas are a continuum, but consultations, requires a clear shift in government they are also internally heterogeneous. and international donor priorities to increase resources available for holistic rural development Development strategies need to be differentiated efforts. Some of the key elements of the holistic for urban and rural areas. However, there should be approach are as follows: an overall coherence between urban and rural development. Economic development is a dynamic Sustainable rural development requires multi-dis- process potentially affecting all areas of a society, ciplinary and pluralist approaches to poverty,social and urban growth can be a catalyst for rural eco- and gender equity, local economic development, nomic activities. Population flows are ongoing, not natural resource management, and governance. static, so the actual boundaries of rural and urban areas are constantly shifting. In fact, despite high An agricultural focus is necessary, but not suffi- rural birthrates, most population growth in the cient for sustainable rural development. More next decades will be in urban areas, largely as a 17 integrated approaches are also needed--inte- result of continued rural to urban migration. Rural grating infrastructure and agricultural technolo- areas can often be more prosperous and produc- gies, institutions and capacity building, non-agri- tive when they are close to, or integrally linked to, cultural job creation, and human capital. urban centers which provide opportunities for agglomeration, major markets, financial resources, Solutions in rural development must be based and employment options. At the urban periphery on participation, empowerment, and rural gover- and in small and medium towns, the "rural" and nance; address directly the shortcomings of ear- "urban" distinctions can be blurred. Non-farm lier top-down, non-inclusive approaches; and employment (small manufacturing and services) is must also foster growth of the private sector, and important in rural economies, and urban agricul- the use of market mechanisms. ture (household plots) is a significant source of food and incomes in many cities. Developing rural institutions and capacities requires long-term efforts. Migration is an integral part of rural and national development and societal change. It allows individu- Piloting and experimenting are desirable, but als to respond to economic opportunity and helps replicability must be a design objective. to manage risks and accumulate assets. Mobility is FRAMEWORK FOR A RENEWED RURAL DEVELOPMENT STRATEGY frequently adopted as a critical livelihood strategy port about four times the volume. Health and edu- for many households. Patterns of migration are cation are almost inevitably quantitatively and qual- themselves diverse ranging from rural-urban, rural- itatively less developed than they are in urban rural and urban-rural and may be daily, seasonal, areas.There are typically low volumes of trade, high annual, or permanent. Part or all of the household margins on goods purchased from distant centers, may migrate. Much migration remains circular and few competitors, and high transaction and informa- many migrant household strategies remain based in tion costs. Many rural markets are highly seasonal their villages of origin.The multi-locational nature of and require storage capacities and financial services livelihood strategies necessitates policies that both that are seasonal as well. This restricts trade and understand and recognize population mobility, and employment in the off season. Because of these which aim to minimize any negative consequences constraints, the private sector finds rural areas less and build on opportunities (de Haan, 1999). desirable than urban ones. Therefore, rural infra- structure services must be seen as public goods Rural enterprises are generally small and suffer requiring public support. from diseconomies of scale (Table 2.1). Rural areas at low levels of development face specific market failures. In most poor rural areas, transport, energy, SELECTIVITY ATTHE REGIONAL AND and telecommunications and business services are COUNTRY LEVELS deficient and expensive, if available at all.These defi- ciencies often have different impacts on male and To support rural development effectively, the female farmers. In Sub-Saharan Africa, crops such as principle of selectivity has to guide implementa- cocoa and coffee, marketed by men, are often col- tion. The Bank's strategic framework paper (SFP) lected from the farm gate whereas food crops mar- and strategic direction paper (SDP) provide guide- keted by women have to be transported to the lines for selectivity at corporate, regional, and coun- market. Studies in Ghana andTanzania revealed that try levels. The selectivity criteria outlined below women spend nearly three times as much time in indicate that the Bank does not intend to work on transport activities compared with men, and trans- all components of the strategy in all regions, and Table 2.1: Characteristics of Rural and Urban Enterprise Environment and Markets in 18 Developing Countries Characteristic Rural Areas Urban Areas Scale of enterprises Predominantly small Small, medium and large Intermediary providers of inputs, Few private providers Many private providers credit and services Public services and infrastructure Scarce, unreliable, and expensive Relatively favorable Markets for products and labor Highly seasonal Year-round Access to markets Poor access to markets, Good access especially for the poor Competition Thin markets, many nearly natural Most sectors have competitive markets monopolies Transaction costs in markets High due to poor infrastructure, Relatively low and many small dispersed buyers and sellers REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT especially, in all countries. Rather, the program has The foundations of the revised strategy are the six a focused hierarchy of priorities that lead to a tai- regional action plans, each the product of intensive lored and selective program for each of the individ- consultations with the full range of stakeholders ual regions and countries. CASs will reflect the spe- including local organizations, national governments, cific decisions by national governments and the private firms, NGOs, academics, and fellow donor Bank regarding the degree of support for rural agencies. The six regional action plans reflect rural development to be provided by the Bank. development agendas fully consistent with the overall Bank rural development strategy. Each has a Corporate Priorities poverty reduction focus and a multi-sectoral At the corporate level the priorities are set to ful- approach with increased emphasis on the private fill the Bank poverty-reduction mandates. The sector, yet they all maintain a region-specific charac- global strategy provides overall priorities for coun- ter. The differing foci of the regional action plans tries at all stages of development. The corporate reflect the varying conditions and the tailored appli- priorities are also geared to programs supporting cation of the corporate rural development strategy global public goods that convey shared benefits to reduce rural poverty and contribute to achieving world-wide (such as support to CGIAR and agri- the MDGs. cultural trade advocacy). The Africa action plan places major emphasis on the Regional Priorities institutional foundation for reducing rural poverty. It At the regional level, the strategies exhibit a greater advocates support for government efforts to decen- level of selectivity and diversity. Each regional strategy tralize, and enhance the participation of rural com- and action plan reflect the specific conditions, stages, munities.The East Asia and Pacific regional plan calls and lessons learned in the given region, and the Bank's for financing programs that directly attack poverty comparative advantage in that region. The regional through targeted productivity enhancing invest- action plans also provide region-specific implementa- ments in very poor areas.The Europe and Central tion guidelines and concrete programs for delivering Asia region focuses on sustainable rural productivity Bank support in rural areas. growth and the completion of the transition process Table 2.2: Country (or regions within countries) Priorities by Level of Development 19 Least Developed Less Poor Middle Income Broad-based Market Growth Promote agriculture Improve agricultural Promote competitiveness of for agriculture and non-farm Integrate subsistence farmers productivity and diversification the commercial rural sector economic activity into market economy Non-farm private sector Promote high-value crops Develop rural infrastructure development Expand private sector provision and basic institutions Improve access to markets of semi-public services Improving social well-being, Basic social services Expand social services Specialist medical services and managing risk, and reducing Introduce safety nets Promote improved risk higher education vulnerability Develop social capital management Comprehensive national safety nets Sustainable management of Property rights Getting resource prices right Environmental regulation natural resources Reduce soil degradation and Watershed management Reduce negative externalities deforestation of agriculture FRAMEWORK FOR A RENEWED RURAL DEVELOPMENT STRATEGY in the rural areas. In the Latin America and THE COMPARATIVE ADVANTAGE Caribbean region, the action plan puts special OFTHE WORLD BANK IN RURAL emphasis on rural and urban dynamics, and adopts DEVELOPMENT a Local Economic Development approach to addressing rural development built around The World Bank is the largest single provider of increased participation of local actors including local loans for rural development, including 60% of all and sub-national governments, private sector and agricultural lending by the international financial organizations of civil society. The Middle East and institutions. Because of this substantial involvement North Africa action plan places a high priority on and experience with rural development, the World rationalizing water management and policies. The Bank has a comparative advantage in rural develop- focus of the South Asia regional action plan is the ment. Bank support to agriculture equals roughly enhancement of human and social capital develop- one-third of total official development assistance ment in rural areas, as well as decentralization (see (ODA) to agriculture specifically, and about 20% of Annex 3 for more information on the regional all assistance to agriculture-related activities. It is esti- action plans). mated that the Bank also provided at least the same amount ($2.5 - $3 billion) of resources to other Country Level Priorities themes in rural areas (including, infrastructure, The differences in emphasis among the regional health and education). The Bank's strong partner- strategies are critical to their ultimate success in ships with most of the major bilateral and multi-lat- implementation. The participation of stakeholders eral development agencies, and key UN Agencies from each individual country ensures that the such as the FAO and IFAD in supporting rural translation of the regional action plans into country development, gives it a depth of knowledge and implementation plans will reflect the unique char- experience in assisting the world's rural poor. acteristics of each country. For East Asia and Pacific, Specifically, the Bank has comparative advantages in Middle East and North Africa, and South Asia, the the following areas: regional priorities have already been translated to country-specific priorities and action programs. For Power to Convene. The Bank is the only global Africa, Europe Central Asia, and Latin America institution capable of bringing together all stake- Caribbean, detailed action plans have been devel- holders and donors, including the private sector, oped for major country groups. to discuss important issues and set objectives for assistance strategies. This convening power At the country level, the priorities and the mix of allows the Bank to play a catalytic role in bring- 20 Bank assistance instruments are determined by ing forth new directions and agendas in rural many factors, including progress in policy reforms, development programs globally, regionally, and the size and state of the rural economy, and the for individual countries, and lever the efforts of access to external finance and markets. Country donors and other international institutions. priorities reflect greater selectivity than the region- al objectives.At the country level, the development Ability to Provide Both Finance and Policy of country-owned rural development strategies Advice. The diversity of instruments available to will provide the framework for translating the cor- the Bank enables it to provide policy-oriented porate strategic framework into reality for the technical assistance and also to support the given country. implementation of Bank-endorsed policies through a variety of investment programs. The country and sub-regional priorities obviously reflect regional and country conditions, but, at the Ability to Approach Rural Development same time, they share common features across the Holistically. As a multi-sectoral institution, the regions corresponding to their levels of develop- Bank is able to provide a cross-cutting and holis- ment, their policy and institutional environments, tic perspective to the truly multi-dimensional and their natural resource endowments (Table 2.2). nature of rural development (including agricul- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ture, non-farm economic production and rural improving social well-being, managing and miti- physical and social infrastructure), and integrate gating risk, and reducing vulnerability; and these into a broader, comprehensive develop- ment framework and PRSPs. enhancing sustainability of natural resource management. Depth of Knowledge and Experience. The Bank's physical presence in almost every client The elements of the strategic objectives conceptu- country provides an unmatched depth of knowl- ally all fall under the two key headings identified as edge.The economic and sector work produced the critical foundations for successful poverty by the Bank in individual countries, in the regions, reduction (Stern, 2001), namely, creating an invest- and globally provides an invaluable knowledge ment climate conducive to rural growth, and base for donors and governments alike. empowering the poor to share in the benefits of growth.The entire strategy approach, as well as its Ability to Provide Clients with Advice Based specific strategic objectives, are fully consistent on World-Wide Best Practices in Rural with the 2001 World Development Report on Development. The world-wide scope of Bank poverty and the 2003 World Development operations, as opposed to regional, or national Report on sustainable development. Addressing development efforts, allows for the diffusion of rural space in its entirety naturally draws on the knowledge and experiences on a global basis. principles underlying the Comprehensive This also allows for the development of part- Development Framework.The rural strategy must nerships and communities of interest and prac- emphasize and utilize the linkages and coherence tice that cut across countries and regions. among all sectors operating to meet the needs of the rural poor and rural communities, such as Impartial Long-Term Development Agenda. Health, Education, Transport, Infrastructure and The Bank is a collectively owned international Communications, Agriculture, Public Sector institution that is not driven by narrow profit Reform, Private Sector Development, and Social maximizing objectives. This reality allows the Protection. As such, it recognizes and draws upon Bank to provide its clients with impartial, multi- the many sectoral strategies of the Bank including year support to rural development, even when the links between urban and rural strategies. political or economic conditions, or conflicts in a given country do not provide immediate busi- The five objectives represent individual compo- ness opportunities attractive to private financial nents of rural development that must be imple- 21 institutions. mented in an integrated fashion, tailored to each particular situation.The successful implementation of these objectives in each country requires a STRATEGIC OBJECTIVES coherent institutional and public policy environ- ment for rural development.The five objectives are The strategic objectives are now addressed by discussed in turn in the five following sections. A returning to the Bank's objectives in rural poverty holistic set of strategies and actions must be devel- reduction (Figure 2.1), which are geared to accel- oped for each setting. erate broad-based rural growth by: fostering an enabling environment for broad- based and sustainable rural growth; enhancing agricultural productivity and compet- itiveness; encouraging non-farm economic growth; FRAMEWORK FOR A RENEWED RURAL DEVELOPMENT STRATEGY FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED 3 AND SUSTAINABLE RURAL GROWTH 23 he strategy From Vision to Action correctly recognized that the rural development T challenge could be met only if international and domestic policies, institutional frameworks, and public expenditure patterns were conducive to sustainable rural development. In spite of progress in our client countries, the process of policy and institutional reform is far from complete.This strategy stresses the need to complete the traditional policy reform agenda and to address new policy issues in client countries. In addition, rural financial services and good governance are also essential components of an enabling environment for successful rural development. The Bank will continue to place emphasis on the poverty reduction and economic growth in the enabling policy and institutional environment for developing world. However, while the volume of rural development, fully embedded within the global merchandise trade grew by a factor of 17, the wider country economic policy and institutional growth in agricultural trade has been relatively mod- framework. In addition, however, no amount of est, approximately matching the six-fold increase in progress will be sufficient for agriculture to fulfill its world production.Further,although developing coun- role as an engine of economic growth until a global tries as a whole have increased their share of world environment conducive to commerce is estab- trade in manufactures, this has not been the case in lished, with the elimination of high international agriculture (World Bank, 2001b). trade barriers to agricultural products.The Bank will thus also enhance its role in, and contribution to, OECDTrade and Domestic Subsidy Policy - international policy for dealing with agricultural a Major Barrier to Agricultural Growth in trade and subsidy issues. Developing Countries A major reason both for the limited growth of agri- cultural trade and for the inability of developing Current Farm Support Levels in OECD countries to capture a larger share of agricultural 3.1 countries as measured by the Producer trade is that protection, especially in the large OECD Support Equivalents (PSEs) markets, has remained high (OECD, 2001a). Barriers to imports in OECD countries, together with Producer support levels (PSEs) vary widely across countries with- export-limiting policies in a number of developing in the OECD. PSEs for farmers ranged from 1% in New Zealand countries, have limited the volume of trade. At the and 4% in Australia to 60% or more for some countries (for same time, high levels of farm support in OECD example Japan, Korea and Norway). For the US, the average PSE countries have led to surpluses that have been is about 20%; for the EU 35%. PSEs also vary greatly among exported (sometimes with the use of export subsi- commodities: rice 81%; sugar 45%; wheat 36%; beef and veal 36%; poultry 16%. The highest levels of support are directed at dies) onto world markets, depressing world prices, temperate products, and it is sometimes argued that these are and further undermining the ability of agriculture to not the products of greatest interest to developing countries. contribute to global prosperity (Box 3.1). However, not only are these products significant in some devel- oping countries, but the heavy subsidies discourage growers of Total agricultural support amounted to $311 billion in tropical products from diversifying into these temperate crops. OECD countries in 2001 (OECD, 2002). This amounts to 1.3% of their own GDP, and is roughly 24 Source: OECD, 2002. equivalent to the GDP of all of sub-Saharan Africa. On average, prices received by OECD farmers were 31% above world prices (compared to 58% in 1986­88) and almost one-third of total farm receipts OECD AND DEVELOPING COUNTRY originated from government programs. Of this sup- TRADE POLICY REFORM CRITICALTO port, 69% is administered via price support and out- DEVELOPING COUNTRIES put payments, mechanisms that are the most distor- tionary for production and trade (compared to 82% Developing countries have a huge stake in the full in 1986­88). integration of agriculture under multilateral trade rules. In many of the least developed countries agri- Reflecting current levels of support, agricultural tariffs culture often constitutes the single most important in OECD countries remain extremely high, in spite of sector in the economy. Many developing countries the reductions introduced with the Uruguay Round have a comparative advantage in agriculture because Agreement on Agriculture (URAA).Recent estimates of their relatively large endowments of land and/or indicate average agricultural tariffs are about six times unskilled labor. Furthermore, a large number of the as high as industrial tariffs.Tariffs of over 50% exist for poor derive their livelihood directly, or indirectly from 60 tariff lines in Canada, 71 in the EU, 14 in Japan and agriculture. Agricultural trade, therefore, is crucial for 8 in the United States (McCullock et al, 2001).These REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT cover nearly US$5 billion of developing countries Policy Bias Against Agriculture in Many exports (despite the high rates) and are almost Developing Countries exclusively focused on agriculture. Given these Policies of developing countries also discriminate extreme levels of OECD countries' trade barriers-- against their own agricultural sectors. Krueger, for example, 129% for sugar in the United States and Schiff and Valdes (1988) found that in the past 162% for grains in the EU (Elbehri et al., 1999)-- developing countries have typically taxed their improved market access offers the potential for huge agricultural sectors, to some extent directly (for increases in income in developing countries that can example by taxes on exports or controlled food supply these products. prices), but even more so, indirectly, through trade barriers and macroeconomic policies that overval- Protection also escalates with the level of processing, ued the exchange rate, turned the internal terms particularly in markets for processed tropical prod- of trade (manufactures prices vis-à-vis agricultural ucts, reducing the scope for profitable development prices) against agriculture, and kept the prices of of value-added activities in developing countries.Tariff agricultural inputs high. These indirect policies escalation essentially taxes developing countries for affected production incentives by making agricul- trying to process their products. ture relatively less attractive than other sectors of the economy. This tends to draw resources away High levels of export subsidies in some OECD coun- from the agricultural sector towards the manufac- tries remain a major factor in world food markets turing sector, diverting resources away from the and have wide effects on world prices and market sector that has comparative advantage. conditions. Between 1995 and 1998, global export subsidies amounted to over $27 billion cumulatively, Many of the direct measures have also been equiv- of which over 90% is from the EU (Elbehri and alent to a tax on agriculture, depressing the prices Leetma, 2002). For potential agricultural exporting received by agricultural producers below levels countries OECD export subsidies reduce prices and that would otherwise prevail. Commodity and make it difficult for them to compete. For importers, input markets have been characterized by heavy they can bring short-term benefits in terms of lower government interventions through centralized import prices. But for both groups of countries they procurement measures (government parastatals can be detrimental to agricultural development in the and marketing boards), input subsidies, quotas on longer run. exports of agricultural commodities, direct taxa- tion of such exports, and various regulatory rules In addition, agricultural imports into OECD countries and decrees. Other direct interventions have 25 and other major markets face an array of health con- attempted to hold down the costs of food for trols, referred to as sanitary and phytosanitary (SPS) urban consumers. Some direct interventions have barriers.While ostensibly designed to protect human, benefited agricultural producers, however. animal and/or plant life, such measures can potentially Governments have often subsidized the costs of restrict trade and pose major market access prob- farm credit and important agricultural inputs, such lems for developing country suppliers. Further, even as fertilizer. when legitimate standards are imposed, developing countries may have serious difficulties proving that During the 1990s many of these interventions their exports actually meet these standards, due to have been eliminated or reduced in scope. the high cost of some testing and certification proce- Developing countries have reduced the explicit dures. Technical capacity constraints--both in the and implicit taxes on the sector and have often public and private sectors--may also seriously hinder reformed marketing arrangements. In addition, developing country compliance,as testing procedures exchange rate overvaluation and high industrial are very expensive. Current rules do not recognize sector tariffs are less prevalent. In many countries, the real difficulties that developing countries have in tariffs on industrial products have been lowered imposing the standards with the emerging array of more than in agricultural products, reducing rela- international standards and technical requirements. tive distortions against agriculture. FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH Although the magnitude of the bias has been reform estimates that the increase in aggregate reduced, it still remains significant. Average tariff on welfare of the developing world could be some US agricultural products remain high--at 113% in $142 billion annually.This does not include any eco- South Asia, 75% in sub-Saharan Africa, 71% in nomic welfare gains from liberalization of trade in North Africa, 54% in Central America, 49% in services, or investments, or reductions in imperfect Eastern Europe and 48% in the Middle East competition. Most of these gains would come from (Gibson et al., 2001)--and continue to create bar- trade policy reforms within the developing coun- riers to greater South-South trade in agricultural tries themselves (about US $114 billion), while the products, which has the potential to improve pro- impact of liberalization in OECD countries upon ductive efficiency based on true comparative developing countries is about US $31 billion-- advantage. Most reforming countries have eliminat- amounting to more than 50% of the official devel- ed export taxes, but there are still some cases of opment assistance given to developing countries in export restrictions.Also, the operation of inefficient 2001. When more dynamic effects of liberalization state-owned marketing enterprises for key agricul- are considered including productivity gains, the tural exports continues in some countries. Despite benefits are potentially much larger (Table 3.1). significant improvements in their macroeconomic and trade policies in the last two decades, many Overall, the potential gains from liberalization of developing countries still retain a policy bias against agricultural markets are estimated to be substan- agriculture. tially higher than the potential benefits from liberal- izing manufacturing, even though agriculture Large Potential Gains from Agricultural accounts for a much smaller share of total world Trade Liberalization merchandise trade. For the most part this is due to A recent World Bank study on the potential eco- the relatively higher level of agricultural protection nomic welfare benefits of global agricultural trade (Figure 3.1). Table 3.1: Gains from MultilateralTrade Liberalization in Agriculture and Food, billions of 1997 US dollars Liberalizing Region Benefiting Region Static gains: Dynamic gains: 26 fixed productivity endogenous productivity High Income High Income 73 144 Low Income 31 99 Total 104 243 Low Income and High Income 23 53 Middle Income Low Income 114 294 Total 136 346 All Countries High Income 106 196 Low Income 142 390 Total 248 587 Source: World Bank, 2001, p.171 Note: Static gains refer to the results holding productivity constant. Dynamic gains allow productivity to respond to sector-specific export-to-output ratios. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Figure 3.1: Gains from Full Multilateral Trade Liberalization, as a percentage of income Agriculture and Food Other Sectors 0 1 2 3 4 5 Low- and Static middle-income countries Dynamic High- Static income countries Dynamic World Static Total Dynamic Note: Static gains refer to results holding productivity constant. Dynamic gains allow productivity to respond to sector-specific export-to-output ratios. Source: World Bank, 2001. Developing countries themselves would net 83% of new activities, and liberalization results in unem- the benefits from liberalizing their own agricultural ployment and lower incomes. It is especially impor- trade policies. And the gains from developing coun- tant, therefore, that OECD countries, which repre- tries' liberalization contribute almost half of the gains sent the largest market for developing countries, from those countries' overall merchandise trade remove first their trade barriers. reform.These large shares reflect not only the sig- nificant distortions in those countries but also the In addition, developing countries have extra reasons fact that the food and agricultural sector is such a to support the full integration of agriculture under large part of the economy of developing countries. multilateral rules. First, and most basic, are the potential gains from the strengthening of a "rules- From the scale of these numbers, it is clear that based" global trading system. Developing countries 27 there are big potential welfare gains from a suc- as a group would benefit most when all trading cessful negotiation of the Doha round, for devel- countries play by a common and more liberal set of oping and developed countries alike. The impor- rules. Second, multilateral agreements and trade tance of the multilateral approach to liberalization negotiations should help developing countries to cannot be overemphasized.The model simulations, undertake and "lock-in" their own trade and in fact, assume that in achieving these gains unem- domestic policy reforms needed to advance their ployment is fixed, so that, once market barriers are development objectives. Reciprocal trade agree- lowered in a given country, all the farmers who ments can facilitate the political economy of policy were producing the now imported foodstuffs will reform in developing countries by enlisting the sup- shift to producing export crops or to work in non- port of other sectors of the economy that would farm occupations. With other markets closed, the gain from trade reforms, thus helping to sustain the former cannot happen, and the latter is difficult to pressure of domestic lobbies for protection. Third, achieve. In other words, if only one country liber- the new round of trade negotiations should expand alizes, foreign producers would enter that new trade in agricultural products, thus reducing the market causing a need to shift production. If trade volatility of world prices that is so high partially barriers in other markets and have not been low- because of the current thinness of markets. Since ered, however, there is little chance of entering producers and consumers in poor countries are FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH especially vulnerable to large price fluctuations, they comparative advantage is that it can combine trade have a special interest in the reduction of interna- policy analyses with significant sectoral expertise tional commodity price volatility. into a comprehensive view of how agricultural trade liberalization, globalization, and market integration World Bank Actions in theTrade Arena can promote growth and rural sector development. The World Bank will continue to assist its clients to This capacity can be used to support better agricul- improve their own trade policies, and to use the sys- tural and trade policies through: tem of multilateral trade rules to expand their trade and thereby enhance their development prospects. Advocacy of trade liberalization in both OECD The Bank's role is particularly important in integrat- and developing countries. The Bank supports ing the complex multilateral and sectoral trade pol- developing countries in their efforts to increase icy issues (especially on agriculture) with economic their market access for agricultural products in growth and poverty reduction objectives.The Bank's OECD countries. This will, first of all, require that the Bank be clear and outspoken in regard to market liberalization in the OECD countries. Turkey - From the Economic Reform to It should also advocate that the removal of cur- 3.2 the Agricultural Reform Implementation rent protection levels not be replaced by non- Project tariff barriers. In 1999, a new and reform-minded Government came to power Mainstreaming agricultural trade liberalization in Turkey. The Government formulated a wide-ranging program and trade capacity development in the Bank's of macro-economic stabilization and adjustment. The country assistance and operations (for example Government's agriculture reform program encompasses three main initiatives designed to reduce the heavy burden on the in national rural development strategies, CASs, budget and Turkish consumers, while promoting agricultural and PRSPs). growth. The first is to introduce a unified national program of direct income support to improve the access of smaller farmers Facilitate capacity building through technical assis- to budget support and to encourage new income generation ini- tance and training on trade-related issues. The tiatives by farmers. Second, the Government is phasing out the Bank will support developing countries in equip- system of subsidies for fertilizer, credit, and price supports, which ping themselves with policy and institutional tools disproportionately benefit large farmers and regressively tax con- to manage their integration into the global econ- sumers. The third initiative is to privatize state enterprises in omy. Bank programs in trade capacity building are 28 agriculture to reduce Government involvement in the marketing geared towards: institutional capacity building; and processing of agricultural products. development of country specific statistical data- bases for policy monitoring; and, providing training The Bank has been supporting adjustment in agriculture and to participate effectively in trade negotiations and other sectors through a separate Economic Reform Loan (ERL), approved by the Bank's Board in May 2000. Agreement on oper- develop national trade capacity necessary to cap- ationalizing the recommendations made by the Bank on agri- ture the benefits from trade integration. cultural policies (in agricultural support policy notes) was reached during ERL preparation. However, full implementation Increase assistance in the area of Standards and requires financial support over a time horizon extending well SPS regulations. In addition, improvements in past ERL. This is being provided through the Agricultural Reform developing countries' food safety and sanitary Implementation Project (ARIP) approved by the Bank in 2001. conditions is a prerequisite to be able to take This operation, not only supports the policy reform described advantage of any trade liberalization.The Bank is above, but also includes components to assist in setting up the engaged in different capacity building programs, direct income support system, to transform the government- including: analytical research on the costs of regu- dominated cooperative system into a true member-operated lation and compliance, and quantitative assess- coop network, and to help farmers switch crops as price sup- ports are removed and the crop-specific state economic enter- ment of standards and regulation as barriers to prises are privatized. trade; diagnostic assessment of the current situation in country supply systems and regulato- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ry/certification arrangements, including the prepa- 3.3 Bulgaria - Agricultural Sector ration of country-specific action plans; and, pro- Adjustment Loans I&II duction of toolkits to help countries and donor agencies identify problems and formulate action A new government was elected in 1997 with a strong com- plans in the area of food safety issues. mitment to market reform. Government eliminated export bans and controls on profit margins of agriculture and food, elimi- Analytical work at both global and country levels nated most import quotas and duties on cereals, liberalized identifying key areas for future policy reform.The markets and abolished subsidies for cereal products. The gov- Bank is conducting rigorous research on the ernment also has a program with the IMF. The objectives of the impacts of WTO agreements, agriculture trade sector adjustment loans were to promote efficiency in the agri- liberalization and the implications of new trade cultural sector, contributing to rural employment generation, agenda issues on developing countries. Further better living standards and more consumer choice through: quantitative research will be carried out to assess impediments to agricultural trade integration and Promotion of a land market, including restitution of 80% development at the country level, and to meas- of land area eligible and several administrative measures to facilitate land transactions. ure the impacts of trade reform on food security Development of a private grain market by privatizing the and rural poverty reduction. grain marketing agency, and limiting the State Grain reserves stock levels to agreed amounts. Privatizing agricultural enterprises including agreed num- CREATING A DOMESTIC POLICY bers of grain mills, seed, and food industries. FRAMEWORKTO STIMULATE RURAL Privatizing irrigation systems through decentralization DEVELOPMENT:THE UNFINISHED transfer of management of operation and maintenance to AGENDA water users associations on at least 100,000 ha. Improving agricultural financing according to agreed criteria. For long-run benefits from trade liberalization to Liberalizing trade in most agricultural products. accrue, it is also essential that developing countries Improved forest legislation and increased community based participation in forest management. adopt domestic policies that facilitate adequate sup- ply responses. This includes an overall macroeco- Each loan was a one-tranche operation, supporting a medium- nomic policy environment conducive to agricultural term program. The Government took all of the designated steps growth and investment, a sound set of agricultural before each of the loans went to the Board. A key feature of sector policies, and the development of comple- the Bulgaria adjustment program is that it had the full sup- mentary markets for credit and agricultural inputs port of the elected government and Parliament. Another fea- 29 and services. In addition, the ability to translate ture was the willingness of the Bank to adjust the state improved market access for agricultural products reserves condition in response to perceived risks of food short- into significant poverty reduction depends signifi- ages by the Government in light of tensions in Kosovo over cantly on having a structure of land ownership that the period of the loan. encourages increased productivity. In spite of major improvements over the past decade, a comprehensive view of how agriculture can pro- many developing countries still need to introduce sig- mote growth and rural sector development, building nificant policy reforms in agriculture.The nature of the on its knowledge of international experience and reforms will be influenced by the degree of agricul- best practice.The Bank can support its policy-orient- tural trade and subsidy reform in OECD countries. ed technical assistance with provision of finance for a The World Bank will continue to assist its clients in variety of investment programs (Box 3.2). their efforts to improve their own policy environ- ment for rural development and thereby enhance Improving the Macroeconomic Context their development prospects.The Bank's role is par- for Agricultural and Rural Growth ticularly important in combining macroeconomic The major areas of domestic policy reform are policy analyses with significant sectoral expertise into macroeconomic policy, sectoral price and trade poli- FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH cies, land market policies, policies in other input mar- need to be reduced and taxation instruments kets, and legal and regulatory policies (Box 3.3 sum- need to be made explicit. marizes the Bulgarian agricultural adjustment loan which supported a comprehensive reform program). Stabilize macroeconomic policy and enhance Specifically, the World Bank will assist its clients in the the institutional framework and the credibility implementation of the following policy agenda: of rules. While macroeconomic polices have improved significantly in many countries, macro- Correct remaining biases in macroeconomic economic stability remains fragile and uncertain. environment. Economic growth in rural areas Evidence suggests that the credibility of reforms requires an undistorted exchange rate policy in many developing countries is poor due to that does not discriminate against agricultural unpredictable changes in rules and policies exports and/or imports of agricultural inputs. (Brunetti et al, 1998).This instability and fragility Macroeconomic and trade policies should seek to has an adverse effect on investor confidence eliminate remaining implicit taxation from cur- and growth. Improving credibility or the reliabil- rency overvaluation and high tariff and non-tariff ity of the institutional framework within a coun- barriers to improve agricultural production and try is a critical requirement to encourage pri- investment incentives. vate sector activity and investment in all sectors, including agriculture. Adopt the principle of non-discriminatory taxa- tion. Agriculture taxes should not be higher than Supporting an Enabling Policy Environment those for other sectors, and should be integrated for AgriculturalTrade with general value added, profit, income and and Market Access wealth taxes. Output and input taxes should be Trade policy measures need to foster agricultural minimized. High levels of agricultural taxation trade and create an institutional environment that facilitates exports, while protecting the poor from sudden price fluctuations: Strengthening Private-Sector 3.4 Reduce trade barriers and anti-export bias to Development and Market Approaches foster growth in agricultural trade. Despite in Rural Areas reforms, average tariffs on agricultural products Create a level-playing field for the rural private sector by remain very high in developing countries, and 30 removing anti-rural biases in the investment climate. there are still some cases of export restrictions.To Tune the methods for surveying investment climate to suit the realize the potential benefit of greater agricultural needs of rural areas, include the rural private sector in coun- trade, developing countries must liberalize their try-level surveys as well as in detailed surveys in rural areas own agricultural trade policies.This must be done and use the results for policy dialogue and interventions to carefully, and not unilaterally, however; with more improve rural investment climates. rapid liberalization possible if OECD countries Conduct pilot operations in rural areas with market solutions reduce trade barriers and subsidies. If OECD as alternatives to public services, and with Output-Based countries do not liberalize, the pace and structure Approaches for delivery of agricultural services, infrastructural of liberalization needs to take into account the services and social services; promote mainstreaming where intervention is proven effective. pace of change in the global trade regime. Promote access to markets for the poor. Facilitate expansion of privately operated financial services to Improve access to foreign markets. Developing all rural areas. countries need to be prepared to play a Promote private associations and public-private cooperation greater role in international trade negotiations that can help in solving market failures and in reducing high to promote international agreements that transaction costs of public services. achieve their market-access goals. Developing countries will also need to build their capacity in meeting the international sanitary and phy- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT tosanitary standards, which will become more maintained at a low level largely to benefit urban important to gaining market access. consumers. Because everyone benefits from the low food prices, the subsidies are very expensive Reduce protection on non-agricultural goods. straining government budgets while not target- Developing countries need to re-examine their ing the poor.The Bank will work with develop- trade policies beyond agriculture. Large import ing country policy makers to design safety-net tariffs on transportation equipment, machinery and compensation policies that are more effec- and agricultural materials impose higher costs tively targeted. on exporters who use these imports as inter- mediate inputs in production. This cost disad- Removing remnants of marketing boards. vantage erodes competitiveness and inhibits Controlled marketing systems continue to distort growth. Non-tariff barriers in fertilizer markets market price signals in many countries. Substantial continue to be widespread and inhibit private gains are attainable through careful introduction sector entry and competition in these markets. of foreign and domestic competition into the High average import duties create a general domestic markets for marketing, distribution and anti-export bias for the economy discouraging import/export services. Governments, however, gains in efficiency and diversification in general, need to ensure that the institutions are replaced including in agriculture. by satisfactory arrangements, that trader entry is not constrained and that newly liberalized mar- Cope with world commodity price decline and kets function adequately. fluctuations. Commodity price volatility implies a need to complement liberal trade policies Remove other obstacles to effective operation with policies to provide an adequate safety-net of input markets. Much progress has been for the poor. Useful strategies to cope with the made in the past two decades in reducing gov- cyclical trends include adopting prudent mone- ernment intervention in these markets. The tary and fiscal policies, avoiding higher export main area where additional progress is needed taxes, avoiding cartels, using hedging instru- is in creating a market-friendly environment ments and prudent financial management in that will permit the private sector to provide times of commodity price booms. Some coun- agricultural inputs without excessive govern- tries have avoided reform largely out of fear of ment regulation. Fertilizer is one input that was domestic repercussions from food price vari- often heavily subsidized in the past. ability.This reality brings to the fore the impor- Governments need to establish labeling regula- 31 tance of accompanying measures such as safety tions for grades and standards (for example for nets and compensation. Useful strategies to fertilizers and animal feeds), but the private cope with secular trends include export diver- sector should be permitted to deliver inputs to sification and more rapid adoption of new farmers in a competitive market environment. technologies. The Bank will continue to work with govern- ments to create a policy environment that will Introducing Sound Food and Agricultural be conducive to private sector participation in Policies, and Supporting Effective Markets agricultural input markets and does not restrict for Agricultural Inputs and Services farmers' choices of seed and other inputs to In addition to removing the anti-agriculture bias of government-approved varieties. policy, there are also large long-term gains to be made from improving competition in agricultural Sequencing is important to successful reforms. input and commodity markets: In the short run there can be large adjustment costs associated with improving the competi- Food subsidies and social safety nets need to be tiveness of domestic firms by liberalizing markets. more effectively targeted towards the poor. In But in the long term improved competition many developing countries, food prices are encourages faster growth of the sector than FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH 3.5 Good Practice in LandTenure and removal and liberalization is therefore a key issue Administration for a successful reform process. Complementary Legal and Regulatory The BThe Bank has accumulated broad expertise and a good track Frameworks that Facilitate Private record in the policy dialogue and investments dealing with land Enterprises administration. The main focus of these operations is formalizing and registering land rights to provide security of tenure, improve access to credit, and thereby reduce the vulnerability of rural poor, partic- Promotion of Efficient Markets and Private ularly for women. Comprehensive, public sector managed, free regis- Enterprise. In addition to correcting the remaining tration, as now promoted in Central and Eastern Europe on a large urban biases in the enabling environment and pro- scale, ensures that security of tenure is available to everyone, not moting a level playing field, governments are respon- only to those who can afford to pay for the service, as is the case sible for creating an environment that is conducive to in demand-driven systems. There is also extensive Bank experience the development and functioning of markets, busi- with land reform and land administration in Latin America and East ness enterprises and farms. Governments need to Asia. The ongoing portfolio of 50 projects has a 96% satisfactory adopt policies, and legal and regulatory frameworks supervision rating as far as expected development impact is con- that facilitate private enterprises and marketing cerned, compared with 89% for the overall agriculture portfolio. cooperatives and improve the investment climate for farmers and other private sector entrepreneurs.The Bank's Private Sector Strategy provides evidence of 3.6 Promote Equal Access to Secure Ownership for Women the importance of private-sector solutions for boosting growth and poverty reduction. In line with that strategy, actions of particular importance to There is also a gender dimension to land ownership, because land rural areas are given in Box 3.4. tends to be held predominantly by men in most countries. For exam- ple, in much of Sub-Saharan Africa conflict between customary and Introducing Effective Legal and Regulatory Policies statutory law in land rights is common. Women's use rights to land for the Efficient Functioning of Markets. Many are generally guaranteed through customary channels, but custom- developing countries have complicated systems of ary prejudices against women owning land mean that they are gen- erally denied titles to land. Even where local norms give women business regulations that increase costs of private rights to use land, these rights are acquired through men--thus sector operation and open up avenues for corrup- these rights are precarious and contingent on a woman's marital tion.These regulations need to be streamlined, and status (Engendering Development, World Bank, 2001a). In Cameroon training is needed for judges and lawyers on the 32 just 3.2% of land titles, representing just 0.1% of the registered modalities of the streamlined systems.The problem land mass, were issued to women. (Fsiy 1992). This often has the of efficient and fair adjudication of contract disputes consequence of depriving women access to credit and security in old is one of the major issues in many developing coun- age, and where women farm land independently of men, also dis- tries. To achieve development success, an efficient courages them from investing in productivity improvements. The and fair contracting system is essential. Contract Bank will seek to promote equal access to secure ownership for enforcement is required for the efficient functioning women in its rural operations. of markets. The Bank will work with developing countries to help create a legal framework and enforcement mechanisms for contracts to enable would have otherwise occurred and releases efficient market transactions. public resources for investment in other needed actions. Nonetheless, where reforms are likely to Continuing Land Reforms and Improving have immediate negative effects, choosing an Land Administration appropriate sequencing and speed of reforms may mitigate the impact on the poor and allow Improve the Operation of Land Markets and Land time to design compensatory policies to safe- Administration. Land is a key input in the rural guard the livelihoods of the poor during the tran- economy and functioning land markets are impor- sition period. Careful sequencing of subsidy tant for the development of agriculture. For land to REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT be allocated and used efficiently, it is essential that ments and insurance.There is also need for a wide land markets operate. But for land markets to func- range of service providers, formal as well as informal tion, owners need to have secure tenure; tenants (Box 3.7).Many rural areas are poorly served.Supply- need to have secure tenancy rights; rental fees and driven agricultural credit has generally proven unsuc- contractual arrangements should be freely negotiat- cessful and is no longer supported by the Bank, ed; titling and recording of land transactions should although still pursued in many countries. Although be in place; and a court system to enforce rights new approaches to rural finance are emerging, it is should function. Much progress has been made on generally felt that these approaches only partially these issues during the 1990s, and World Bank lend- meet the immediate challenges of broad-based ing for land administration has grown several fold rural growth and poverty reduction. The Bank will (Box 3.5). strengthen its support for the development of a diversity of products and institutions that fill the finan- Promote Land Reform for Countries with Inequitable Land Distribution. Some countries have a highly unequal pattern of rural land owner- Diversity in Rural Financial Services 3.7 ship. For example, in Brazil, for the year 2000 the wealthiest 5% of the farmers owned 69% of the nation's agricultural land, while the poorest 40% owned only 1.2% of the land. A more equal distri- The range of rural finance services includes many forms of savings, bution of land can produce greater social harmony, such as membership of a savings and credit association or a funer- higher productivity, and poverty reduction. Land al society, savings accounts in a bank, and holding financial papers. ownership has a significant gender dimension as People can borrow from relatives, friends, money lenders, micro-cred- well (Box 3.6). But the record of land reforms has it institutions, savings and credit cooperatives, banks, processors, been poor. Several countries (notably Brazil, traders and shopkeepers. Equity participation may be available as an alternative source for investment. Remittance transfers and trans- Colombia, South Africa) have been experimenting action payments can be made through banks, postal offices, or spe- with community-managed agrarian reform pro- cial services. Insurance can be obtained through policies for health grams that are often referred to as "market-assist- and other hazards, but also through forms of risk sharing in pro- ed." Under such programs, groups of landless peo- duction, buying and selling. ple negotiate directly with willing would-be sellers of land, and then, with credit and follow-up infra- structure investment provided by the state, pro- New Approach to Rural Finance ceed to establish a smallholder farming structure 3.8 33 backed by strong community organizations. The experiment with this approach for land reform, There is a growing consensus on rural finance: which in some countries is sponsored or financed Credit cannot compensate for urban bias. by the Bank, is still ongoing.The Bank is also active Credit subsidies almost never reach the poor. in supporting land reform and the transformation Providing financial services to poor people can be good of the farming sector of transition economies, business. focused on the provision of secure land tenure Rural financial systems and institutions must be judged by outreach and self-sustainability. rights and creating a system of land administration. There is also consensus on the characteristics that make rural finance institutions successful. Successful institutions are: DEVELOPING EFFECTIVE RURAL Rural-based but not specialized on agriculture. FINANCIAL SERVICES Autonomous. Able to charge market interest rates. In order to achieve broad-based economic growth Able to mobilize savings and reduce reliance on donor or and reduce vulnerability, people and enterprises in state funds. rural areas need access to a range of services for sav- Able to collect on loans and have few losses. ing, borrowing, remittance transfers, transaction pay- Able to provide staff incentives. FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH cial needs of low-income rural clients in income gen- to safe saving facilities and insurance mechanisms to eration and reduction of vulnerability. The Bank will smooth consumption, diversify risk, and cope with also try to reduce knowledge gaps about the relation vulnerability. In a developing market economy between financial services and poverty and about the demand for formal forms of savings, credit and effectiveness of various instruments. other financial services increases.This means that liq- uidities have to be generated in rural areas and allo- Financial services develop in interaction with cated to evolving priority uses for production, inno- demand. In a subsistence economy informal institu- vation and managing risks.The Bank's objective is to tions generally suffice and modern financial institu- support the institutional and economic factors that tions often are not viable. In a developing market play a role in this process. economy, however, modern financial services are essential to enable farmers and enterprises to flour- The development of modern financial institutions in ish (Box 3.8). In all societies households need access rural areas meets serious obstacles: (a) high transac- tion costs due to spatially dispersed population and weak physical infrastructure; (b) high probability of large income fluctuations and the prevalence of Latvia -Agricultural Development 3.9 covariate price risks as well as yield risks; (c) small Project (ADP) and Rural Development sizes and volumes of savings, loans, payments and Project (RDP) insurance contracts; and (d) difficulty of contract These two projects have supported the newly emerging private enforcement and lack of physical collateral for lend- rural economy in Latvia. When ADP was launched, there were no ing. Often informal providers of services and non- commercial banks in Latvia with interest in serving small scale financial enterprises can cope better with these private farmers. The Agricultural Finance Company (AFC) was set obstacles. But they face limitations in providing effi- up with a flying squad of mobile credit officers who took finan- cient support to the commercial sector because of cial services to the farmers rather than waiting for them to come their small scale and limited geographical reach. Given to a fixed and often far away site for such services. The concept the inherent constraints to developing sustainable of "a bank coming to the clients" helped overcome the trans- financial markets in rural areas, government policy portation problem frequently faced by farmers. During four years may need to specifically address these obstacles. of implementation, with only 42 staff, AFC approved a total of $43 million for 2,860 sub-loans including reflows, and the repayment rates remain high at around 93 percent. The loans made at mar- In many developing countries financial institutions are ket interest rates offered both in Lat and US $. AFC was subse- poorly functioning. Many countries still look at their 34 quently merged with a commercial bank in Latvia and continues financial sector as a political instrument that can be to serve the rural population today. used to influence the political landscape and favor allies in business. Often the policy and regulatory RDP, approved in 1998, supports a wider range of rural entrepre- environment hinders the development of commer- neurs and was aimed at helping the Government to build its rural cially viable financial institutions. Common features policy making capacity for EU membership. A particular innovation are targeted credit and interest rate caps. Formal was the "Special Credit-line" with government subsidy of a match- financial institutions are often not or hardly available ing grant for small-scale farmers and rural entrepreneurs borrowing in rural areas. Policies to use state-owned institutions for the first time. First time borrowers received a small portion of the loan in grant form, once they had repaid their loan amount in to provide subsidized credit have produced at best a full. To date, some 1,300 of these small loans, each for a maximum very modest development impact. Subsidized credit of $4,000 equivalent, have been made. The bulk went to a wide is often appropriated by wealthy farmers, and repay- range of rural entrepreneurs, including rural tourism, hairdressers, ment is poor. Consequently, directed credit drains tailors, doctors, and other rural service providers with only 20% public resources and is counter-productive for the going to farmers. RDP also successfully introduced participatory development of viable financial institutions. approaches to rural development by creating Local Action Groups (LAGs). Two leaders of LAGs in Latvia received a United Nations Alternative approaches to rural finance are emerg- Award of Excellence for community-led development. Repayment per- ing. In recent years, innovative micro-finance meth- formance continues to be good, at around 98%. ods have been successful in helping households to REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT smooth their consumption and support their eco- ity building of private institutions by helping them nomic activities.They have been able to overcome to overcome market failure and providing public lack of collateral, and often achieve high repayment. goods. Matching grant-based programs are often However, their spread into less densely populated needed.The Bank will develop good practices in areas is limited, and their role in agricultural and using matching grants.A basic requirement for the term credit almost negligible. New approaches to way grants are given is that they enhance and not crop and livestock insurance are being based on destroy market development. readily monitorable indicators such as rainfall and commodity prices, though coverage so far is limited. Promote investment in social and economic infra- Information technology and credit scoring are structure. A new focus on capacity building facili- enabling commercial institutions to better reach tates greater access by lower-income and poorer small enterprises and lower-income clients, though clients through training in business culture and more in urban than rural areas. financial management skills, building up business development services, assistance in group forma- The Bank Group will continue to support credit in tion and in the creation of viable savings and rural areas to farm and non-farm enterprises where credit associations. Alternative interventions may market failures inhibit the flow of liquidity, while be needed for extremely poor clients and com- observing sound market development approaches munities that lack an adequate economic base for and discipline in financial intermediation (Box 3.9). credit and financial institutions to succeed. The The Bank recognizes that there are many suppliers Bank will work flexibly with poverty-focused pro- and demanders for rural finance, and a range of grams to develop packages of grant, credit, and mechanisms. Strategic priorities for rural finance are: savings-based programs that are suited to the cir- cumstances and economic potential of client Pursue a proper enabling environment for the communities, while pursuing the discipline provision of financial services. Policy reform for needed for viable financial institutions. the financial sector is a high priority for many countries.This may include removal of supply and The Bank will develop indicators of access to finan- demand constraints, privatizations and contract cial services in rural areas and financial performance management for state owned financial institutions, of intermediary institutions, and monitor progress. and appropriate licensing and supervision of a Basic knowledge about the relation between reduc- wider range of financial institutions. Good com- tion of rural poverty reduction and the role of finan- mercial laws and effective enforcement are nec- cial services is still thin. Consequently, knowledge 35 essary for all providers of financial services. about effectiveness of interventions is limited. For Communication and infrastructure services facili- this purpose, the Bank will produce a strategic paper tate the supply of efficient financial services. to fill these knowledge gaps. Support the development of efficient, viable finan- cial institutions and products.The development of SUPPORTING EFFECTIVE INSTITUTIONS financial markets requires viable financial institu- AND GOOD GOVERNANCE FOR RURAL tions.This often involves improved management, DEVELOPMENT organization, and human capital of the financial institutions. Development of financial instruments Good governance and institutions are needed to is important as well. Generating local savings is a support rural development. Empirical analysis has success factor, both in providing services to the confirmed that poor governance significantly poor and in providing a sustainable source of lowers development achievements (Kaufmann et al, funds for investment. Institutions with activities 2000). Similarly, there is increasing recognition that diversified over various sectors can better cope the highly centralized institutional structure that with agricultural risks than agricultural develop- characterizes many government administration sys- ment banks.The Bank Group will support capac- tems can lead to losses in effectiveness of develop- FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH ment investments and policies.An adequate transfer an environment in which fair and predictable rules of resources must accompany administrative decen- form the basis of economic and social interactions. tralization, so that local governments have the fiscal resources needed to carry out decentralized func- Administrative Decentralization and tions effectively. Political decentralization is also nec- Development of Effective Institutions essary, as it leads to better accountability and gover- The delivery of public sector functions that are nec- nance reforms at the local level. essary to achieve rural development in our client countries is hampered by the fact that many different Improved,But Still Inadequate Governance sectoral ministries or agencies operate within rural In the past decade, there has been increasing space (for example,agriculture,health,education,pub- recognition among development stakeholders that lic works, water resources and environment) each good governance is crucial for achieving sustainable with a high degree of centralization. Furthermore, the development and poverty reduction. This recogni- formulation and implementation of effective rural tion brought about improvement in many aspects development strategies is also hampered by the fact of governance in general. However, the speed and that public administration in the rural sector typically impact of these improvements in governance has has lower capacity, poor personnel training, and inad- not been felt as much in rural areas due to the equate budgetary resources, and that rural institutions lower average level of education, the lower average generally have a low level of transparency, responsibil- qualification of civil servants, the smaller enforce- ity, and responsiveness to clients. ment ability of governments, and more widespread traditions of paternalism. In general, several factors Experience shows that decentralization offers great contribute to determine the quality of governance scope for more efficient delivery of public sector in Bank's client countries: functions. Decentralization allows local decision- makers to make better decisions based on their Better processes by which governments are superior knowledge of local conditions and needs, selected, monitored and replaced: More and allows greater local participation in the decision- accountability and public representation, greater making process. Local government has a greater civil liberties, more political rights, better proce- stake at being responsive to local priorities and dures for disclosure, and greater independence needs (especially if elected in some popular or dem- of the media, which serves an important role in ocratic manner). For that reason, it is more likely to monitoring those in authority and holding them engage in participatory procedures that can identify 36 accountable, lead to more effective public devel- local priorities, and that provide feedback on actual opment activities. implementation progress and difficulties. Improved capacity of government to effectively In recent years, the Bank has increased its emphasis implement sound policies: Such capacity on institution building and related capacity develop- depends on the quality of services provided by ment, with special attention to the Africa region. the public sector, the quality of the bureaucracy, and the competence of civil servants, and their Fiscal Decentralization is an Essential independence from political pressures. Higher Component of an Improved quality was achieved in many countries by Administration System adopting personnel policies based on merit, Financial responsibility is a core component of rules of conduct that entail checks and balances, decentralization. If local governments and private and budgetary processes that limit waste. organizations are to carry out decentralized func- tions effectively, they must have an adequate level Media and civic organizations have increasingly of revenues--either raised locally or transferred exposed and battled cronyism and favoritism, and from the central government--as well as the have championed non-tolerance of corruption.All authority to make decisions about expenditures.An these improved the ability of a society to develop adequate decentralization of resources is particu- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT larly important for rural development, as it is gen- complete, and the environment for private eco- erally associated with a net increase in the amount nomic activity is still unattractive.The development of resources benefiting rural areas. Fiscal decentral- of good rural institutions is of particular impor- ization can take many forms, including: a) self-financ- tance, since, in general, rural areas have populations ing or cost recovery through user charges; b) co- that are less assertive politically, and often do not financing or co-production arrangements through have a tradition of participatory government. which the users participate in providing services and infrastructure through monetary or labor con- Good public institutions are characterized by trans- tributions; c) expansion of local revenues through parency, accountability, responsiveness to clients, property or sales taxes, or indirect charges; d) inter- checks and balances, participatory approaches, and governmental transfers that shift general revenues concern for the interests of the disadvantaged.They from taxes collected by the central government to also practice independent audit procedures for local governments for general or specific uses; and both financial and substantive affairs and adopt e) authorization of municipal borrowing and the monitoring and evaluation systems as part of the mobilization of either national or local government management system.The Bank will encourage gov- resources through loan guarantees. ernments to concentrate on the provision of pub- lic goods and on the establishment of supporting Political Decentralization legal, administrative, and regulatory systems that Political decentralization is also important as it leads correct for market failures, facilitate efficient opera- to better accountability and governance reforms at tion of the private sector, and protect the interests the local level. Political decentralization aims to give of the disadvantaged. citizens or their elected representatives more power in public decision-making. It is often associ- Facilitating further decentralization in rural areas is ated with pluralistic politics and representative gov- an important component of the policy agenda out- ernment, but it can also support democratization lined in the strategy, which incorporates future by giving citizens, or their representatives, more World Bank assistance programs to support influence in the formulation and implementation of decentralization efforts in the rural areas of client policies. Political decentralization has a great impor- countries. In order to promote the development of tance for rural areas in light of the fact that the effective institutions for rural development the rural people generally have a weaker political voice. Bank will support the following actions: Decisions made with greater participation will be better informed and more relevant to diverse Upgrading local administrative capacity. Local 37 interests in society than those made only by governments often lack the skilled staff, equip- national political authorities.The selection of repre- ment, and working methods needed to imple- sentatives from local electoral jurisdictions allows ment complex programs efficiently. A history of citizens to know better their political representa- limited funds has deprived local governments tives and allows elected officials to know better the from gaining knowledge and skills in designing needs and desires of their constituents. and managing interventions.This implies that the International experience has shown that when local Bank should support investment in capacity institutions are empowered, within a democratic building in a well-coordinated sequence along system, they become more responsive to local with decentralization. development needs and more effective at support- ing a favorable business climate. Transferring responsibility also requires a trans- fer of resources and power. Fiscal decentraliza- The Role of the World Bank in Supporting tion must accompany the decentralization of Development of Effective Institutions and institutions and administrative functions. Bank Good Governance support for decentralization should include a In spite of the progress achieved, the institutional thorough assessment of the likely local financial reform agenda in many countries is still far from requirements associated with decentralization, FOSTERING AN ENABLING ENVIRONMENT FOR BROAD-BASED AND SUSTAINABLE RURAL GROWTH and installing a realistic capacity (and authority) Involve private sector as much as possible in to raise revenue and retain it locally. provision of public services. Many government functions can be carried out more effectively Enhancing accountability. Where democracy by contracting specialized private sector firms and transparency have not been traditionally and NGOs under competitive bidding. Certain practiced at the local level, it cannot be taken functions that need to be performed by public for granted that local government is more agencies can be better accomplished if the accountable to the local constituency. In such agencies are organized as financially autonomous cases, the transfer of responsibilities, budget, and entities, capable of securing much of their fund- power, coupled with the absence of checks and ing through the recovery of costs from users. balances, can produce very undesirable out- This is typically the case with "toll goods" and comes, where the benefits of public activities "natural monopolies" such as water utilities, are captured by narrow interest groups domi- power suppliers, and land registration and titling nated by the wealthy and influential, to the bureaus. Some services may prove too expen- detriment of the poor. Some of the activities in sive for the poor, and require graduated tariffs, capacity building discussed above could amelio- direct income subsidies, or targeted vouchers rate these risks. for the needy. The financial viability of these public service entities requires that commercial Support Participatory Approaches. Participation and social objectives must be kept separate is the process through which stakeholders influ- and distinct. ence and share control over priority setting, policy-making, resource allocations and access to public goods and services. Participatory processes or civic engagement in the adminis- trative process allows authorities to share infor- mation with other stakeholders and thereby increase the transparency of their decision- making. This in turn will improve government accountability to the people and, as a result, increase the overall governance and economic efficiency of development activities. The World 38 Bank is increasingly relying on participatory approaches as an instrument towards better governance. Retaining economies of scale in certain govern- ment functions. Training of public employees and updating their knowledge are easier to accomplish when they all belong to a central organization.The establishment of training cen- ters is not efficient if compartmentalized. Similarly, some procurement and requisition functions are easier and more efficient when handled centrally, as well as the development of monitoring and control systems. The Bank should facilitate the improvement and retention of functions of this nature under central gov- ernment responsibilities. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT 4 ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS 39 here are 900 million poor people living in rural areas in the world today. Rural T poverty is as diverse as are the rural poor in their livelihood strategies. While acknowledging this diversity, certain common threads can be identified. In many poorer developing countries agriculture is the principal source of overall economic growth and agricultural growth is the cornerstone of poverty reduction.1 Agricultural development, however, needs to be undertaken in a sustainable manner. AGRICULTURE'S ROLE IN RURAL treaties and regulatory frameworks whose imple- POVERTY REDUCTION mentation requires local capacity. How to lever these shifts so that small and impoverished farmers Agriculture is faced with fundamental change. reap the benefits is a major challenge. Human population growth, improved incomes and shifting dietary patterns are increasing the demand Agriculture employs nearly one-half of the labor for food and other agricultural products. At the force in developing countries. Indeed, a high share of same time, however, the natural-resource base rural communities and especially the rural poor are underpinning agricultural production is under threat, directly or indirectly dependent on agriculture with growing threats to genetic diversity and the through farming, food processing, fishing, forestry, degradation of land and water resources. and trade. A paradigm shift is underway from agri- Revolutionary advances in biological and informa- culture being an often protected and sometimes tion sciences offer great potential to address these closed sector highly influenced by state interven- resource constraints. However, making their benefits tions toward an open, diversified and highly com- available to small-scale farmers is a major challenge, petitive sector, tightly interlinked with other eco- especially women with limited access and control of nomic sectors and more strongly influenced by productive resources. International trade is increas- macroeconomic policies.This shift is occurring only ing rapidly bringing with it a set of global governance slowly, however. To reach the millennium goals of cutting hunger and 4.1 Distribution of Benefits of Enhanced poverty, agricultural growth must be put back on top Cassava Productivity in Nigeria of the development agenda--but `business as usual' will not suffice.The dynamic changes now influencing agricultural production, diversification and competi- Cassava is the most important food staple in Nigeria. The tiveness require a thorough re-analysis to develop Nigerian Roots and Tubers Research Institute in collabora- better ways to support tomorrow's agriculture. tion with IITA introduced improved cassava varieties in the 1980s that resulted in yield increases of about 30% on Given the poverty-reduction focus of the World 50% of the cassava area. Falusi and Afolami, 1999 estimated Bank, agricultural growth and competitiveness are that consumers captured 72% of the benefits of this seen in the context of broad-based rural growth research through lower prices. In addition poorer consumers with the following overall objectives: 40 captured a disproportionate share of these benefits. And since poor farmers consume most of their produce, they improve the income-earning capacity of family gained relative to larger farmers. farmers through improved technology and better access to input and product markets; % increase in household income boost rural employment creation through com- 10 petitiveness and access to global markets; and 8 enhance the availability and quality of food 6 produced in rural areas, through increased supply, sustainable production methods, and 4 efficient markets. 2 Agriculture's Multiple Contributions to Achieving Development Goals 0 < 2 2­4 4­6 6­8 8­10 > 10 Given the number of poor in rural areas and the Income level ('000 Naira) changes in the agricultural sector--all compounded by the deteriorating natural resource base--the REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT role of agriculture in achieving Bank goals has never vation.The deteriorating land and water base in many been larger. Agriculture impinges on the following regions presents a concern for many producers, and goals: a) economic growth; b) poverty reduction; c) wider public awareness of environmental issues is food security: and d) the conservation of natural bringing urgency to conservation issues æ many glob- resources. Subsistence agriculture is the ultimate al in nature. Protecting natural resources and the safety net for many of the poorest rural people. environment will require greater efforts to ensure sustainability of intensive agricultural production sys- Reducing poverty through economic growth. In tems, and to manage natural resources in less-favor- low-income countries, the agricultural sector is the able and more fragile production environments. primary engine of overall economic growth, due to its size and its important growth linkages to the rest PAST FAILURES AND SUCCESSES IN of the economy. Agriculture is by far the largest AGRICULTURE: UNDERLYING FACTORS employer in these countries, providing 68% of the labor force and 25% of GDP. In middle-income There have been significant achievements in terms of countries the share of GDP falls to 10% but agricul- global agricultural productivity in recent decades. ture still accounts for one quarter of total employ- Commodity prices on world markets have shown a ment. Many of the world's poor depend directly on decline as a result of productivity gains and the agriculture for their livelihoods. Increased agricultur- increased availability of food from industrial coun- al productivity also provides cheaper food, which tries that subsidize agriculture (Figure 4.1). Rapid makes up a high share of expenditures of poor technological progress in the production of the households (Box 4.1). In addition, an evolving agri- major staples across much of the developing world cultural sector creates jobs in agricultural processing has brought impressive results: low food prices, and marketing, input supply and consumer products improved farm income, and the generation of and services, and indirectly generates jobs for those employment in the farm and rural non-farm sector. leaving the farm. Finally, for the poorest rural dwellers, subsistence agriculture often provides a survival strategy in the absence of jobs, and in the 4.2 absence of commercially viable agricultural activity. Empirical Illustrations of Relationships Between Agricultural Improving food security. Future food and feed Growth and Poverty Reduction needs are large and expanding, driven by population and income growth and rapid growth in demand for A 10% increase in crop yields leads to a reduction 41 grain for livestock feed. Projections by Rosegrant between 6% and 10% of people living on less than $1 (2001) indicate that unless there is a renewed com- a day, according to a recent study (Irz, et al., 2001). For mitment to agriculture through increased public and African countries, a 10% increase in yields leads to a private investment and favorable policies, the long- 9% decrease in the percentage of those living on less term trend to lower food prices will not be main- than $1 a day tained to 2020, and millennium targets for poverty Wheat prices would have risen 34%, and rice prices 41%, reduction and malnutrition will not be met. more between 1970 and 1995 in the absence of inter- Agricultural growth also makes important contribu- national agricultural research efforts (World Bank, 2001d) tions to other dimensions of food security (Box The average real income of small farmers in southern 4.2)--access to food (by increasing incomes of the India rose by 90% and that of landless laborers by poor who depend on agricultural production for 125% between 1973 and 1994, as a result of the Green their livelihoods), and utilization of food (through Revolution (World Bank, 2001d) more nutritious, higher quality and safer foods). One percent increase in agricultural GDP per capita led to a 1.61% gain in the per capita incomes of the low- Conserving natural resources and the environment. est income fifth of the population in 35 countries ana- Agriculture depends fundamentally on natural lyzed (Timmer, 1997) resources and has an important role in their conser- ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS Over the past three decades, irrigated area doubled cultural performance has not kept pace with other and fertilizer use increased 18-fold, resulting in a 20% regions, and is a major cause of continuing, or even increase in per-capita food production. Increased deepening rural poverty.The sector has been sub- agricultural productivity and lower unit costs of food ject to policy and institutional failures, in particular: production have led to a sharp decline in real prices of cereals in world markets, providing significant ben- agriculture suffers from quantitatively inadequate efits to poor consumers. The major ingredients for support, excessive taxation, and discrimination in this Green Revolution-led growth were public macro, trade, and industrial policies; investments in irrigation and roads, public research on high-yielding varieties, and reliable (sometimes agricultural marketing institutions, particularly private but often public) supply of inputs such as fer- parastatals, providing services to farmers, have tilizer. Returns on these investments have often been been inefficient, uncompetitive, and poorly linked high, especially in agricultural research (often over to international markets; 40%), but variable. However, the yield growth expe- rienced since the 1970s has slowed sharply in the reform of parastatals has been incomplete and 1990s due to diminishing returns to further input support to alternative private sector structures use, the rising cost of expanding irrigation, a slow- has been inadequate; down in investment in infrastructure and research (in local and regional markets are underdeveloped part induced by declining commodity prices), and and hampered by poor infrastructure, lack of resource and environmental constraints. security, and bureaucratic obstacles; The agricultural development track record in devel- rural financial systems have failed to stimulate oping countries is rather uneven. In many develop- and capture agricultural savings and channel ing countries, especially in sub-Saharan Africa, agri- these into agricultural investment; Figure 4.1: Index of Global Food Availability per Capita and Food Prices, 1959­1997 200 42 180 160 140 120 100 (1961=100) 80 Index 60 40 20 0 Food Price Food per Capita Source: IFPRI & WRI, 2001 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT political institutions are weak, both within gov- DIRECTIONS FOR FUTURE BANK ernment and in civil society (e.g., farmers' OPERATIONS IN ENHANCING organizations); AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS insecure property rights have inhibited invest- ment in land improvements; and finally, This strategy treats agriculture as the leading sec- tor within the rural economy, with significant for- OECD agricultural and trade policies have lim- ward and backward linkages to the non-farm ited market access, depressed world market sector. Accordingly, agricultural productivity prices, caused greater price volatility and inhib- enhancement is considered as a crucial compo- ited processing to add value within poorer nent in reducing rural poverty. The strategy rec- countries. ognizes that the production of staple foods is the primary source of income for many poor rural In terms of agricultural development, the majority of households, but to get out of the poverty trap, successful examples are found in East Asia. Here diversification into livestock, cash crops, and non- agricultural development created a dynamism in farm activities is essential. In particular for those rural areas, which, in later stages, was combined with higher value products, experience has shown rapid industrialization.The major lessons of this suc- that, for sustained development, it is essential to cess are as follows: support backward and forward linkages. Agricultural development induces economic policies must not discriminate against agriculture, growth in other rural sectors by creating nor give it special privileges and agriculture demand for inputs, and providing materials for should be taxed lightly, using the same progres- processing and marketing industries. Experience sivity and instruments as for other sectors; has also shown that agricultural investments are more effective if they are set within appropriate the economy should be open, employment sen- policy and institutional environments with ade- sitive, and oriented towards smallholders; quate infrastructure and market development. This strategy, therefore, puts agricultural growth the importance of external, including specialty and competitiveness in the context of broad- and niche markets, should be fully recognized based rural growth. In designing future Bank and exploited; activities in agriculture, the new strategy incor- porates the successful aspects of the lessons 43 FDI should be an integral part of the agricultural learned and focuses on the following areas: development process; provide an enabling policy and institutional envi- land reform is essential where land is very ronment and advocacy and assistance for greater unequally distributed; market access in the global trading system (OECD,WTO); rapid technological progress is needed, for which both the private and public sectors have support sustainable intensification of production important roles in research, extension, and through the use of new technologies and scien- financing; tific advances; rural areas need substantial investment in educa- encourage, in part through demand-driven tion, health, and infrastructure; and extension services, more efficient use of farm inputs and a reduction of post harvest losses; the needs of women, who constitute an impor- tant component of farmers and farm laborers, increase the productivity of water use in must be built into programs. agriculture; ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS support the diversification of agriculture and number of important new features. These include boost the share of high-value products; shifting the emphasis: strengthen farmer-to-market linkages; from narrow agricultural focus to broader policy context--including global impacts; enhance food safety and address competitive- ness through quality assurance and supply chain from agriculture to rural space; management; from focus on crop and livestock yields to mar- apply differentiated strategies to fit various farm ket demands and incomes; types; and from staples to high value crops; support the development of rural physical and financial infrastructure2 services. from primary production to entire food chain; This agenda expands and refocuses the Bank's from a single farm type approach to hetero- existing support program for agriculture with a geneity; from public to public-private partnerships, includ- ing community driven development; 4.3 AgriculturalTechnology Generation and Dissemination from avoidance of issues to head on approach (biotechnology, forestry, water). The Bank is promoting new models of partnerships between the private and public sectors, through com- This chapter provides directions along these lines petitive and contractual resource allocation schemes, for both the Bank and client countries. Support building producer organizations, and providing farmers to the preparation and implementation of nation- with a menu of technology options. In Brazil, Colombia al rural development strategies is one of the pri- mary implementation thrusts of the strategy, and Ecuador, national competitive funds have forged new providing detailed programs for agricultural research partnerships involving the national research development in a national context. In many 44 institutes, universities, farmer organizations, NGOs, the cases, agriculture will remain the key economic private sector and foreign and international organiza- driver in the rural economy and in reducing rural tions. Projects in Venezuela, Uganda and Burkina Faso are poverty. Agriculture will be reflected in the pri- building the capacity of rural producer and community orities of national rural development plans and organizations and local governments to contract exten- correspondingly, in the Bank's country assistance sion services and monitor their implementation, result- program (which entails dialog, technical assis- ing in services that are responding to farmer demands, tance, and financing). Additionally, to deepen the including information on marketing and business man- conceptual framework for agriculture and the agement. Several projects are incorporating new tech- policy directions of the future, the Bank will pre- nologies, such as research in the new field of genomics pare an agricultural approach paper which will present greater operational detail to guide the to more precisely target crop breeding in India, and Bank's future agriculturally-related interventions, multi-media approaches with new information and web- with particular reference to scaling-up good based approaches to disseminating information, as in practice and innovations. Together, these efforts Russia. These models replace the pure public-sector deliv- will go a long way towards addressing the ery model of the past, which had significant efficiency, "micro" agenda required to support country- relevance, and sustainability problems in many countries. level agriculturally related planning processes and interventions. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Providing the Enabling Environment for The Bank will continue to support institutional Transforming Agriculture reforms to promote demand-driven and financially Despite much progress in privatization and liberal- sustainable national research and extension sys- ization, many of the Bank's client countries still do tems that include public research institutes, uni- not provide a business-friendly environment for pri- versities, the private sector, NGOs, and producer vate investment. Clearly, macroeconomic stability organizations. Strategic alliances with foreign and and good governance are necessary conditions for a international public and private research institu- positive investment climate, including a climate that is tions, including collaborative R&D activities with favorable to private farm investors.The Bank's over- CGIAR centers and other global programs, will be all approach to creating a pro-poor rural policy and emphasized to promote access to knowledge. institutional environment is discussed in Chapter 3. Innovative financing arrangements will be explored to develop mechanisms for regional Sustainable IntensificationThrough the research programs.The Bank will also foster glob- Application of Science al policy dialogue to ensure equitable access to new technologies, and continue to provide the High Priority to Public and Private Investment in leadership and financing to put the CGIAR system Science and Technology. Most high-potential agri- on a sustainable footing as a major provider of cultural areas have now reached the limits of land international public goods in agriculture. and water resources that can be exploited. The closing of that land frontier--not to mention the It will be impossible to achieve the level of research acute water scarcity in many areas, diminishing investment needed from the public sector alone. returns and negative environmental effects from high levels of external inputs--means that future growth in these areas will largely depend on knowl- 4.4 edge.This means that future agricultural growth in Meeting the Challenge of the high-potential areas will be increasingly knowledge- Livestock Revolution based. The growth in total factor productivity that accounted for about one-third of growth in the Projections by IFPRI (Delgado et al, 1999) shown an past will now need to be the major source of almost doubling of demand for animal products over the growth in the coming decades (Box 4.3). next two decades. Along with the dramatic expansion of demand in developing countries has come major pres- Therefore, investment in science and technology will sure for change. Traditional production systems fre- 45 45 play a larger role in the future, as agricultural sectors quently cannot compete with intensive, industrial pro- in all regions face increasing land and water scarcity, duction systems, especially for poultry, but also increas- and greater demand for quality assurance in nation- ingly for swine, fish, and cattle. New intensive produc- al and global markets. For very poor countries, tion systems confront serious issues regarding: increasing food staple productivity remains the main opportunity for growth and poverty reduction. environmental sustainability, especially relating to Science, technology, and knowledge-based invest- waste management; ments are also important to support market-driven animal health, both to maintain productivity and to diversification into high-value crops and livestock avoid international spread of disease; products, and for the development of sustainable food safety for livestock products; production and marketing systems.Therefore invest- genetic diversity and loss of germplasm of local ments need to support traditional research areas breeds; such as crop and livestock breeding (Box 4.4), inte- animal welfare, a growing concern, at least in indus- grated crop management, and crop-livestock sys- trialized countries; and tems, post-harvest technology and food safety, as employment standards and conditions for employees well as provide new funding for biotechnology in processing plants. research in many countries and regions. ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS Increased private investment in agricultural individual countries and/or regions, and that bene- research is essential. To stimulate that investment, fits and risks will be specific to the country/region the Bank must contribute to the creation of an in which it is applied. Therefore, where justified in economic environment wherein the private sector the context of CAS priorities and tradeoffs, the has a reasonable chance of obtaining a return on its central pillar of Bank approach to biotechnology investment. This requires protection of intellectual will be to build capacity so that policymakers, sci- property rights, input market systems that permit entists, consumers, and farmers in client countries introduction of new varieties and technologies, and can make informed decisions about options for, and other policy reforms conducive to an efficient mar- risks of, research and technology release.The Bank ket system. will participate in dialogue with partners on global, regional, and country-specific policy issues and, in The Challenge of Biotechnology.The Bank is com- selected cases, will provide leadership and leverage. mitted to helping developing countries assess, Key issues include access to, and adaptive capacity explore, and safely use new technologies. There is for, using proprietary tools and technologies, man- an emerging consensus in the scientific community agement of biological assets, assessment of risk, and that biotechnology is likely to be a valuable tool in benefits in food and environmental safety, especial- addressing production and nutritional constraints ly in regard to biodiversity and genetic integrity of and to commodities important to poor producers local species. Other issues include models of tech- and consumers.The Bank recognizes that strategies nology transfer, regional harmonization of regulato- and priorities for biotechnology will be specific to ry frameworks, and development of international public goods.The Bank will look to current interna- tional protocols for guidance on the formulation and implementation of regulations and will contin- 4.5 Mali IPM Special Initiative--A ue to contribute to discussions on international Comprehensive Approach to Capacity agreements on bio-safety, intellectual property Building and Policy Reform rights, and genetic resources. In this regard, the Bank will convene a consortium of interested institutions Mali depends on cotton production as a cash crop for farm- to assess the status of agricultural science, including ers and for export revenues. About 90% of the pesticides biotechnology.3 The Bank recognizes the critical imported into the country are used on cotton. In the role of public funding of research and development, 1990s, due to pesticide resistance and inappropriate use including risk assessment and food safety, if biotech- 46 practices, pesticide costs increased steadily while yields nology is to meet the needs of poor producers and remained stable or declined. Evidence of occupational health consumers safely and sustainably. problems and pesticide residues in food was mounting. Promotion of Environmentally Sustainable Pest Based on a comprehensive status report produced by a local Management Systems. Excessive use of chemical research institution and a stakeholder policy workshop, a pesticides can be a risk to human health and the Special IPM Initiative was developed. The initiative cuts environment. The Bank will continue to promote across project components and takes a problem-focused integrated pest management (IPM) systems to view. Policy reform elements include the expansion of exist- reduce the reliance on synthetic chemical pesti- ing participatory farmer training for IPM, the strengthening cides. Accordingly the Bank will seek to enhance of regulatory controls, capacity building for monitoring of the adoption of agro-ecological and biological plant environmental and human health impacts, and the adjust- protection approaches guided by the framework of ment of the fiscal and economic incentive framework (elim- its safeguard policies.The promotion of IPM in Bank ination of hidden subsidies of cotton and food crop pesti- operations includes support to technology genera- cides, provision of sustainable funding for regulatory and tion in IPM (for example, through the CGIAR sys- training activities through elimination of import duty tem and through lending for R&D), support to national policy reforms (for example, elimination of exemptions for pesticides). pesticide subsidies), and inclusion of IPM in exten- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT sion and farmer education programs. The Bank is years under such water constrained environment. updating its strategy and guidelines on pest man- Another challenge is that most of the available agement and monitoring IPM implementation in quality land is already brought under irrigation and the lending portfolio.The demand for IPM technol- any further expansion would be in marginal land ogy can be served in research support projects, as or at the cost of valuable forest resources. was done in Ecuador and the Uttar Pradesh Therefore, future investment will need to focus on Agricultural Research Project, where comparatively improving the productivity of existing cultivated large shares of project funding were allocated to land, meaning,`more crop per drop' and `more crop IPM through competitive research grants. Another per land area.' This would require promoting new approach in some countries has been to support the development of regulatory and economic frameworks to promote IPM (Box 4.5). 4.6 Key Principles in the Design of Effective An Evolving Concept for Agricultural and Efficient Extension Programs Extension Agricultural and rural development extension pro- 1. Productivity gains in agriculture are essential for reducing rural grams will be critical to achieving the rural devel- poverty, and technical agricultural extension (for example on adop- opment objectives. Delivering scientific and techni- tion of new technologies, use of water retention technologies and cal advances in most developing countries requires fertilizers) is necessary to achieve these gains. Generally, demon- effective extension programs. New approaches in strations in farmer fields of new varieties and technologies are extension services will be important in bringing needed to assure widespread and rapid farmer adoption. together the rest of the ingredients for successful productivity gains in agriculture æ new technolo- 2. Technical extension can be combined with information dissemina- tion in other areas such as HIV/AIDS, and especially for women farm- gies, modern inputs, credit, and efficiently function- ers, information on health and nutrition. Priorities for extension deliv- ing product markets. Some approaches need to ery should be determined and managed locally. recognize the specific requirements of small and poor farmers, while other approaches which are 3. Extension services will have to be publicly financed in the poor- designed to serve large and commercial farmers est countries. But in many cases they can be privately provided should encourage the participation of the private even though they are publicly funded. Existing and new institutions sector in delivering extension services and be such as NGOs, universities, private firms, and even public agencies based on joint financing and monitoring among can compete for delivery of publicly funded extension services. stakeholders in order to improve efficiency and 47 increase cost recovery. But extension must be 4. Modern information and communication technologies need to be more than just a delivery vehicle for agricultural employed to ensure that most people are reached with a wide range of information. technologies. Extension can play an important role in delivering social services such as information on 5. To assure effective management of privately provided extension rural development, business development and mar- services, local institutions will need to be strengthened to minimize keting, and other areas. Key principles in creating waste and corruption. In many areas, this will require some assis- extension systems to accomplish these objectives tance in developing local institutional capability and in assuring that are outlined in Box 4.6. the poor are adequately targeted. Increasing the Productivity of Water Use in 6. As rural areas develop and agricultural productivity increases, Agriculture some of the extension, especially the technical agricultural part, can Fresh water is indispensable for agricultural pro- move towards private farmer funding. duction, yet this input is under increasing pressure 7. Periodic review and quantitative evaluation of all programs should due to population increase and competition with be designed into the local operation and management systems. other consuming sectors (Annex 4). It will be a great challenge to meet growing food demands, Source: Alex, Zijp, and Byerlee (2002) which is expected to double during the next 50 ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS policies, institutional arrangements, technologies shifting from staple food production to higher value and management practices, which lead to products. The focus on the entire watershed, improved water use efficiency and increased over- including attention to downstream environmental all agricultural productivity of the already land impacts, accountability and transparency mecha- under irrigation.To improve irrigation efficiency the nisms, knowledge and information systems, and Bank will focus on: ensuring the integrity of exist- modernization and rehabilitation will help realize ing infrastructure that can be economically viable the potential of existing irrigation systems and (primarily a challenge in low-income countries and reduce the need for new construction. New sys- in Central Asia); addressing adverse environmental tems will generally be smaller scale, and existing impacts; providing demand-driven irrigation to larger-scale systems will be renovated in conjunc- improve livelihoods of poor producers; and raising tion with management improvements. Attempts improving cost-effectiveness (Box 4.7). will be made to focus management at the greatest level of decentralization possible. A poverty focus Future irrigation projects must be designed in con- underpinning new investments will use irrigation cert with agricultural policies and include user - investments to increase the assets of subsistence ownership and incentives for efficient and equitable and small-scale family farmers.The IFC will explore water use, as well as cost recovery, and transfer of financial structures that can attract private financing system responsibilities to autonomous private user for the development of irrigation systems. groups or water users associations. The Bank will support innovations to improve water use efficiency, Promoting Diversified and Sustainable including, where appropriate, pricing of water, and Production Systems for Expanding Markets The food and agricultural systems of today face more rapid changes than at any time in history. They also face greater opportunities than ever 4.7 before.These changes and opportunities are being Egypt Irrigation and Drainage Program made possible by consumer demands and by the liberalization of markets and trade. The drainage program in Egypt represents a long term commit- ment towards growth and sustainability. The shift to a high With market liberalization taking hold in most intensive agricultural production system following the construction countries, the private sector--traders, processors, of High Aswan Dam in the 1960s depended largely on a and retailers--is expanding in many fields, including 48 reliable irrigation supply and highly efficient water management technology, information, and marketing services. system. Adequate drainage has been timely planned and Markets are now the driver for agricultural growth, provided to mitigate the effect of the irrigation induced water- making cash crops attractive, and allowing special- logging and salinity. The government of Egypt in a partnership ization and diversification into new products. with the Bank invested about US $3 billion (in FY2001 Dollars) since the 1970s to provide main and farm drainage systems Private investment is creating more value added to 5 million acres. The program is expected to continue till a and employment in rural space, more competition full coverage of the irrigated area (about 6.5 million acres) is and thus better services for consumers, farmers achieved by the year 2017. The government and farmers have and non-agricultural businesses. Technological shown great commitment to the program through adopting appro- progress is central to competitiveness and can priate technologies, improving the irrigation system, transferring boost production for markets and promote spe- management to WUAs and adopting a well functioning system of cialization and diversification. National food mar- cost recovery. With remarkable increase of the crop intensity kets are rapidly changing with urbanization and (230%), the yield per unit area of crops in Egypt stands now more affluent populations who are demanding a among the highest in the world especially for wheat, rice, and cot- richer, more diverse diet, with higher value prod- ton. The share of improved drainage accounts for 15-25% of the ucts. Increases in demand for meat, fruits, vegeta- yield increase. Re-use of drainage water in irrigation guided by appropriate criteria and guidelines contributed to the raise of the bles, specialty and processed foods will provide overall water use efficiency to one of the highest in the world. new market opportunities to farmers, especially those who have sufficient access to resources, infor- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT mation and skills. The dramatic shift in food con- precise use and efficiency of inputs, conservation sumption to urban areas will also place special tillage, and integrated nutrient management. demands on food supply chains, market infrastruc- Integrating livestock into small farm systems will ture and transportation. provide a means of recycling nutrients, and create income generation opportunities, especially for Rapidly expanding export markets are providing a women farmers and poor landless people. For new source of rural growth, especially for middle- both extensive and intensive livestock systems, income countries and the more commercially ori- special attention will be given to environmental ented farmers. Many high-value products such as and food safety issues. Driven by market liberal- fresh fruit, vegetables, fish and flowers have created ization, urbanization, and income growth, there are an opportunity for developing-world farmers to rapidly expanding options for diversification of compete for a share in export markets. agriculture and boosting the share of high-value Diversification to high-value export commodities products, serving niche markets (for example, offers farmers new opportunities to increase organic produce, cut flowers), and meeting the incomes without increasing farm area. It also offers fast increasing demand for livestock products. As them wage employment in processing and packing indicated by international experience, the sites. Another new phenomenon is the fact that increased focus on export crops does not imperil large food retailers and processors are increasingly staple food production or food security (Box 4.9). sourcing their supplies globally. As a result, interna- The Bank will focus on strengthening private ini- tional trade in high-value agricultural products is tiatives to export, implement post­harvest initia- growing by some 7% annually compared to 2% tives to improve product quality and reduce post- annually for staple commodities. This expanding harvest losses, diversify and develop new prod- global market provides exciting possibilities for ucts, and link poor producers to markets through export, but it also forces farmers to compete with supply-chain management systems and strength- the world's most efficient producers. In addition, ening producer and community development the expansion of supermarkets and chain retail out- groups. Public-private partnerships in science and lets in many developing countries is already having an impact on national production and market sys- tems. In Latin America and Southeast Asia, for 4.8 example, the supply of local commodities to local Export Oriented Agricultural Growth markets is having to compete with globally sourced Based on Cash Crops:The Malaysian commodities (Box 4.8).To achieve such gains from Example 49 diversification requires adequate infrastructure and investment in research and extension. Malaysia has achieved success by nurturing its export-oriented cash crops, namely rubber and oil palm and pursued a three pronged Growing public awareness of environmental values strategy encouraging rubber production on plantations, the develop- is leading to new opportunities to produce envi- ment of an oil palm industry on small farms, and increasing rice ronmentally friendly products at premium prices. production in fertile alluvial river basins. The post colonial govern- These opportunities include such things as organic ment nurtured the rubber industry by developing rural infrastruc- produce, environmental services (such as carbon ture and industry, supporting research that transferred knowledge to farms and promoting credit and extension programs. The govern- sequestration or biodiversity conservation), and ment also initiated world-class research in oil palm. The export earn- new products related to multi-functionality of agri- ings from rubber and containment of rice imports provided the culture, including rural landscape management. resources that kicked off rapid industrialization. Poverty declined and the Malaysian economy rapidly transformed itself into an industrial Coping with these new market opportunities will nation. In the case of Malaysia, political factors positively contributed require technologies tailored to specific groups of to agricultural development since the majority of farmers and the farmers in more narrowly-defined production government were Malay while business people were Chinese. The only environments. The Bank's agricultural programs way to avoid income disparities between the two dominant ethnic will emphasize technologies that promote more groups was to create a prosperous agricultural sector. ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS technology will be supported to enhance and promoting market solutions for service delivery, retain the momentum for competitiveness and including co-financing and cost recovery mecha- sustainability of diversified production systems. nisms, where they are efficient and effective for Finally, the Bank will assist clients in developing poverty alleviation; arrangements for product certification (for exam- ple, for organic products). empowering the poor, especially women, through collective action to profitably partici- pate in markets, manage their risks, and access Strengthening Farmer-to-Market Linkages public services; Strengthening farmer-to-market linkages is a crucial objective in promoting agriculture. In implementing promoting selective direct support to groups of this objective, the Bank will focus its interventions farms, farmers, small enterprises, and rural labor- in ways that maximize participation of the private ers, with a high potential for sustainable poverty sector and impact on poverty reduction: reduction; and, improving conditions for private investment and promoting supply chain management as a means the functioning of markets by helping overcome to secure market linkage, quality control, and market failure; reduction of logistic costs. improving the performance of agencies provid- Strong producer organizations and community-driv- ing key public goods and services that underpin en groups can help to link farmers to markets and the productivity of agriculture, with a focus on technology providers, combined with an enabling cost-effectiveness, client-responsiveness, and environment conducive to private investments. sustainability; The strategy gives special attention to building local capacity through producer and community organizations. In this regard: 4.9 Is it better to Focus on Food Crops or Bank lending will strengthen the capacity of pro- Export Crops? ducer organizations to link to markets and access technology, as well as provide a voice in Countries should focus on producing the crops that they can grow policy formulation and governance. 50 most profitably. The International Food Policy Research Institute has undertaken extensive research on this question. The main Producer organizations will participate in new research findings are: Bank lending in roles ranging from consultation and advice to direct planning and implementa- Countries that treat agriculture and rural areas favorably tend tion of technology and marketing services. to do well in producing both food and export crops. Where smallholders shift some land to export crops, they con- Trade associations for exporters, processors, tinue to produce high levels of staple foods. seed companies and others will be promoted Smallholders use their increased purchasing power to improve and included as stakeholders in agricultural sec- their farming operations overall, not just their export crop operations. tor development and contributors to consulta- As employment (including hired labor) and incomes rise, child tions on policy reforms, project design, and sec- nutrition often improves. tor development. Thus, what matters most for impoverished household food security is income growth. It rarely matters whether the source of income New information and communication technologies growth is higher production of food crops or export crops. (ICTs) with lower costs, combined with the increasing literacy and sophistication of farmers, Source: International Food Policy Research Institute have the potential to revolutionize rural informa- tion systems, providing more and better informa- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT tion directly to farmers or to extension agents, Differentiated Strategies to FitVarious agribusinesses, and other intermediaries that FarmTypes:TheTransition to Commercial serve them. Application of ICTs in rural areas may Farming increase the flow of information of all types, and In many developing countries, agriculture is already facilitate market transactions, changes in employ- in transition from subsistence orientation and gov- ment, emergence of new industries, and social ernment dominance to a dynamic sector that is development. well integrated into markets and has access to modern technology. However, this transition is Enhancing Competitiveness and Food incomplete and varies enormously by region and Safety through Quality Assurance locality within countries. Most agricultural sectors Investments in strengthening the capacity of insti- have a combination of farm types, with different tutions and structures responsible for food safe- needs for public services and investments. A useful ty will play an important role in improving public framework for analyzing different entry points for health and facilitating access to export markets. assistance delineates different farm types by their Food safety, especially that relating to microbial asset base and level of access to markets contamination and residues, is a major problem (Berdegué and Escobar, 2001): for domestic consumers and is emerging as a major issue in international markets. Poor Commercial farmers who produce entirely for countries need to improve their food sanitation the market, and who dominate some cash crop standards as an integral part of poverty reduc- and livestock markets and increasingly some tion efforts, and if they want to increase access to niche export markets, such as cut flowers.These international markets. Food safety typically farmers prosper where there is a market-friend- belongs in the public domain, as there are ly enabling environment for private investment externalities and moral hazards involved. and initiative, especially infrastructure, policies Where capacity exists, it is often good practice to that provide a level playing field and protection rely on private certification and investments, of property rights, and economies of scale in the under government supervision. On the other production process. hand, the introduction of quality grades, in particular if it is linked to brand name develop- Small producers on family farms who are linked ment is a pure private good and should be to markets, but have limited assets. Globally, they left to the private sector. The Bank would produce a large share of the developing world's support its clients in: food products including rice in Asia, vegetables 51 for the domestic market all over the world, and identifying the level of assistance in food safety milk in India and East Africa. These farmers-- regulation to provide measures appropriate for often poor and operating in both favored and domestic and export markets; less-favored areas--generally rely on diversified production systems and may have important strengthening legal frameworks, regulatory and off-farm livelihood activities. With improved incentive policy reforms related to pesticides, market opportunities, many of these farmers HACCP training, and food-chain management; can build their asset base and make the transi- tion to commercially oriented farming. investments in basic hygiene, disease control and eradication campaigns, laboratory capacity for Subsistence-oriented farmers frequently oper- residue testing, quarantine facilities, and systems ate in less-favored production environments and of product traceability; and lack most types of assets.They have varied liveli- hood strategies, often operate outside of the preventing the use of food safety issues from market and are prone to high levels of poverty becoming protectionist non-tariff barriers to and food insecurity.Within this group, part-time exports from low-income countries. farming is growing in importance accounting for ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS a significant share of family income. Many of The transition of farmers between the different these farmers are also located in marginal areas farming types (Box 4.10) under liberalization offers with limited infrastructure and few options for unprecedented opportunities for small farmers to lift agricultural improvement. While many in this themselves out of poverty. It may, however, also lead group of farmers in middle-income countries to more differentiation if the economic environment are exiting agriculture, many will remain simply does not enable family farms to become more mar- because there are few other options. ket oriented, there is a policy bias toward large com- mercial farms, and if land markets constrain adjust- ment. Farm consolidation and expansion, allowing more efficient farms to compete, is one way that this 4.10 Options for Farming Operations in will occur in regions where good infrastructure and Developing Countries a conducive policy environment favor growth of non-farm employment so that less efficient farmers Essentially farmers have five possible means of improving their economic can leave agriculture. Contract farming and out- well-being: a) get larger; b) become more efficient; c) do different things grower schemes are other mechanisms for small on farm; d) engage in non-farm activities; or, e) exit from agriculture. Getting bigger means acquiring control of more land and other assets. farmers to link to input and product markets, credit, Usually this requires efficient land markets and an enabling environ- and technical expertise. ment for growth. Becoming more efficient means getting more produc- tive in existing farming operations. Doing that usually requires effective The Bank fully recognizes that the farmer is the agricultural research and extension, efficient input and output markets, lynchpin in rural development, and is committed to good marketing and market information systems, transportation infra- employ differentiated strategies toward the various structure, etc. Doing different things (different mix of crop and livestock farm types to achieve the objectives of this strategy. enterprises) requires some of these same support systems plus farmer These strategies are summarized in Table 4.1. education in the new technologies. Adding non-agricultural activities requires an economic policy environment conducive to new business Development of Rural Physical ventures and a marketing and transport system that permits trade with Infrastructure and Infrastructure Services low transactions costs. Finally, the choice to leave agriculture and take up other means of gaining livelihood requires that economic opportu- Both farms and households need a minimum level of nities be available outside the farm. infrastructure services to function efficiently. Lack of safe drinking water is a major contributor to diar- rhea, a frequent cause of death among children in Rural Roads Help Connect the Poor rural areas.Trade requires transportation infrastruc- 524.11 to Markets: Peru Rural Roads Project ture and services. Markets require information sys- tems. Adequate infrastructure is a sine qua non for agricultural and rural development (see Annex 5). The Peru Rural Roads Program Team, through an innovative design that emphasized a strong poverty focus, grassroots par- Despite widespread recognition of the potential ticipation, and collaboration among key players--the Ministry of positive impact of rural infrastructure investments, Transport and Communications, the Inter-American Development the availability of transport, energy, water supply, san- Bank, the World Bank, and more than 20 NGOs-- succeeded in itation, and telecommunications services in rural improving physical access to about 3 million poor inhabitants of the rural Sierra. The program reduced the isolation and facilitat- areas remains limited. A review of investments in 15 ed the integration of the beneficiary communities. It also developing countries reveals wide disparities in infra- enhanced economic opportunities and spurred local entrepre- structure availability between rural and urban areas neurship. Over 11,000 km of rural roads were rehabilitated, and (Komives, Whittington and Wu, 2000). Average 32,300 seasonal unskilled, and 4,700 permanent jobs were cre- access to electricity, inside water supply, and tele- ated in 410 local road maintenance enterprises. An institutional phones were two to five times higher in urban areas collaborative framework was established to make most of the than in rural areas. The rural-urban disparity exists comparative advantage of each stakeholder. This innovative part- across all regions, except in the case of electricity in nership program was one of the recipients of the 2001 World Eastern Europe and Central Asia. In order to Bank President's Award for Excellence. improve the availability, quality, and affordability of REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Table 4.1 Strategies for Enhancing Poverty Impacts through Growth of Different FarmTypes Strategy Enhanced Poverty Impacts Commercial Assistance to develop and employ food and Develop labor-intensive Farm Sector biosafety high-value systems to regulations and systems for quality assurance, generate employment traceability and certification of agricultural pro- for the poor. duce (labeling, organic certification, fair trade label, etc.). Increase productivity to reduce food prices for Strengthening of legal frameworks for property non-tradables. rights to promote private R&D and secure ten- ancy. Strengthening producer organizations to repre- sent member interests and promote initiatives in the industry. Supporting development of diverse and com- petitive agricultural/agro-industrial innovation systems based on user-financing and private service delivery. Small, Developing an efficient agricultural technology Broad-based growth to Market- system to meet the needs of small farmers. generate income for Oriented small-scale farmers. Farm Sector Supporting innovative communication systems to supply relevant information on production, mar- Increase productivity to kets and alternative crops. reduce food prices for non-tradables. Promoting small-farmers' organizations to coordi- nate input and marketing needs. 53 Subsistence- Strengthening of local institutions and organiza- Introduce participatory Oriented tions that can best support farmers with scarce research and extension Farm Sector resources. approaches to build human and social capital necessary Facilitating participatory development of local to address wider problems. infrastructure and technology in collaboration with NGOs. Identify niche commodities such as organic produce Supporting local organizations that hire support that are labor intensive. services to develop market-oriented enterprises. Target investments to poorer regions. ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS infrastructure services to rural households and Transport and trade are initially the most impor- enterprises, rural infrastructure constitutes a sub- tant drivers for the rural economy (Box 4.11). stantial and growing component of Bank activities. Investment in infrastructure is important in reduc- This trend needs to be continued. ing the high costs of marketing for small producers. With improved transport services, markets devel- op and farmers and other rural households have the opportunity to produce surplus for sale, to 4.12 Ghana CommunityWater & Sanitation specialize in producing those goods in which they are most productive, and to diversify for distant markets. High returns to investment in rural roads, In the early 1990's the Government of Ghana created the National in particular in less-favored areas (Fan, Hazell, and Community Water and Sanitation Strategy and Action Plan (CWSP), the Thorat, 1999), reflect the potential of growth product of a national policy reform to which all donors signed. The through increased trade. Increased mobility first Ghana Community Water Supply & Sanitation project was intend- through transport and information also increases ed to support the reform program and complement the existing activ- ities of the central government water authority, which would focus on participation of rural labor in income-generating building larger systems. activities that can add significantly to rural growth and poverty reduction.Therefore, the Bank intends The program evolved out of a set of national workshops on improv- to provide an enhanced support to clients in their ing water supply and sanitation in Ghana. These workshops, which efforts to improve rural physical infrastructure and involved stakeholders from all sectors of society, produced a strategy ensure that the basic physical infrastructure (roads, and action plan for reorganizing the development of rural water sup- ports, telecommunication, electricity, drinking water, ply and sanitation (the CWSP). It used the community-driven, demand sanitation, etc.) needed for rural economic growth responsive approach where rural communities identified their needs is in place (Box 4.12). Specifically, in implementing and the level of services they could manage and for which they were rural infrastructure projects, the Bank will: willing to pay. The new institutional arrangements included all levels of government, NGOs, communities, and the private sector to provide support the formulation and implementation of and co-manage services. sound sector policies to enhance the sustainabil- ity of investment programs; In terms of impacts, the rural water supply program more than achieved its physical targets. Beyond that, it increased the capacity of NGOs, so that they could provide technical assistance for water sup- promote decentralized arrangements for pro- ply. It also built capacity of small entrepreneurs to supply equipment viding local infrastructure; 54 for the infrastructure. The increased competition, created in response to increased demand from communities, led to a 50 percent reduc- advocate participatory, gender inclusive, and tion in the price of boreholes. The project also made specific achieve- demand-driven approaches; ments in gender representation with women comprising 50% of water and sanitation committees (WATSANs). In addition, the WATSANs began facilitate private sector involvement in the pro- diversifying into other areas ­ such as environmental services. duction and financing of infrastructure; The follow-on project is helping the government scale up the approach ensure accountability to users in rural infrastruc- to a national program. Progress began slowly with the first 18 months ture projects; and spent working with the government agencies and communities to learn and accept their new functions in the reformed system. Now two years encourage adequate cost recovery and upfront into implementation, the project has taken off and is working simul- taneously in 1000 rural communities. The program is also piloting contributions from users. community contracts (currently the local government contracts) based on lessons learned at a World Bank international conference on CDD held in April 2002. District level agencies manage the program and now handle most of the procurement for infrastructure ­ now decen- tralized from the national level, and many districts are supporting the operating costs for water supply themselves. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ENDNOTES 1 Two studies that were completed as supporting documents for this chapter provide greater detail on the issues discussed in this section.These are: Investing in Science for Food Security in the 21st Century, ARD 2001, and Farming Systems and Poverty, FAO/World Bank, 2001. 2 Rural finance issues are discussed in section 3.3. 3 The consultations will include all relevant stakeholders, will discuss the full range of S&T issues and will not just focus on transgenic crops. 55 ENHANCING AGRICULTURAL PRODUCTIVITY AND COMPETITIVENESS 5 FOSTERING NON-FARM ECONOMIC GROWTH 57 ustainable rural development requires multi-disciplinary approaches to poverty S reduction.The agricultural focus is necessary, but not sufficient for sustainable rural development (Box 5.1).The Bank's updated rural development strategy recognizes the importance of non-farm economic activities, and the essential role of the private sector in rural development, including rural infrastructure and financial services. 5.1 Rural Development Strategies: Marginal Many non-farm activities are derived from agricul- Versus Favorable Areas ture and natural resource use via upstream or downstream linkages and they can have important multiplier effects (Box 5.2). Other activities are In many cases, policymakers and donors call for more research on marginal areas as a way of reducing poverty and arresting resource essentially similar to those in urban settings including degradation. This is appropriate, as the situation is usually complex. manufacturing, services and commerce. With the In some of the most difficult areas, the rate of gain from improved opening of markets, many non-farm enterprises will technology may be very slow. Providing infrastructure, education and feel increasing competitive pressure and some will non-farm opportunities may bring earlier, greater and more sus- be forced to adjust or abandon the activity. tainable benefit (to both poverty alleviation and the conservation of natural resources) than is possible with agricultural intensification. To design proper supporting strategies for the This is especially true for areas with high production risks and/or development of the rural non-farm economy, a fragile resource base. In addition, there are often substantial linkages to agriculture and to the process of urban- spillover benefits from productivity gains in favored areas through ization must be fully taken into account. As is the operation of labor markets (migration from marginal areas, etc) summarized by Ashley and Maxwell (2001), these and food markets (e.g., lowered cost of food). relations develop according to a four-stage model: Source: Renkow 1993; David and Otsuka 1994. In pre-modern and subsistence societies, charac- terized by high rural remoteness and low urban- 5.2 Rural Non-Farm Investment Benefits ization, the rural non-farm economy is small, and the Poor: Madagascar Aqualma Project has only local service provision; Aqualma was established in 1992 to produce and process shrimp In the next stage, as the agricultural economy for export in a remote area of Madagascar. The project was sup- grows, the rural non-farm economy is able to ported by IFC. Aqualma has established itself as one of the lead- capitalize and expand; ing private companies in the country, with exports of US $26 mil- lion in 2000 and a profound impact on the local economy and Later, as the urban economy grows and new living conditions. Aqualma in 2001 has about 1,200 employees, roads connect rural to urban areas, the rural 80% of whom were never previously involved in wage-paying non-farm economy faces new competition and employment. Employees and local villagers have been able to access education and health services through the primary school and clin- may decline; and ic established by the company. The project has generated many 58 linkages with small local enterprises during the construction and Finally, in the fourth stage, as the economic and operational phases. Future plans include expanding production on social costs of urban congestion grow, new a new site, for which a community development plan and a con- forms of rural non-farm economic activity may servation management plan to protect biodiverse habitats are develop, perhaps benefiting from new outsourc- being developed. ing or clustering arrangements, and the unique circumstances offered by a rural environment Source:: Karmokolias, 1997. (tourism, etc). Of course, such a model does not apply every- STRATEGIESTO SUPPORT NON-FARM where and the poverty impacts of increased rural ENTREPRENEURIAL ACTIVITIES non-agricultural entrepreneurial activities are not evenly distributed.Many observers have pointed out In addition to agriculture, growth of non-farm rural that the relatively high-return activities in the rural income producing activities offers important oppor- non-farm economy are usually accessible only to tunities to reduce rural poverty. A common feature those with capital or skills, while the low return is the wide diversity of non-farm income sources at activities are often the only ones open to the rural the household level including income derived poor. It is essential, therefore, that the interventions through mobility of labor markets and remittances. designed to support rural non-farm activities REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT include actions needed to enable the poor to over- Promote local economic development and come entry barriers and allow them to participate in inter-sectoral linkages. Recognizing that the sec- the more productive aspects of non-farm economic toral responsibility for the rural economy falls activities. The informal segments of the non-farm between many line ministries and private play- rural economy are especially important for the poor ers, the formation of cross-ministerial working and should also be taken into account when design- groups and structures to support the rural ing assistance programs. Strategies to support rural economy will be encouraged. These working non-farm economy activity can be grouped into four groups need to be fostered at both national and main types (Start, 2001): a) removing general con- local levels and should involve the participation straints to growth; b) facilitating urban-rural links; c) of both public and private sectors. Such groups facilitating enterprise growth; and d) sector at sub-national and local levels should aim to or sub-sector specific interventions (Box 5.3). The address local-level competitiveness and the creation of an enabling policy and institutional envi- wider enabling environment of both the farm ronment for non-farm entrepreneurial activities is and non-farm sectors, identify and seek means discussed in Chapter 3. to remove barriers (legislative, regulatory frame- works, taxation, infrastructure, financial institu- SPECIFIC BANK ACTIONSTO SUPPORT tions, etc) and address opportunity creation for RURAL NON-FARM ENTREPRENEURSHIP the community and the private sector. The development of effective methods of support to the rural non-farm economy is an essential objec- tive of the rural strategy. Interventions will focus on strengthening existing opportunities, seeking new 5.3 Strategies for Supporting the Rural opportunities and removing barriers to entry by Non-Farm Economy rural people to diversified employment and enter- prise activity. Specifically: REMOVING GENERAL CONSTRAINTS TO GROWTH; FACILITATING URBAN-RURAL LINK Strengthening skills and organization capital.The Invest in transport, communication, education, and health Bank will help build the labor market and enter- Facilitate labor movement and remittances prise development needs of rural communities Increase the flow of market and price information to rural areas and address the means whereby such capacity Set regulations/standards that facilitate out-sourcing and sub- building can be offered and accessed. Such skill contracting 59 needs range from functional literacy and numer- Develop rural recreational amenities for the urban population acy, to specific skills in labor markets, and to Identify options for increasing access to social-business networks Foster local economic development planning, combining rural management and administrative skills for enter- and urban administration prise development, including market assess- ments and detection of business opportunities. FACILITATING ENTERPRISE GROWTH Specific attention will be given to the demands Develop infrastructure in small towns and needs of women and to the rural poor. Support producer associations for marketing & sourcing Common interest associations, trade and pro- Remove regulatory or bureaucratic burdens on small/medium fessional associations and cooperatives will be enterprise promoted. Rural Producer Organizations Support business advisory services (RPOs) will be encouraged and supported to be able to perform economic and social advocacy, SECTOR OR SUB-SECTOR SPECIFIC INTERVENTIONS information sharing, capacity building, and coor- Support industrial clusters Provide incentives for industry relocation dinating functions and to develop market and Use concessions to encourage local economic linkages negotiating power.The Bank should support the emergence of these organizations and develop Source: Start, 2001 working partnerships with them. FOSTERING NON-FARM ECONOMIC GROWTH Strengthening the supply chain and product link- Recognize and support labor mobility. Migration ages. Trends in consumer markets, quality and labor mobility are essential aspects of eco- requirements and competition require better nomic development, employment creation, and planning and coordination of supply chains from poverty reduction. The Bank will provide sup- input suppliers, primary producers, traders and port to policies that increase mobility through processors to retailers. Competitiveness information on, for example, labor legislation, depends on effective and flexible logistics and communications, skills development, and low transaction costs in the chain. The role for addressing welfare and entitlements, including the public sector is to create adequate condi- access to services, and those policies that mini- tions for the development of efficient private- mize the potential for social tensions and envi- sector supply chains and to promote investment ronmental damage. in physical infrastructure, to support effective sub-contracting systems and quality inspections The non-farm sector is an important source of through appropriate legal frameworks and employment for rural women. Research in enforcement systems. Ghana and Uganda has shown that non-farm activities are linked to falling poverty rates for Support micro-, small-, and medium-scale enter- both male and female headed households, but prises. Lack of a skilled labor force, and lack of the rate of decline is faster for woman-headed public and private services, including financial households. Increased women's employment in and technological services, are obstacles for the the non-farm sector is also a direct contribution development of small enterprises, especially in towards one of the MDGs. rural areas (Box 5.4). The Bank will promote small rural enterprise development through sup- In most countries knowledge about the rural non- port for commercial business development farm private-sector is insufficient for effective devel- services.The Bank will promote efficient service opment interventions. Surveys and sector work will provision through SMEs, in particular, in rural be carried out to obtain better information. For this infrastructure services. purpose, the Bank will include rural specificity in surveys on the investment climate, and to conduct more detailed surveys in rural areas, including rural towns.Where relevant, findings will be addressed in Kenyan Entrepreneurs Build Market a rural section in country Private Sector Strategies 605.4 for Business Services and CAS documents. In preparing rural strategies, surveys will be conducted to assess the investment climate, and findings will be analyzed to find possi- Since 1998 an innovative World Bank project with a rural component, the Kenya Micro and Small Enterprise Training and Technology Project, ble interventions for improving competitiveness. is using vouchers to enable jua kali entrepreneurs to purchase skills Outputs can also feed into the PRSP and other and management training. As a demand-side instrument, the voucher national processes. More work will be done on project departs from the old approach of supporting public training rural labor markets and policy interventions for institutions. Now, diverse suppliers are packaging their services for jua enhancing broad-based growth and employment kali clients. Skilled craft workers have emerged as the leading providers generation, including addressing the relationship of training. Local private agencies handle allocation of the vouchers. between the formal and informal sectors in a diver- More than 25,000 vouchers have been issued, 60 percent of them to sified rural economy. Efforts will be made to identify women entrepreneurs. There has been a 50 percent increase in strategies strengthening the poverty impact of non- employment and income among training recipients. The project cur- farm private-sector development. rently subsidizes up to 90 percent of the cost of each voucher, but cost-sharing percentages rise with second and third vouchers. Jua kali now frequently purchase training without vouchers from providers who have demonstrated the value of their services. Source: Riley and Steen (2000). REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT IMPROVING SOCIAL WELL-BEING, MANAGING RISK,AND REDUCING 6 VULNERABILITY 61 I mproving social well-being, managing risk, and reducing vulnerability are key to improving the quality of life of rural people. These investments will also make substantial contributions towards increasing productivity, promoting the rural non- farm economy and enhancing economic growth. The Bank's activities to improve social well-being and address and minimize the vulnerability of the rural poor will be focused on: a) improving access to nutrition and health; b) HIV/AIDS; c) increasing access to and improving the quality of rural education; and d) managing and coping with food insecurity and risk for the rural poor (Annex 5). To achieve these objectives, foster broad-based growth, and enhance the sustainable management of natural resources, the Bank will also promote inclusiveness and remove barriers that exclude individuals on the basis of gender or ethnicity from economic and social opportunities. IMPROVING ACCESSTO NUTRITION advocate the interests of the rural poor to AND HEALTH ensure that government resources for health are not biased toward urban constituents; Disease and illness are frequent consequences of living in poverty, while at the same time illness and place greater emphasis on improving dietary disease are leading factors pushing families into quality and micronutrient status (fortification poverty. Communities routinely mention that poor and supplementation are important strategies to health is a characteristic of their poorest members combat micronutrient deficiencies, however (Narayan et al., 2000). Disease and illness also affect plant breeding may provide an alternative sus- labor productivity and economic growth. Current tainable and affordable long-run solution); health and nutritional status of adults affects partic- ipation in the labor force and the intensity of work- promote community-driven multi-sectoral effort. Among children, nutrition and health status approaches to improving health and nutrition as affect cognitive development and learning abilities. these are more likely to yield high returns; and Childhood malnutrition can also affect future labor- force participation and work-effort since it is asso- promote the status of women in rural develop- ciated with increased risks of morbidity and mor- ment to improve health and nutrition (as pri- tality during adulthood. mary care-givers, women are key to improving health and nutrition but their ability to invest in The area of reproductive health--and in particular their own and their children's health and nutri- culture-specific family planning--is essential to tion is hampered by their lack of control over achieve the goals of the rural strategy. For example, household incomes, poor education, and the experience in Latin America shows that attention health risks arising from their reproductive role). to reproductive health care would have direct pay- offs by facilitating increased and effective participa- tion of women in productive activities. Lessons HIV/AIDS:ATHREATTO RURAL from Bank projects including Ecuador and DEVELOPMENT AND FOOD SECURITY Argentina indicate that better development out- comes can be achieved if childcare and domestic HIV/AIDS is threatening the progress made in the responsibilities are considered in projects address- past 40 years of agricultural and rural development, ing agricultural and non-farm productivity. undermining gains in life expectancy and threaten- 62 ing productivity. The disease is no longer just a Rural areas are also the scene of widespread mal- health problem--it has become a major develop- nutrition, which compromises natural immunity and ment issue, posing enormous challenges to govern- contributes to disease burdens. In 2000, an estimat- ments, NGOs, and the international community. ed 32.5% of children under the age of five in devel- oping countries were stunted (ACC/SCN, 2000). Of the 36.1 million people living with HIV/AIDS, an While the global prevalence of stunting has overwhelming 95% live in developing countries.The declined considerably during the past two decades, situation is particularly dramatic in Sub-Saharan there are still unacceptable numbers of children Africa, where approximately 9% of all adults carry suffering from malnutrition. There is mounting evi- the disease. Sub-Saharan Africa accounts for only dence that child malnutrition rates are static or one-tenth of the world's population, but nine out of increasing in Sub-Saharan Africa. Micronutrient mal- ten new cases of HIV infection. In nine countries in nutrition also continues to be a significant problem Sub-Saharan Africa,more than 10% of the adult pop- affecting both children and adults throughout the ulation is HIV positive. In Botswana, Namibia, developing world. Swaziland and Zimbabwe, 20 to 26% of the popula- tion aged 15­49 is living with HIV or AIDS. Other To improve health and nutrition outcomes the parts of the world are also hard hit, however. In India, Bank will: around four million people are currently infected REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT with HIV. Further, it is estimated that by 2010 Asia because more than one-third of the GNP of the will overtake Sub-Saharan Africa in absolute num- most-affected countries comes from agriculture. bers (Barnett and Rugalema, 2001).The incidence of According to a recent FAO/UNAIDS study, agricul- the disease is high in several Caribbean countries, tural output of small farmers in some parts of although the spread of the epidemic in Latin Zimbabwe may have fallen by as much as 50 per- America has been slower than in other regions and cent in the past five years, mainly because of AIDS. the epidemic is concentrated in urban areas. In East Africa, labor shortages caused by HIV/AIDS Although HIV/AIDS has traditionally been regarded have led to a range of farm changes, including a as an urban problem, it is gradually being recognized reduction in land under cultivation, a decline in crop that rural communities are perhaps more vulnera- yields and a shift from cash crops to subsistence ble to it (UNAIDS, 2001). In absolute numbers, crops. In general, farmers have shifted away from more people living with HIV reside in rural areas. labor-intensive cash crops, such as bananas and cof- For example, more than two-thirds of the popula- fee, to subsistence crops that demand less work, tion of the 25 most-affected African countries live in such as cassava and sweet potatoes. As a result, rural areas (FAO, 2001). Information and health incomes have fallen.The impact of AIDS on farming services are less available in rural areas than in cities. communities differs from village to village and coun- Rural people are therefore less likely to know how try to country. to protect themselves from HIV and, if they fall ill, less likely to get care. In addition, the costs of The epidemic is tragic and made more so because it HIV/AIDS are largely borne by rural communities is preventable, through education, behavioral change, because many urban dwellers, at least in Africa, appropriate public policy, and treatment.The World return to their village of origin when they become Bank has developed an instrument to make ill. At the same time, HIV/AIDS undermines agricul- resources available rapidly to countries wishing to tural systems and affects the food security of rural implement their own programs to prevent the families. As adults fall ill and die, families lose their spread of HIV/AIDS and to help communities cope labor supply, as well as knowledge about indigenous with its impacts, including care for orphans. The farming methods. Families spend more to meet HIV/AIDS operations are a core element of the medical bills and funeral expenses, drawing down Bank's strategy to support rural development, espe- savings and selling assets. HIV/AIDS undermines the cially in Africa.The Bank will: incentives and the ability to invest in farms, infra- structure and education, threatening future Give high priority to stopping the spread of 63 prospects for rural and national development. HIV/AIDS and helping communities cope with its impacts. Poor households facing HIV/AIDS are HIV/AIDS disproportionately affects economic sec- less able to cope with loss of labor and are more tors such as agriculture, transportation and mining likely to dispose of assets to meet medical and that have large numbers of mobile or migratory funeral expenses than are more prosperous fami- workers. AIDS reduces productivity as people lies. Governments and development partners become ill and die and others spend time caring for should target assistance to the poorest house- the sick, mourning and attending funerals.The result holds, especially in the period immediately follow- is severe labor shortages for both farm and domes- ing death, when families are struggling to reorgan- tic work. Labor-intensive farming systems with a low ize their production systems. Programs managed level of mechanization and agricultural input are by communities that allow rural people to design particularly vulnerable to AIDS. The FAO has esti- and implement their own approaches are proving mated that, in the 25 most-affected African coun- effective when they are linked to local and nation- tries,AIDS has killed seven million agricultural work- al governmental structures. As costs of treatment ers since 1985. Up to 25% of the agricultural labor for HIV/AIDS begin to fall and access to medica- force could be lost in countries of Sub-Saharan tion increases, measures should be taken to assure Africa by 2020. This is particularly worrisome that rural people as well as urban can benefit. IMPROVING SOCIAL WELL-BEING, MANAGING RISK,AND REDUCING VULNERABILITY Mainstream HIV/AIDS in Bank operations. The following Bank actions are envisaged to pro- Because of the catastrophic implications of mote rural education: HIV/AIDS for African development, prevention and mitigation of HIV/AIDS has been main- place top priority on achieving free universal pri- streamed into most of the projects in the Bank's mary education; Africa rural portfolio, either in the design stage or through retrofitting of components. In addi- advocate gender equality in rural education; tion, the Africa region has designed a generic rapid-response multi-sectoral intervention called advocate quality improvements in rural schools; the Multisectoral AIDS Program (MAP) that makes resources available through streamlined ensure that public funds for education are dis- approval procedures to multiple countries in tributed equitably; support of rapid responses where commitment to addressing HIV/AIDS is demonstrated. A sig- encourage greater community participation in nificant portion of funds flows directly to com- rural education; munities to carry out programs of their own design under simplified procurement guidelines. increase investments in rural secondary educa- tion, particularly in countries close to attaining universal primary education; INCREASING ACCESSTO AND IMPROVINGTHE QUALITY OF RURAL promote literacy and training opportunities for EDUCATION unschooled rural adults; Education plays an essential role in reducing pover- ensure that investments in agricultural training ty. By enabling individuals and households to har- programs are in line with current needs; and ness knowledge, increase and diversify incomes, manage risks, and increase social mobility, educa- support experiments with private delivery of tion offers the prospect of breaking through the educational services. cycle of poverty. In rural areas, education also improves agricultural productivity and efficiency. Skills acquired though both formal and informal MANAGING AND COPING WITH 64 education enhance farmers' ability to acquire and HOUSEHOLD FOOD SECURITY AND decode market and technical information, select RISK FORTHE RURAL POOR optimal cropping patterns, and purchase the right mix of inputs. Education also plays a critical role in Managing the risks with which rural communities facilitating off-farm employment and economic and individual residents must cope received only development. In addition to the direct impact on brief mention in From Vision to Action.Yet, as clearly incomes, there are significant positive externalities articulated in the 2000/2001 WDR, an effective that are associated with investments in education. strategy for reducing poverty needs to enhance Most notably, higher levels of women's education security by reducing the risk of natural, financial and are associated with lower malnutrition, lower fer- health shocks and by enabling households to miti- tility and population growth rates, and better child gate their consequences. survival rates. Many features of economic development indirectly There are two educational needs in rural areas.The reduce the riskiness of rural incomes as they facili- first need is for general education (primary and tate growth (Anderson, 2001). For example, invest- secondary schooling), while the second, more spe- ment in irrigation as well as improved roads, cific need is education for agricultural and natural telecommunications, and modern banking systems resource management. reduce vulnerability. But there remains a need to REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT design and adapt policies, institutions, and invest- 6.1 Some Management and Coping ments that directly manage, reduce, or counteract Strategies for Risk Related to the risks facing rural residents, particularly the Agricultural Production poor. This need may be evolving with climatic change and with changing market structures. Providing More and Better Information: Access to reliable information significantly reduces uncertainty in a In many areas, women have predominant respon- risky world. Such information relates to markets and weather, sibility for household food security. Removing con- as well as technologies. straints and improving conditions that enable Insurance: The principle of insurance as a risk-sharing women to carry out their roles more effectively device is that, by accepting appropriate premiums from a large would promote food security both within the number of clients, the insurance company is able to pool the household and outside. risks. New mechanisms for insuring against price risks are being explored in a donor-supported initiative operated out of the Agriculture and Rural Development Department of the World Strategies to Manage and Cope with Risk Bank (Commodity Risk Management Program). Such yet-experi- Management of risk can be seen as policies or mental price insurance arrangements will operate in conjunc- other actions taken to deal with or reduce risks tion with credit instruments to reduce downside risk to both faced by poor rural households, whereas coping lenders and small-scale borrowing producers. To overcome some generally implies actions after the fact to help of the well-recognized problems of traditional crop insurance, households deal with shocks they have experi- the World Bank and several partners are testing novel rainfall- enced.The Bank is promoting a number of policies based insurance policies. IFC is investing in a global facility to and instruments that help in managing and coping develop weather-index insurance in emerging countries and with climatic and financial risks (Box 6.1), yet avoid financing the establishment of such an insurance scheme in market distortions. Among the new instruments Morocco. The Bank is testing a weather based insurance scheme for poor pastoralists in Mongolia. being developed are a diverse set of financial products that are market-based but historically Contract Marketing: In many countries, farmers have have not been readily accessible to many of the the opportunity to reduce price risks for commodities not yet poor, such as forward contracting, hedging, and produced, or for inputs needed in the future, by various mar- keting arrangements. The most important alternatives, from a pool pricing.The Bank is also exploring means to risk-management perspective, include cooperative marketing assist poor individuals learn about and use insur- with price pooling and forward contracts for commodity sales ance, and to reduce the costs to primary insurers or for input delivery. and re-insurers. Income Diversification: This includes a range of crop- 65 ping practices, investments in livestock and non-farm income, Social Safety Net Policies and Strategies to and migration that are used to reduce fluctuations in income. Maintain Food Security. Targeted transfers serve Traditional risk coping strategies may also serve this function. to convey income to the poor and vulnerable. However, such programs face special challenges in rural areas due to the difficulties in defining tar- geting criteria, in collecting beneficiary contribu- World Bank-supported programs and policy tions, and in administering programs in communi- advice are based on the experience that many tar- ties with low population densities and undevel- geted food security programs are more cost- oped infrastructure. Many of the most successful effective than generalized food subsidies. Food programs in rural areas, such as Mexico's security at the household level is essentially a mat- Progressa and South Africa's Old Age Pension, are ter of access or purchasing power. In most situa- administered in middle-income countries (for tions, cash transfers or the provision of vouchers example, Cord 2001b). The poorest countries will allow the recipients to purchase the food they with the greatest need for poverty programs also require using normal market channels, although in have the greatest need to be selective to avoid a few cases, mainly famine situations in Africa, it compromising macroeconomic stability or invest- may be necessary for outside agencies to trans- ment in human and physical capital. port food to remote areas. While food assistance IMPROVING SOCIAL WELL-BEING, MANAGING RISK,AND REDUCING VULNERABILITY may be given to families (as opposed to individuals), SOCIAL INCLUSION, GENDER such transfers can be a small part of a broader pro- AND ETHNICITY gram aimed at improving nutrition for vulnerable children or of health programs for pregnant women. An important priority of the rural strategy is to help These programs stress food utilization as much as make institutions more responsive to the rural poor household food security. thereby improving social well-being and reducing vulnerability. One approach includes empowering Another principle to be emphasized by the Bank is rural people through their increased participation in the strengthening of informal support programs the work of the Bank.This means that any barriers that build upon traditional rural community struc- to inclusion must be removed. Particularly vulnerable tures. While these frequently fail in times of shared to exclusion are refugees, ethnic minorities, indige- hardship, this shortcoming may be reduced with nous populations, women, landless and the disabled. support from a central government.The Bank also supports a third form of intervention for smoothing Principles of Bank actions in ensuring inclusiveness consumption in times of economic crisis by having are envisaged as: government provide employment in public-works programs. Such programs generally allow self-selec- 1. Reforming institutions to establish equal rights tion by offering wages slightly below market rates. and opportunities for both genders, marginalized The value to the poor of such programs is not populations and ethnic minorities measured only in terms of income support but also in terms of the benefits they receive from the infra- Advocate legal reforms and regulations that structure created. ensure equitable ownership of assets (particu- larly, land and livestock) and user rights (includ- Disaster management. Many disasters have a low ing water use, forest management) and promote probability of occurring in any given area, yet incur equal opportunities (labor laws, corporate laws, high costs when they occur and, thus, are unsuited to equal opportunity laws). private insurance. The Bank supports disaster pre- vention or relief programs, while facing the challenge Improve rural financing opportunities and mech- of designing publicly funded programs that stabilize anisms for rural women and entrepreneurs and income or consumption without creating induce- marginalized groups. ments that encourage excessive risk taking. For 66 example, investments in afforestation reduce the risk Promote social safety nets and protection for vul- of flooding.The Bank's overall Social Protection strat- nerable groups. egy provides guidance that is also relevant to rural development (Holzmann and Jørgensen, 2000).The 2. Fostering equal access to resources for women, Bank also assists in disaster early warning and has marginalized populations and ethnic minorities recently redrafted its Operational Policies and Bank Procedures for emergency reconstruction to clarify Promote an enabling environment for rural guidelines. An issue that is related to that of disaster women and minorities to benefit from new eco- management is that of reconstruction after conflicts. nomic opportunities. As with many types of disasters, rural areas may be particularly vulnerable to devastation, since isolated Improve access to markets through improved communities often are targets in insurgencies. It is availability of information by ICTs, better infra- important to understand the involvement of the structure services, especially transport and com- local communities in their own reconstruction. munication facilities. Women have been recognized as critical but often invisible players in post conflict societies. They also Reduce the opportunity costs of women's time have been recognized as a force for peace, often and energy in carrying out their multiple roles, crossing borders and ideologies. through investments in water, fuel, transport etc. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT 3. Strengthening the political voice of women 6.2 Community Driven Development and ethnic minorities Principles Ensure equality of opportunity for women and 1. Empower communities: participatory decision making, resources and ethnic minorities in community and producer authority to implement; organizations, and local, regional and national governing bodies. 2. Empower local governments: fiscal and administrative decentralization; 3. Re-align service delivery of central government: policy and enabling Promote leadership training for rural women environment; information to communities for decision making; and ethnic minorities. 4. Ensure transparency and accountability at all levels; Aligning the rural and gender strategies. The rural development strategy of the World Bank is comple- 5. Make it a learning by doing process and build capacity along the mented by the Bank's recent strategic document on way; and, gender and development.1 Gender disparities in 6. Commit to long-term reform for the institutional development to take power and resources, gender-based division of labor hold and be sustainable. and gender inequalities in rights and entitlements contribute to poverty, undermine economic growth and reduce the well-being of men, women and chil- dren.The strategy calls for gender mainstreaming in the Bank's work by working with member countries to identify gender issues important for poverty reduction and growth and by aligning Bank policies, processes and resources. The Bank's rural develop- ment and gender strategies support and reinforce one another. It is now widely acknowledged that one of the critical factors in revitalizing rural development is to raise the productivity of women farmers.In most of the developing world, women do most of the agri- cultural work. Women are also in charge of house- hold food security, yet in some areas are constrained in their access to, and control of, productive 67 resources such as land and money. Decentralized development efforts such as commu- nity driven development (CDD) offer the potential for increased community participation and ensuring the inclusiveness of all groups of society in rural deci- sion making, irrespective of gender, social class, or eth- nicity. In addition to devolving control and decision- making power to poor women and men themselves, these initiatives help communities build social capital by expanding the depth and range of their social net- works (Box 6.2). Past experience reveals that decen- tralization is not always synonymous with participa- tion and that transparency in decision making and an oversight or review process that does not stifle com- munity initiative is necessary to ensure that all groups participate in decentralized projects. IMPROVING SOCIAL WELL-BEING, MANAGING RISK,AND REDUCING VULNERABILITY ENDNOTES 1 Integrating Gender into the World Bank's Work: A Strategy for Action, January 2002 68 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ENHANCING SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES 7 69 N atural resources provide fundamental support to life and economic processes in rural areas. Many of the natural resource issues have already been treated in chapters 4­6, but this chapter adds some additional important considerations related to the objective of enhancing sustainable management of natural resources (see also Annex 6). THE BANK APPROACH This strategy promotes an innovative approach to NRM based on ecosystem management. This Soils are the foundations of agriculture, forests help approach provides an opportunity for the Bank to to protect water sources and provide income for respond to the lessons learned from past Bank more than 1.6 billion people, and water is essential experiences in NRM and issues that have been for human life and agriculture. Biodiversity is the raised in Bank reviews of the NRM portfolio. Both basis for protecting and improving all domestic objectives can be met by adopting an integrated plant and animal varieties and safeguards food natural resources management approach that opti- security. Inappropriate use of these resources mizes the use of the natural resource base to meet threatens rural livelihoods and creates formidable agricultural productivity goals, protects the long- new challenges, such as global warming.The degra- term productivity and resilience of natural dation of the natural resource base affects the poor resources, and meets communities' goals. (Izac and more than others, as they tend to rely on more Sanchez, 1999).These goals would include the wel- fragile natural resources for their livelihoods. fare of future generations, poverty reduction and Sustainable natural resource management and agri- environmental conservation. This approach avoids culture are generally quite compatible. Decisions dealing with strategies that address the principal on the use of natural resources are not made by resources individually; rather it will focus on inter- governments or international organizations, but are actions between soil, water, solar energy, and plant made daily by millions of farmers and rural inhabi- and animal germplasm. For example, bad forestry tants. In particular, women's indigenous knowledge practices will have an adverse effect on water sup- of seed selection and preservation, medicinal and ply and lead to land degradation. Land conversion other special use of plants as well as genetic from agriculture to urban use puts greater stress on resources for food and agriculture makes them marginal zones that in turn leads to conversion of essential to the process of conserving agro-biodi- forests to agriculture and further erosion. Also, versity. Policies that do not consider the roles of there is a confirmed relationship between female women and indigenous groups in NRM can result illiteracy and population growth, the latter being a in inefficiencies and non-compliance in policy significant driver of rapid deforestation throughout implementation. various ecoregions. All of these, in turn, have adverse impacts on biodiversity. However, at the The Bank's recently developed environment strat- operational level, natural resource management egy, the forthcoming water and forestry strate- strategies will be broken down into manageable 70 gies, and the 2003 World Development Report investment, institution building and policy pro- (Sustainable Development in a Dynamic World), grams/projects, often at the single-sector level (for give overall guidelines in approaching rural natural example, forestry or water supply, fisheries, energy, resource management (NRM) issues, and set the or environmental protection projects). framework for linking rural development and the environment, as well as forest management. The Bank's specific objectives in relation to rural devel- FUTURE BANK ACTIONS opment to improve the sustainable use of natural resources include: The Bank's current natural resource management portfolio includes three distinct types of projects, as Reducing land degradation; well as several combinations, each of which Improving water management; addresses technical, institutional and policy con- Promoting sustainable production of forest straints, as well as different implementation chal- products while protecting the environment; lenges. Some projects combine production and Supporting sustainable fisheries resource man- conservation, or conservation and institutional agement; and objectives (Box 7.1).Virtually all have some institu- Incorporating global warming into rural devel- tional development component. By and large, the opment planning. projects were designed to: (a) promote sustainable REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT agricultural, forestry, and fisheries development opment of additional water supplies. An irriga- and/or water resource use through the use of envi- tion and drainage business plan will be pre- ronmentally sound resource management tech- pared as part of an agriculture and food niques; (b) conserve or protect specific ecosystems review paper in FY03. and associated biodiversity (such as national parks and wildlife reserves); and (c) strengthen national With regard to forests, significant investments and/or sub-national institutional capacity to achieve will be targeted toward scaling-up collabora- improved NRM. tive forest management and promotion of for- est products. Catalytic investments for sustain- The strategy proposes future investments with the able harvesting and forest management will be potential to promote interventions and policy considered, but only in situations that have responses to the major market and government fail- been independently verified or certified. ures that are at the root of natural resource degra- dation.These investments will ensure the successful With regard to biodiversity, the promising application of the framework described above for areas of future investment are in the conser- integrated natural resources management programs vation of the genetic variation within species at the landscape and watershed level. and populations for crops and livestock, con- servation of the number of species for subsis- Under the revised strategy the Bank will support tence and cash income, and habitat preserva- capacity building for the integration of indigenous tion, especially in modified habitats (farmland, land, water, forest, and biodiversity management rangeland and forests). Other potential areas methods with scientific knowledge, and the dissem- for investment are to promote synergies ination of the resulting knowledge to producers. At between biodiversity conservation and agricul- the community level, investments will also be made tural development. to promote appropriate incentives for community- driven resource management programs. The Bank will also promote incentive systems that influence 7.1 how resources are used by strengthening or estab- Good Practice in Watershed lishing property and tenure rights, removing gov- Development ernment-induced distortions, and piloting new mechanisms to deal with market failures, such as Highly satisfactory results (outperforming the average of the Bank, with 90% satisfactory development objective, of systems of payments for environmental services. 71 which 17% highly satisfactory, compared with, respectively, 89% and 4% for the overall rural portfolio) have been Specific investments in technical interventions for obtained in the areas of community driven rehabilitation of land, water, forest, and biodiversity will be directed degraded watersheds. The Bank's OED rated 92% of the 42 as follows:1 watershed development projects completed between FY90 and FY99 at least satisfactory in achieving their development Investments in land and water will be made to objectives. Projects such as the China Loess Plateau cover a number of crucial interventions such Watershed Rehabilitation project reduced erosion as the restoration of soil structure and chemi- by 20-30 million tons annually, and improved the income cal content, reducing the flow of water and of the poorest households by an average of 20%. The wind over land surfaces, and reducing the min- combined impact of project and non-project activities benefits 6 million people and protects over 5.5 million hectares of ing of soil nutrients and carbon through recy- forested land. Common key factors of success include high cling, fertilizer use, and crop residue manage- government and community ownership. Other examples of ment. Investments will also be considered to successful watershed development programs include the improve the management of water quantity Eastern Anatolia Project in Turkey and the Tunisia and quality within a watershed-management Northwest Rural Development Program is another context (upstream-downstream demand com- positive example. ponents), as well as investments in the devel- ENHANCING SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES Investment in the area of climate change must be This strategy is currently being articulated in a associated with agriculture's role in cost-effective Fisheries Approach paper and is being implemented approaches for reducing greenhouse gases. on a `pilot' basis in several countries in East Asia, Investments should be in three key areas: a) mitiga- Latin America and West Africa, through technical tion of greenhouse gas emissions; b) reduction of assistance to help improve these countries' policy vulnerability and adaptation to climate change; and c) framework for fisheries management. The World capacity building to promote and implement these Bank expects to continue to learn from these themes. Actions would include: i) better manage- efforts in order to increase its own portfolio and ment of agricultural soils, rangelands and forests; ii) capacity for sustainable fisheries management and improvement in the efficient use of fertilizer; iii) to respond to the growing demand from develop- restoration of degraded agricultural lands and range- ing countries around the world. lands; iv) improving ruminant digestion through bet- ter feed; v) improving rice farming to reduce the As critical as the investments in land, water, biodi- amount of methane escaping into the atmosphere; versity and climate change is the investment in and vi) slowing deforestation by reducing slash-and- human capital. Reducing the mining of soil nutri- burn agriculture and establishing appropriate tree ents and carbon through recycling, fertilizer use, plantations (CGIAR, 2000). and crop residue management demands training and education of the rural poor.The promotion of The World Bank has a long history of involvement in sustainable forest products means the involvement the fisheries sector, focusing in the past on fisheries of the men and women who harvest and market development assistance intended to increase pro- non-timber forest products. Investment in natural duction and provide critical infrastructure. However, resources requires an understanding of how rural by the 1990s, experts confirmed that roughly two- people use those resources and benefit from them. thirds of the world's major marine fisheries had been It means a respect for local knowledge. The Bank fully or over-fished, and their exploitation is becom- recognizes the importance of investment in the ing less and less economically viable. Given these partnership of human and biological resources if adverse trends affecting marine fisheries throughout sustainable rural development is to be achieved. the world and the fact that 95% of the over 30 mil- lion people engaged in fisheries live in developing countries, consensus clearly emerged that govern- ments and communities need assistance to sustain- 72 ably manage fisheries resources. In response, the World Bank is now focused on strengthening coastal developing countries' capacity to sustainably manage their fisheries sectors, through: capacity-building and technical assistance for sus- tainable fisheries resource management, includ- ing support for reduction of fishing capacity, and institution building to improve the effectiveness of our client countries in international negotia- tions on fishing rights, fees; coastal rural development, particularly the cre- ation of additional economic opportunities for artisanal fishermen; and, assistance to encourage aquaculture production. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ENDNOTES 1 Some of these investments will be supported by the Global Environment Facility (GEF). 73 ENHANCING SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES 8 IMPLEMENTING THE STRATEGY: KEY THRUSTS AND CHALLENGES 75 T he previous chapters outline a framework and objectives for revitalizing Bank activities to reduce poverty in rural space, which was endorsed by clients (Box 8.1). The four implementation thrusts discussed in this chapter outline an agenda which enables the implementation of the strategic objectives of Reaching the Rural Poor. These thrusts are firmly embedded in the six regional strategies, reinforce and add incrementally to the value of global, regional, and national programs, and take into account the key constraints and lessons learned during the implementation of From Vision to Action. THRUST 1--INTEGRATINGTHE NEEDS focused on poverty reduction. The Bank will OFTHE RURAL POOR IN NATIONAL encourage a holistic approach reflecting the multi- POLICY DIALOGUES sectoral dimension of sustained rural poverty reduction. Such national rural development One of the main characteristics of the development strategies and associated policy and analytical process, advocated by Reaching the Rural Poor, is its work by nationals should be integrated into the strong client-driven nature in national policy making. national processes and will be the key driving However, this policy making process often still has a force in bringing the attention of Ministries of pro-urban bias. Redirecting national attention to the Finance and the Bank's Country Directors and plight of the rural poor will only occur through inter- CountryTeams back to rural development.When nal advocacy within the World Bank and more such work is done by nationals, local ownership is importantly in individual country capitals.The expe- likely to be enhanced. rience of From Vision to Action shows clearly that unless there is broad country ownership of the rec- Bank staff will support the national rural develop- ommendations, there will be little impact on the ment strategy formulation processes, as well as country programs. Under Reaching the Rural Poor the provide analytical work to acquire a better under- focus will therefore be on fostering strong advocacy standing of the rural areas in client countries.This processes in the client countries. This can best be would be done by supporting the enhancement done through support to the preparation of client- of the rural aspects of Poverty Assessments, owned and client-driven national rural strategies Public Expenditure Reviews, and the preparation and to enable client country institutions to better of Rural Policy Notes. Such an improved Bank articulate and advocate the needs of rural inhabi- analytical platform will be a condition for tants, and specifically, the rural poor. To have an improved decision making on resource allocation impact such processes must be aligned with, and in rural space, more effective advocacy by both integral to, national development strategy processes rural representatives in client countries and mem- (for example Poverty Reduction Strategy Papers and bers of the Bank's rural staff, and in discussions national development plans), and be supported by with other development partners. Bank diagnostic, analytical and strategic documents (Poverty Assessments (PAs), Country Economic This thrust is therefore envisioned as one of the key Memorandums (CEMs), Country Assistance activities at the country level. Backing of national Strategies (CASs), Country Gender Assessments processes for the rural strategy formulation (Box 8.2) 76 (CGAs), etc). The principal focus of this thrust is to is the overall priority in this regard, and its supportive strengthen the voice of the rural poor, in national analytical work will concentrate on up to 12 coun- processes for strategy formulation. This would be tries or themes per year. In selecting the countries accomplished through two related activities: and themes, priority will be given to those with: a) widespread rural poverty; b) opportunity for impact, Rural institutions in client countries will be sup- i.e., focus on countries with an overall policy environ- ported in preparing broadly owned national ment and rural development policy conducive to rural development strategies focused on rural poverty reduction in rural space or willingness to poverty reduction.To do so, the Bank will partner establish such policy; c) windows of opportunity for with all stakeholders involved in rural space; i.e., influencing the CAS, PER, PRSP, CGAs and other organizations of producers, women's organiza- country-driven processes to ensure maximum tions, local NGOs, line ministries, academic insti- impact, accepting that there are many opportunities tutions, and the private sector, to support both to ensure increased attention and improved quality advocacy and policy processes by nationals of decision making in country and donor-agency through, for example, the organization of stake- processes; and d) opportunities to translate the rural holder workshops and consultation processes, poverty strategy into increased lending, learning the preparation of policy notes, undertaking diag- through pilot operations, and/or close cooperation nostic, analytical and strategic work on rural issues with the other development partners.This thrust is REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT based on the regional strategies.This initial group of will include consultancy contracts with key stake- countries in which national rural development strat- holders for the preparation of rural poverty-reduc- egy work will be focused does not exclude similar, tion-focused strategies and key policy notes, and the though probably less intensive work in other coun- organization of national workshops and media con- tries.The Bank will provide support for the develop- tracts. For the economic and sector work, it may ment of improved rural development strategies in include critical Bank or consultant staff inputs. The any client country requesting such assistance through Bank will build upon its existing global and national the country assistance strategy process. alliances with other development partners to sup- port this effort. To take this thrust forward with the necessary level of commitment and funding requires enhanced Within the Bank, the Agriculture and Rural donor collaboration to ensure coherence of work at Development Department will work with internal country level following the principles of CDF within units and external partners to provide training for the rural space. Donors need to support the Bank-wide staff to help them acquire the necessary increased national dialogue on rural development at expertise in rural poverty reduction for both oper- national and local levels, and undertake essential and ational and analytical work and the preparation of supportive analytical, diagnostic and policy work.The enhanced tool kits and guidance and training materi- inputs required from the Bank and its partners to al for pro-poor rural development.A gender dimen- assist the national rural policy formulation process sion will be included in training materials. 8.1 ClientViews on the Strategy Both the corporate and regional strategies reflect inputs based on There were strong calls for assistance in the development of coun- a broad set of outreach activities and consultations conducted try driven rural development strategies and the underpinning eco- over eighteen months (see Annex 2). nomic sector work to support national processes, including the PRSP, and to raise advocacy at national levels. The importance of The holistic approach towards rural development and the the human factor was emphasized, in terms of demographic trends increased focus on poverty, vulnerability, risk mitigation, and social and their impacts, migration from rural areas to urban areas as issues has been endorsed in consultations with the Bank's stake- well as migration within rural areas, and education of rural peo- holders. There was widespread agreement among the stakeholders ple. While the increased emphasis on the private sector was 77 on the continued emphasis on agriculture in the new strategy. At endorsed, the continued role of the public sector was also under- the same time, the stakeholders endorsed the Bank's holistic scored. It was felt that the previous Bank strategy did not prop- framework for rural development within which agricultural devel- erly elaborate the new models for public/private partnership opment will take place, including activities to promote a vibrant which are required for rural development to succeed. Stakeholders non-farm economy; an increased role of the private sector, and emphasized the need for the rural strategy to highlight Bank sup- social sector services. Some of the new directions for Bank oper- port of the private sector, especially where rural SMEs and agro- ations have also been strongly supported by the stakeholders. processing development are concerned. Land reform and land pol- These included support for decentralization; community-based icy reform are important issues across all regions, and the active implementation; and increased flexibility in project and program participation of the Bank in this process is expected, beyond the design and implementation. Other issues emphasized by stake- efforts outlined in the previous strategy. The consultations con- holders included increased attention to political economy and gov- firmed that natural resource management issues need attention. ernance, conflict and disaster management, and institutional devel- In this regard, smaller projects and community based implemen- opment and capacity building. tation was emphasized. It was clearly apparent from the consul- tations that stakeholders expect the Bank to implement the strat- There were requests that the new strategy should give consider- egy in a more client-specific, more flexible, simpler, less bureau- ation to the diversity of conditions among countries (and espe- cratic, more "bottom-up" fashion, and be more accepting of local cially inside large countries) and the heterogeneity of the poor. experience and expertise. IMPLEMENTING THE STRATEGY: KEY THRUSTS AND CHALLENGES 8.2 Essential Content for National Unlike From Vision to Action, where financing could Rural Development Strategies not be strategically and systemically sustained, this program will be supported by annually earmarked ("off the top") funding, in part already secured by a Alignment with wider national planning processes: specific allocation by the Agriculture and Rural provides direct inputs for PRSP; and, subsequently, CAS develop- ment. Development Sector Board from the FAO/CP resources, and partly by a reallocation of the Participation for broad stakeholder engagement departmental budget. This will supplement Bank and ownership: reflects wider moves toward democratic allocations made by the regional departments. decentralization. Moreover, by not restricting the actions to a limited Diagnosis: good analytical work , informative household sur- number of focus countries, as was done under From veys, review of past policies, understand causal linkages and Vision to Action, but by opportunistically supporting transmission, understand livelihood strategies, assets and vulner- key activities at the national level in a variety of ability, understand economic drivers, all these influencing ulti- countries, a greater impact can be expected. mate content. Content: naturally must be tuned to the specific sit- uation of the country but typically: THRUST 2--SCALING-UP INVESTMENTS holistic, covering the entire rural space; AND INNOVATIVE APPROACHES IN RURAL DEVELOPMENT tune strategic options to locational specificity of different areas; The Millennium Development Goals will not be favor livelihoods-strengthening diversification options for met if greater numbers of rural poor do not have multi-occupational and multi-locational households; dramatically increased access to resources for advance market institution development in tandem with lib- proven investments. Reaching the Rural Poor will eralization steps; therefore give particular attention to identifying explicitly take on inequality, in assets and incomes, with tar- and scaling-up good-practice investments to other gets, timetables and concrete measures; regions within the country, to other countries, or to other continents. Recognizing that there are defini- propose measures to take advantage of technical change, rec- tional issues surrounding the term "scaling-up" and ognizing the need for public support to research; that more work needs to done to further clarify demonstrate that agricultural strategies, the cornerstones of boundaries, the Bank proposes as a working defini- rural povety reduction efforts; 78 tion of scaling up as "increase positive socio-eco- recognize the importance of investment in infrastructure and nomic impacts from a small to large scale of cover- human capital; age." Neither the approach or type of intervention respond to the `obligation' to protect the poor, with cogent to be scaled-up, nor the regions listed are exclusive social protection measures, including for conflict areas and for and new interventions may be added over time. HIV/AIDS; and, This thrust recognizes that where appropriate experience in key development interventions has propose pragmatic steps toward greater de-concentration and devolution. demonstrated to have sustained and positive impacts on rural poverty reduction, all reasonable Targeted M&E: recognize multi-sectoral within rural and effort should be made to address wider application disaggregation for monitoring (by local communities etc.) and within and between countries and regions. local and national planning. Priority actions: prioritization based on realistic assessment Scaling-up Rural Investments at the of institutional capacity, macroeconomic feasibility, governance Country Level situation and the policy environment. Scaling-up good practices must be seen an integral Fostering partnerships: new instruments, sharing, public- part of national rural development strategies. Good private, ­ civil society organizations etc., fostering intersectoral practices are acquired after years of development linkages and coherence. experience. These should have been piloted suc- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT cessfully before being scaled-up. Innovation and A Selected Checklist of Readiness pilot projects will therefore be supported as well. 8.3 for Scaling-Up andTaking Effective intervention must be locally validated and Innovation Forward adapted including its socio-economic and gender impacts. Scaling-up does not mean that the Bank What is known about impact? will apply the same approach everywhere. Innovative methods of learning and information Level of social, environmental or economic impact sharing between countries and among development Cost of delivery of benefits partners need to be supported. Mechanisms for capturing, validating, disseminating and adapting Nature of beneficiaries good practices need to be developed concurrently. Timescale A checklist for readiness for assessing the features What is known about success factors? of a practice and the policy and institutional con- text has been developed (Box 8.3). It will form an Organizational process and institutional factors important tool for assessing the readiness of a practice for wider scaling-up and will provide other Cultural, environmental and social factors development partners, governments and commu- Characteristics of beneficiaries nities with a better understanding of the state of Policy and sectoral environment the practice and associated risks and opportunities. The Bank, with its partners and member govern- Technical aspects and inputs supply ments, will assess the fit of good practices within the national rural development strategies and What is the "state of practice"? processes, the PRSP and the CAS. Innovation ­ minimal objective evidence Broadly, the selection criteria for investments to be Promising practice ­ anecdotal evidence scaled-up are based on achieving the highest return Models ­ positive evidence in a few cases in sustainable poverty reduction per unit of invest- ment. The investments selected should: a) make a Good practice ­ clear evidence from some settings clear contribution to one or more of the objectives Best practice ­ evidence from multiple settings of Reaching the Rural Poor; b) cover a large popula- Policy principle ­ proven in multiple settings tion of rural poor, which, in some situations, implies 79 an emphasis on, for example, remote areas, areas with poor resources and women farmers; c) have a What are the organizational strategy options? low investment cost per beneficiary so that coun- Direct organizational growth ­ internal replication; program tries and beneficiaries can afford the required expansion investment; d) have a good track record in terms of development outcome; and e) be suitable for part- Indirect organizational growth ­ catalyzing and supporting oth- nerships with other donors, so that funding can be ers; joint venture leveraged. Different weights need to be given to Direct institutional mainstreaming ­ capacity building; partner- the individual criteria in each region or country. ships; replication by others Indirect influence ­ diffuse concepts and models; policy advocacy The Initial Program for Scaling-Up. The regional strategies set out the initial program for scaling-up. In strategy implementation, there will be a continu- ous process of selecting new projects for scaling-up, The selection for consideration in the first round is driven by the regional departments, based on coun- based on regional demand and topics where the try programs.Table 8.1 shows the first phase in the Bank has accumulated solid experience (see also region/country good practice scaling-up program. Chapter 2).This choice is reinforced by the high per- IMPLEMENTING THE STRATEGY: KEY THRUSTS AND CHALLENGES centage of project in the current portfolio that are ect preparation and supervision, through "off the rated satisfactory or highly satisfactory in Bank top" allocation of the budget of the Cooperative Project Supervision Reports for meeting their Program with FAO, to be supplemented by Bank development objectives. Annex 7 provides a collec- funds,Trust Funds and partnerships; (c) the devel- tion of successful Bank operations in rural areas. opment of a structured learning process and pri- ority funding for knowledge management in these The above list is not exclusive. Other types of areas; and (d) working closely with other partners projects demonstrating success in a particular and clients in the identification and sharing of country will also be scaled-up. Scaling-up good good practice and innovation. practices will require: (a) widespread advocacy from senior management to audiences beyond Promoting New and Innovative the typical rural constituency, and with special Approaches in Rural Development focus on Finance Ministries, Central Banks, and the Together with the scaling-up of good practices, international media; (b) special incentives for proj- Reaching the Rural Poor proposes to accelerate Table 8.1: Potential areas for scaling up and innovation Objective Theme Policy and Institutions agricultural policy reform development of rural strategies institutional reform and capacity building participatory planning Agricultural Productivity and land reform and administration Competitiveness research and extension information technology ­ marketing and knowledge irrigation and drainage support for producer organizations/user groups food safety and agribusiness 80 rural finance ­ including micro finance Non Farm Rural Economy rural non-farm economy including business development private sector role in service provision infrastructure, including small towns Strengthening Social Services and health and education: specific rural issues Reducing Risk and Vulnerability community driven development/district programs social inclusion, including women and girls commodity, climate, and disaster risk management emergency reconstruction Sustainable Natural Resource soil fertility Management watershed development community natural resource management community forestry fisheries REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT work on rapid learning in new ways of working and Improve the Sustainability and in innovative areas reflecting the dynamic and Institutional Development Impact changing economic, social, environmental and insti- To improve the current low sustainability and insti- tutional context of rural development and the tutional development impact ratings of completed increasing potential for impact of externalities on projects, attention will be given to the identification the rural poor. These themes are again based on of improved procedures to enhance the long- the demands from the regional strategies and term development impact of Bank rural opera- include the priority need to develop effective tions and guidelines on how to assess and means to enhance multi-sectoral coordination and improve sustainability. This will include an initial the role of the private sector in rural development. focus on financial and institutional sustainability, The continuum between innovation, good practice including institutional development (ID) as key and policy principle is recognized and work on determinants of lasting project impact. Beyond this, innovation will be set within and tested against the it will increasingly focus on how the Bank's rural framework as set out in Box 8.3. development operations affect overall sustainability of livelihoods and poverty reduction in the rural space. Methodology for gender mainstreaming will THRUST 3--IMPROVINGTHE QUALITY be included in the sustainability analysis.The guide- ANDTHE IMPACT OF BANK lines and standards now being used for sustainabil- OPERATIONS ity analysis across the Bank will be improved. Issues of trade-offs between different aspects of sustain- The poverty focus, poverty impact, and sustainabil- ability (for example, between environmental and ity of the Bank's operations in rural space all need economic sustainability), will be addressed. It will to be improved.This will require strengthening the also include the development of toolkits and staff understanding of the key characteristics of a pro- training programs, in cooperation with WBI. poor operation, improving sustainability, social inclusiveness, and maintaining quality standards as Continue to Improve Other Quality set by the Bank's Quality Assurance Group and Indicators for Rural Development OED, and achieving a better development out- Operations come of completed projects. This thrust will have three components. To continue to improve the key quality indicators for the strategy's objectives, such as the quality of Improve the Poverty Focus Economic and Sector Work (ESW), Quality at 81 To improve the focus of the Bank's operations in Entry and Quality of Supervision, the Rural Sector rural areas, effort is needed in the understanding Board will expand the program for Quality of rural poverty and the application of that under- Enhancement Reviews (QERs) and clinics for ESW, standing in the design of the Bank's interventions. Poverty Analyses, Public Expenditure Reviews, More specifically, this will include development of Gender and Social Analyses. At least twenty such methods for poverty analysis initiated under the events will be sponsored per year. preparation for Reaching the Rural Poor. More explicit integration of gender-sensitive poverty analysis and diagnosis in operational strategies THRUST 4--IMPLEMENTING GLOBAL and project design, and the introduction of a CORPORATE PRIORITIES AND poverty-related Monitoring and Evaluation ENHANCING PARTNERSHIPS Framework in the project documentation will be sought. Poverty learning workshops, and at least Increased Involvement in International two regional clinics or training sessions per year Public Goods will be organized around enhancing the rural High-quality, high-impact rural poverty reduction poverty focus, in cooperation with the WBI and operations will require continued commitment and Thematic Groups. support to key global public goods in two critical IMPLEMENTING THE STRATEGY: KEY THRUSTS AND CHALLENGES areas: first, ensuring that the interests of developing progressively allocating the Bank's contribution countries, and thus the rural poor, are safeguarded to up-stream research on global public goods, in an increasingly globalized world; and second, prioritized by share- and stake-holders, and car- there needs to be ready access to new and appro- ried out by consortia of the most competent priate technology, which in particular is suitable for institutions, under the leadership of the CGIAR. poor farmers. Continued support for client coun- Considerable leverage of the Bank's current tries in dealing with global trade issues is important CGIAR funding could be achieved to increase in this regard. Support for the Consultative Group cooperation and reduce competition between on International Agricultural Research is also an International Agricultural Research Centers and important component of support to the global National Agricultural Research Systems; public goods dimension of Reaching the Rural Poor. The Bank will also assist client countries in adjusting understanding and supporting policy adjust- to the consequences of global climate change as it ments in agricultural practices and technology as affects the rural space and work with colleagues in a consequence of anticipated impacts of global implementing the Bank's Environment Strategy. climate change; and, PromoteTrade Liberalization and WTO understanding women's role in agriculture to Process make agricultural research more relevant to Assisting developing countries in the WTO process women and other resource poor farmers. and other international trade liberalization efforts is high priority in the implementation of this strategy. Improving External Linkages Specific actions envisaged in this area are discussed Partnerships can yield major benefits by harnessing in Chapter 3. the Bank's effectiveness in rural development. The Bank has a broad and intensive network of coop- International Agricultural Research eration and partnerships in activities related to The Consultative Group on International rural development. In addition to regular and well Agricultural Research (CGIAR) researches techni- established institutional engagements with other cal and economic subjects vital to sustainable agri- international organizations and donors, the Bank culture, food security, and poverty reduction. has over 30 rural-related collaborative agreements Through these activities, the CGIAR complements and partnerships as of late 2001. Of these, 24 are the Bank's efforts to enable developing countries to global in nature and seven are concerned with spe- 82 realize their full agricultural technology and pro- cific regions. The Bank's Study on Partnership duction potential. Selectivity and Oversight discussed by the Bank's Board in April 2000, and an OED review (2001), as The Bank's current support for the CGIAR is being well as the new ESSD partnership guidelines, pro- broadened to a multi-stakeholder initiative, includ- vide a framework for improving partnerships in ing private industry, advanced research institutions, rural development. international research institutes, national agricultural research systems, and civil society, to harness The development of this strategy has provided an global advances in science and technology for the opportunity to refresh and improve these rela- benefit of poor farmers in developing countries. tions with the Bank's traditional rural partners, This will include: such as the FAO and IFAD; the bilateral partners including the Netherlands, USA, UK, Germany, continued dialogue between the development France, Canada and Japan; various UN agencies; partners and all other stakeholders, promoted regional development banks especially with AfDB, by the Bank, in developing competitive instru- ADB, IADB, and many others. The further devel- ments and achieving leverage of public sector opment of relations with international partners funds for investments in science and technology was aimed at improving the distribution of labor for food security and poverty reduction; among the various partners based on the Bank REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT and the partners' specific comparative advantages. 8.4 An Outline for a Global Platform for Coordinated support for the development of Rural Development national rural development strategies, in conjunc- tion with PRSPs and CASs, will be a major focus Mission: of the Bank's engagements with international part- To contribute to the elimination of rural poverty and the ners. Through enhanced partnership arrange- enhanced economic development of rural areas through ments and linkages with others, the Bank will also deepened global, regional and national cooperation and benefit from the experiences of best practice and collaboration innovation and from analytical and policy work. These partners can also strengthen the Bank's competence in addressing gender issues in rural Principles: development. Opportunities will be fostered to align Trust Fund allocations to the implementation Direct participants ­ development agencies, donors plan of Reaching the Rural Poor and to seek means and IFI to establish multi-partner funding mechanisms to Fosters a range of interlinked formal and informal tackle key strategic issues. alliances and activities with stakeholder representatives Places emphasis on action, flexibility and responsiveness Collaborative arrangements include formal agree- Light on overheads and bureaucracy ments with partner organizations to address con- crete issues in rural development, and/or are formed to implement a time-bound program. Outputs may include: These arrangements, in which participating organi- zations allocate resources to achieve specific objec- Raised awareness and advocacy tives, are considered to be essential components in implementing this strategy and further enhance Sponsored policy and public debate Bank effectiveness in rural poverty reduction. New Increased levels of investment and development fund- and revitalized collaborative programs will be insti- ing including increased co-financing tutionalized.These will include enhanced collabora- Joint analytical and policy work on challenging issues tion between the Bank and USAID focusing in the first instance on global public goods specifically Shared lesson learning in good practice and innovation agricultural trade and markets, environmental Authorizing and enabling environment for related change including climate change, and science and alliances 83 technology; and with the European Commission on Joint monitoring and evaluation broad-based issues of rural poverty reduction in particular in support of the PRSP processes and key thematic programs including land reform and access, and community driven development. Corporate Partnerships are either legal entities established to address high priority issues, or rep- through which the FAO established and staffed resent long-term programs between the Bank and a program to help countries design and prepare a specific institution.They are the most visible com- projects and help the Bank with sector work. ponents of the partnerships and high-level institu- The FAO/CP has almost 100 professionals who tional commitments. cover a full range of disciplines. The Bank pro- vides 70% of the funding for the CP while the FAO and World Bank Cooperative Program FAO provides the remainder (the Bank con- (FAO/CP).The FAO is the Bank's oldest partner tributes about $10 million annually). The in rural development. The Bank entered into a FAO/CP resources are allocated among the cooperative agreement with the FAO in 1964, regions, and the respective sector units develop IMPLEMENTING THE STRATEGY: KEY THRUSTS AND CHALLENGES their programs with the FAO/CP directly. This (CSOs) and non-governmental organizations cooperation is ongoing and both the FAO and (NGOs) have increased dramatically over the past the Bank are aiming for a higher degree of inte- ten years. Internet websites and information sharing gration of the FAO/CP into core Bank activities now provide the opportunity for increased direct and in particular in support of the implementa- dialogue and interaction between the Bank and tion of Reaching the Rural Poor. CSOs/NGOs.The consultation process on regional action plans and the new corporate framework for World Bank ­ IFAD Rural Partnership the rural strategy proved to be a valuable and pro- Initiative. This new partnership aims to build on ductive means of enhancing relationships with both the complementary assets of the two institu- large numbers of NGOs as well as with the private tions recognizing the shared commitment to sector across all regions. Improved linkages with the rural poverty reduction. It will specifically focus private sector in a country framework is among the on rural advocacy, knowledge management, scal- top priority objectives for each region. In a rapidly ing-up of good practice, and resource mobiliza- globalizing world, links with multi-national compa- tion to address structural issues at both country nies active in agriculture and which have an impact and global levels.This initiative will work closely on rural development are also important. As the with the FAO. process of scaling-up of good practice is further developed it is anticipated that the CSOs, NGOs New alliances to raise the platform and enhance and the private sector will play a key role both in global advocacy for rural poverty reduction--A the sharing of good practice and in support to scal- Global Platform for Rural Development. There is ing-up at the local level. growing consensus among international develop- ment partners including the Bank, FAO, IFAD, EC, regional development banks, and major bilateral IMPROVINGTHE MIX OF INSTRUMENTS agencies, that we will not be successful in meeting national and global poverty reduction targets unless In the past five years, the Bank has experienced a we reduce poverty in rural areas. A global under- more significant change in lending instruments than standing of approaches to meet the needs of the at any previous period in its history. In addition to the rural poor has never been closer, as many of these traditional investment and adjustment operations, a agencies have recently taken stock of their past wide variety of new, and often more flexible, instru- experiences and redefined their approaches and ments have emerged. Some of these instruments 84 commitment to poverty reduction in rural areas.The represent improved versions of investment lending Bank will work with others in a broad-based global such as Learning and Innovation Loans (LILs), coalition to make the reduction of rural poverty a Adaptable Program Loans and Credits (APLs); major thrust for the coming decade. Efforts have Community Based Rural Development (CBRD) and recently begun to establish a Global Platform for social funds. More recently, new instruments, such as Rural Development (Box 8.4). It is proposed that PRSP-based programmatic lending and Poverty such an alliance be a flexible consortium of interna- Reduction Support Credits (PRSCs) have emerged. tional donors, interested in cooperating on the chal- lenges of rural poverty reduction, acting as advocates Addressing rural poverty in a comprehensive fashion and champions for the rural poor and specifically in requires that an evolving set of instruments are support to the strengthening of the rural focus in applied to Bank operations in rural space.This is chal- policy and investment decisions in our client coun- lenge has also been reflected in the 2001 OED tries. Moreover, it will serve as a platform for joint Annual Review of Development Effectiveness learning and identification of good practices. (ARDE) (World Bank, 2002a). There is clearly no one "golden rule" as to the optimal distribution Improved Links to the Civil Society and Private between different Bank instruments. However, some Sector. The Bank's links to citizens groups, producer general directions can be identified regarding Bank organizations, and other civil society organizations operations in rural space: REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT the diversity of rural situations between regions, Programmatic Lending: Poverty countries, and sub-country regions requires the 8.5 Reduction Support Credits (PRSCs) use of a broad set of instruments with increased multi-sectoral character set within the CAS The first examples of Poverty Reduction Support Credits framework; (PRSCs) involve a series of two or three programmatic operations that correspond to the time horizon of the traditional investment projects will continue to PRSP and CAS. They typically have one tranche and are play an important role, however they should be provided based on up-front completion of a set of pri- blended with the new type of operations (i.e., LIL, APL, PRSC, etc) according to country ority reform measures and public actions that demon- requests and conditions; and strate satisfactory progress with the country's social and structural reform agenda. Some PRSCs will focus mainly the broader use of new instruments, such as on economy-wide policy or institutional issues, with lim- programmatic lending, should be promoted only ited rural content. Others will focus on sectoral poli- after careful study and assessment of the actual cies, institutions, and regulatory actions. There is concern field experiences with these programs and that rural space will not be fully incorporated in pover- assurance that there is adequate rural focus. ty reduction strategies or in programmatic lending. The rural family will monitor the use of these instruments Ensuring an Adequate Rural Focus in Programmatic to ensure an appropriate rural focus. Lending.The recent internal changes within the Bank indicate that the increased use of programmatic lend- ing tools, especially in the poorest countries (Box 8.5), may have a profound impact on the way that rural poverty can best be addressed. It is too early to demanded by most of the Bank's client countries. evaluate the impact of programmatic lending in this While the concept of community-based develop- respect, but there are both opportunities and risks in ment is appealing and compelling (Coirolo et al. achieving rural poverty reduction objectives with this 2001), the knowledge of how to do it properly and shift. Programmatic lending could help to set a frame- effectively, is still evolving. Recognizing this state of work for improved rural spatial analysis leading to affairs would suggest that the expansion of com- improved cross-sectoral rural poverty design. It could munity-based activities should be done with the also address overarching institutional and policy con- flexibility to adjust and fine-tune designs as knowl- straints, provide a channel for systematic gender edge builds up. On the whole, however, it is desir- 85 inclusion,support better national poverty monitoring, able to increase the involvement of communities in and improve donor coordination. At the same time, program design and implementation to the maxi- the broader framework of programmatic lending mum extent possible. It is equally important to might lead to the result that the rural aspects and fea- assure that these processes are inclusive and take tures of rural livelihoods are less well covered than in into consideration the specific time or cultural and smaller projects.The best way to guarantee that pro- social constraints of women. grammatic lending becomes an opportunity for rural beneficiaries is to provide the rural stakeholders in the countries with the assistance necessary to create MONITORING AND EVALUATION high-quality national rural strategies and to undertake other well targeted analysis. This strategy presents a program to revitalize the Bank activities in the rural space, and increase the Expand Community Participation in Project effectiveness in the Bank's work in rural poverty Design and Implementation. In FY00 one quarter reduction. Reaching the Rural Poor will pay consider- of projects in the rural space were implemented able attention to monitoring and evaluation of the with community participation. The community- strategy's implementation. A set of targets and based approach is much welcomed and even benchmarks will be used as the baseline for evalu- IMPLEMENTING THE STRATEGY: KEY THRUSTS AND CHALLENGES ating this progress over a five year period.These are include other major international organizations presented within a framework of results-based such as the UN regional centers, and the FAO. management principles, i.e., inputs, outputs, out- comes, and impacts. The Bank's Agriculture and Rural Development Sector Board will work closely RISKS IN IMPLEMENTING THE with senior management in the further alignment of REVISED STRATEGY the rural strategy implementation framework to emerging Bank work on results-based management. It is recognized that there are several risks inherent In conjunction with the implementation of the in implementing the strategy: Strategy, an attempt will also be made, together with other international donors, to improve the moni- That Reaching the Rural Poor is not acknowl- toring of regional and global progress in rural devel- edged within the Bank as a multi-sectoral strat- opment and rural poverty reduction. The Strategy egy and that substantive multi-sectoral collabo- has not proposed specific lending targets, as such ration does not materialize. The effective imple- targets no longer fit in the demand-driven nature of mentation of the strategy necessitates that all sec- the Bank's operations. It is expected, however, that tors operating in rural space make appropriate increased national demands and improved quality of efforts to embrace the opportunity offered (rise the operations in rural areas should generate to the challenges of rural poverty reduction) and increased demands. in particular engage actively with the establish- ment and operation of the regional implementa- Implementation targets for rural operations will tion and coordination arrangements. allow for continuous monitoring of strategy imple- mentation.Additionally information will be provided That the Bank will not maintain the momentum for a selected group of key countries to gauge established through the preparation of the progress at the country level.The progress in imple- Strategy, in the implementation phase, and fail to menting the strategy will be reviewed quarterly address the necessary internal institutional within the Bank, and annual reviews will be prepared arrangements, the incentive framework, funding for the Board of Executive Directors. In addition to resource allocation, and creation of an appropri- presentation of progress against these indicators, ate staff skills mix. One of the failures of the From the annual review will also provide an overall assess- Vision to Action was the lack of capacity to main- ment of progress on strategy implementation and tain commitment to the core principles and 86 highlight any critical issues. implementation processes. The impact of Bank operations by themselves on That the emerging new lending instruments and global rural poverty indicators, is difficult to attrib- trends in lending are not conducive to innova- ute. Monitoring overall and regional trends, as well tion and risk taking in the rural space. With as country indicators in rural development and increased interest in programmatic lending and poverty reduction, however, results in very impor- large scale budget transfers, the incentive and tant information that can be useful in analyzing the opportunity to pay necessary attention to learn- implementation of the strategy in the evolving ing and innovation within the country context international context (Millennium Development may be reduced. In light of the urgency of deep- Goals). General rural development indicators, and ening the understating of risk and vulnerability of indicators for the food and agriculture sectors are the rural poor and tackling key structural and not easily available, and improving the information- institutional issues, space must be given for com- al basis for rural poverty reductions requires inter- munities and countries to adapt and learn within national cooperation. The Bank has already estab- an active investment framework. lished partnerships, such as the Africa initiative for enhancing the rural-related statistical database.This That the Bank together with willing country effort should be continued and broadened to partners and other stakeholders is not able to REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT mobilize the voice of the poor rural women and That the Bank's willingness to open up to, and men, and other rural stakeholders. The strategy capacity to work with, a wide range of partners is recognizes the challenges of mobilizing national inadequate to address the challenges. The Bank and international advocacy for the rural poor and cannot address rural poverty reduction alone. has in place a number of approaches to address Whilst there is broad consensus globally on this. However the time frame for change in giving approaches to rural development, this consensus strength to such voices must be closely moni- must be fostered.The Bank should seek to work tored and adjusted to meet the objectives. Every with others to develop its own comparative effort should be made to use the range of instru- advantage and gain from working with others in ments available to meet this risk. those areas for which it is less institutionally or organizationally suited. The transaction costs of That overall long term growth is not achieved in working with others is recognized.However,if well client countries. Long-term growth is a neces- managed, the potential gains outweigh such costs. sary but not sufficient condition for rural poverty reduction. 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Rural Finance: Issues, Design, and Best Practices, Environmentally and Socially Sustainable Development Studies and Monographs Series 14.Washington, D.C.:World Bank REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ANNEXES 95 ANNEX 1: Lessons in Implementing From Vision to Action for Reaching the Rural Poor Vision to Action Lessons for Reaching Objectives Outcomes Comments the Rural Poor APPROACH 1. Shift from sub-sec- With a strong increase Inadequately functioning Strengthening the holistic toral to broad rural in such areas as com- inter-sectoral integrating approach by emphasis on development focus and munity driven develop- mechanisms in the Bank non-agricultural, physical and improve coordination ment, and watershed still constrains multi-sec- human infra-structure while between various actors. development, the focus toral activities. maintaining a strong commit- of operations has ment to agriculture. broadened. Develop internal institutional mechanisms to support multi-sectoral coordination and coherence. 2.Working with all Rural aspects increas- Rural poverty reduction Increased support for broad stakeholders to inte- ingly treated in CASs issues are satisfactorily based client driven process- grate rural development and PRSPs. treated in only 50% of es for national rural develop- in overall country devel- CASs. ment strategies to strengthen opment strategies. advocacy. Enhance internal and partner skills training. PRIORITY ACTION 1. Enhancing portfolio quality 1.1 Increase ESW for ESW budget remained Rural portfolio review Combine budgetary realign- the rural areas. stable at $9.5 m over indicated need to ment with earmarked funds FY 96-97 to $10.4 m increase both the quality for increased ESW. over FY 99-00. and content of ESW for 96 broad based pro-poor Enhance pro-poor focus of Investment in sector rural development. future ESW and strengthen work for agriculture as impact of ESW on strategy a share of total lending and design of investment costs declined from lending. pre-VtoA amounts by about 50%. 1.2 Improve develop- Development out- Sustainability and Maintain the goal of 80% sat- ment outcome of rural comes of rural projects Institutional isfactory rating and strongly projects to 80% satisfac- declined from 66% in Development remain increase attention to tory rating. FY 94-95 to 60% over critical weaknesses of Sustainability and Institutional FY 99-00. rural portfolio. Development, during project implementation. 1.3 Reverse decline in Lending for agriculture, Weak rural advocacy in Support to rural advocacy lending for rural devel- rural roads and water, client countries, and groups, link incentives for opment (without indi- and natural resources lack of incentives at country teams to focus on cating specific goals). management declined country team level to poverty reduction. over the period FY96- focus on rural poverty. 00. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Vision to Action Lessons for Reaching Objectives Outcomes Comments the Rural Poor Lack of base-line against Annual monitoring of lending which to measure trends against FY99-01 baseline for in wider rural lending. investment in rural space. 2. Enhancing knowledge 15 Rural Thematic While shared learning TGs need to be rationalized management. Groups (TGs). clinics are felt to be and aligned strategically with effective in improving new strategic objectives to quality of project prepa- improve their effectiveness ration, there remained a and to contribute to contin- lack of a clear mecha- uous learning and innovation nism to assess impact within the Bank, with part- and specific contribution ners, and clients. to wider VtoA goals. 3. Strengthening alliances. The Rural Family is The rapid increase in Enhance partnerships with engaged in over 30 partnerships has raised clear linkage to implement- rural partnerships and some concerns about ing the strategy. collaborative agree- spreading resources too ments. thin and diverting atten- tion from Rural Family priorities. MAJOR OUTCOMES 1. Bank seen as a leader Bank remains a leader Limited institutional More structured global ini- in the fight to reduce in rural development capacity and lack of spe- tiatives with clearer respon- rural poverty by fiscal thinking and in provid- cific institutional arrange- sibilities. 2000. ing development assis- ments to champion rural tance to rural space. development has reduced Enhance role in advocacy at potential for wider global and country levels. impact. Decline in agricultural 97 lending. 2. Freer and fairer world The Bank has taken an Authorizing environment Continued advocacy com- agricultural trade. active role in assisting of the Bank in dealing bined with focused support client countries to pre- with OECD countries to developing countries to pare for the WTO. and their subsidies and enable them to become market access is limited. beneficiaries of trade liberal- ization. 3. Reversing the low Lending to focus coun- Longer term concentra- Focus on more specific growth the trends of tries increased from tion on a limited number objectives i.e., improving under-performing 54 % of total lending of countries, which are number of rural poor affect- countries. for agriculture over the subject to political ed by the Bank operations FY 92-96 period changes, led to variable and tie activities with the Focus on 15 countries (before they were results. PRSP/CAS processes. with support to their selected) to 64% after rural strategy. the initiative (FY 97- Phase program of work on 01), and Quality at an annual basis with a larger Entry was 100% for all overall number of countries Quality Reviews. and interventions. ANNEXES ANNEX 2: Consultations in Strategy Preparation More than 2,000 people (government officials, civil society, academics, private sector, and donor agencies) have been involved at some stage in the consultation process surrounding the rural strategy development. This has involved four major processes: Consultations on the regional strategies and the initial framework of the corporate strategy. Altogether there were nine regional consultations held in early 2001 (Nepal, Philippines, China, Lebanon, France, Kenya, Senegal, Russia, Panama, Belgium, and Japan). Consultations and seminars focused on the corporate strategy and its implementation.Three consulta- tions specifically focused on implementation were held in 2002 (Vietnam, Nigeria, Ethiopia), and two more are scheduled (Jordan and Peru).Additionally, seminars were held at the Asian Development Bank in March 2001, African Development Bank in June 2002, and at an EBRD workshop in March 2002. Seminar presentations were also made in Australia (February 2002),Tokyo (March 2002). Presentations, seminars and panel discussions at major international gatherings with broad-based stake- holder participation. These venues include the IFPRI Conference ­ September 2001 (Bonn), FAO Conference ­ November 2001 (Rome), Conference on Financing for Development ­ March 2002 (Monterrey), UN PrepCo for World Summit on Sustainable Development ­ March 2002 (New York), European Sustainable Development Conference ­ March 2002 (Berlin), 35th World Farmer Congress ­ May 2002 (Cairo),World Food Summit ­ June 2002 (Rome), European Rural Development Forum ­ September 2002 (Montpellier). Rural strategy website and internet consultations on the final draft of the strategy. A website was cre- ated early in the strategy development process. All relevant material has been posted on this site for comment including background papers, seminar summaries, and early drafts of both corporate and regional strategies. From April to August 2002 the final stage pre ­ Executive Board draft was posted 98 for public comment.A significant number of comments from academics, civil society groups, donors, gov- ernments, NGOs, and private individuals were received. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ANNEX 3: Regional Strategy Summaries AFRICA Africans are currently refugees, displaced from their homes and deprived of their livelihoods.The impact Sub-Saharan Africa's population remains predomi- of conflict is clear from the statistics. Countries that nantly rural (70%), and poverty is widespread.The enjoyed high rates of agricultural growth during the international community's commitment to cutting 1980s, including Burundi, Rwanda, Sierra Leone, the global incidence of absolute poverty in half by Comoros and the Republic of Congo, all experi- 2015 implies a massive effort in rural Africa. enced low or negative agricultural growth when overwhelmed by conflict in the 1990s. Regional Context Agriculture remains important in rural Africa, and Growth of productivity has lagged that of agricul- indicators of rural well-being are closely correlated tural output. Agricultural productivity per worker with agricultural performance. Aggregate growth for the region as a whole has stagnated during the rates in African agriculture overall improved during past ten years at an estimated $375 per worker the 1990s.While Africa's agricultural growth lagged (constant 1995 US$). This is 12% lower than in all developing regions in the 1980s, the gap nar- 1980, when value-added per worker was $424. rowed in the 1990s due to improvement in Africa Moreover, agricultural yields have been level or have and deterioration elsewhere. Despite improved fallen for many crops in many countries. Significantly, growth, African rural poverty remains deeper and yields of most important food grains, tubers and more prevalent than in other regions. legumes (maize, millet, sorghum, yams, cassava, groundnut) in most African countries are no higher General improvement in the 1990s masks wide dis- today than in 1980. parities in the performance of countries throughout the region. The 48 countries of Sub-Saharan Africa Low productivity has seriously eroded the compet- are widely diverse in their resource and factor itiveness of African agricultural products on world endowments and their abilities to commit politically markets. Africa's share of total world agricultural to actions to increase growth and reduce poverty. trade fell from 8% in 1965 to 3% in 1996. During the 1990s 12 of the 48 countries of the region were able to maintain agricultural growth The Historical Legacy: How Relevant is it rates of 4% or better. This is a large improvement to Today's Agenda? over the 1980s, when only five countries achieved African rural areas are severely undercapitalized, as 99 agricultural growth rates of more than 4% (Benin, reflected in the low use of fertilizers, tractors and Comoros, Mozambique,Togo and Cape Verde). other agricultural technologies, limited infrastruc- ture, inadequate education and health, and deple- Agricultural growth in a second group of countries tion of natural resources. Long secular persistence has been positive, but less than 4% per year on of poor policies and institutions explains the under- average, and in many cases less than population capitalization. Much of this can be attributed to the growth. Rural poverty is gradually worsening in legacy of slavery and colonialism. Post-colonial poli- these countries, although again the measures are cies did not reverse the decapitalization of rural not complete. About half of African countries fall areas, as governments pursued macroeconomic into this category. and agricultural policies that discouraged invest- ment in rural areas, weakened local governments, A third group of countries is still immersed in civil and suppressed the development of civil society or international conflict or unrest with sharply rising organizations (including voluntary producers' poverty and increasing desperation, particularly organizations). among rural people displaced by fighting. About 100 million Africans, a fifth of the region's total pop- The legacy of scarce capital, poverty, and depend- ulation live in these countries. About 4 million ence is thus very relevant to the agenda of today. ANNEXES Rural areas still lack capital, including physical, human, alternative farming systems for economically infrastructure, natural resources, social and political marginal areas; (as in representation and influence) capital. Deep Prevalence of HIV/AIDS and other endemic dis- institutional and social changes are needed to rem- eases of people and livestock; and edy this multidimensional lack of capital. Changes Cultural traditions affecting dietary preferences cannot be ordained from the top, and must be and livelihoods. derived from stronger participation of rural com- munities and greater voice of rural people. For example, in countries emerging from conflict, such as the Democratic Republic of the Congo, the The strategy emphasizes community participation, rural strategy will focus on rebuilding livelihood sys- strengthening of voluntary producer organizations, tems at the community level through participatory primacy of the private sector in production and trade, diagnoses and micro-projects. In large and diverse a stronger role for markets, greater attention to the countries, such as Zambia and Tanzania, different needs of women, enhanced activity of local govern- strategies are appropriate for different regions. In ments in provision of public services, and transparen- many places the potential for intensification through cy and accountability in the use of public funds. better linkages of producers' organizations to mar- kets is substantial. In marginal areas far from mar- The Strategy kets, intensification based on purchased inputs is not Although specific elements of the strategy are appropriate, but improved rotations and cultivation unique to countries and regions, the strategic inter- practices can strengthen food security and stew- ventions fall into four broad categories: ardship of natural resources. Making governments and institutions work bet- Making Government and Institutions Work ter for the rural poor; Better for the Rural Poor Promoting widely-shared growth; Issues of governance, including the general frame- Enhancing management of natural resources; and work for security, the rule of law, and probity in Reducing risk and vulnerability. public expenditure are particularly important for rural areas, since the least empowered within a The strategic interventions apply differentially political system suffer most from poor governance. depending on circumstances of individual countries. These issues are high on the World Bank's corpo- Given the scarcity of resources, the fiduciary rate agenda. responsibilities of the World Bank, and lessons 100 learned regarding the efficacy of aid, preference is In addition to supporting improved governance, the accorded to countries that are performing well and Africa rural strategy strengthens the institutional demonstrate a strong commitment to reduce foundations for rural development by: poverty.This preference is reflected in the allocation of resources among countries and in increased Supporting government's efforts to decentral- attention to systems of public procurement and ize, through technical assistance in design of management of public finance. decentralization, enhancing capacity of subna- tional governments, providing financing in sup- Other factors that affect the emphases of national port of decentralization, and assisting with design strategies include: of systems of monitoring and evaluation. Stability and strength of local institutions (for Enhancing the participation of rural communi- example, presence or absence of conflict, and ties in newly decentralized political and adminis- status of decentralization); trative systems, and providing resources to com- Relative factor endowments (for example, abun- munities to use to pursue their own priorities for dance or scarcity of land and water); development. Potential for intensification through greater com- Providing support for voluntary producers' mercial integration of small-holders relative to organizations by assisting governments to create REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT an enabling policy and legal environment within idate reforms and to support budgets of public which producers' organizations can flourish, pro- entities fulfilling newly defined functions. An viding organizational support and technical assis- important part of the policy agenda lies outside tance, and giving matching grants to producers' the boundaries of African nations, in the evolving organizations that have demonstrated capacity rules of the WTO and decisions regarding subsi- to manage funds and activities on behalf of all dies and market access of the OECD countries. their members. The World Bank assists in the area of trade lib- Augmenting rural voice in discussions of priori- eralization by providing analysis and advocacy for ties for public expenditure and national develop- African countries, and by assisting their trade ment. Each of the interventions noted above also representatives to prepare for participation in serves to enhance rural people's voice within the trade negotiations. domestic arena.The donor community can help Improving provision of agricultural services, amplify rural voice in consultations and negotia- including research and extension. The techno- tions with partners and clients. The Poverty logical lag in African agriculture is primarily a Reduction Strategy Paper (PRSP) process and its symptom of under-investment and lack of adop- links to the Highly Indebted Poor Countries tion, not low rates of return on research. In the (HIPC) initiative provide important opportunities future,African institutions of research and exten- for the donor community to encourage partici- sion will need higher levels of support, stronger pants in national policy dialogue to give appropri- outreach to beneficiaries, and closer linkages ate weight to the interests of the rural poor. with institutions working on the frontiers of sci- entific discovery. Promoting Widely-Shared Growth Increasing investment in infrastructure and the Agriculture remains high on the agenda for rural quality of services in rural areas. Access to development in Africa--more so than in regions infrastructure, education and health services with greater food security and income levels sup- declined during the 1990s, and indicators of porting a more diversified economic base. While well-being (life expectancy, infant and child mor- agriculture is not the only source of rural growth tality, literacy rates) worsened in most countries. (tourism, mining, forestry, fishing and others are Models of delivery of rural services are in a important in some places), in Africa today agricul- period of transition, away from centrally con- ture is the most important rural enterprise, con- trolled provision by the public sector, and tributing an average of 30% of total gross domes- toward more decentralized, demand-driven, pri- tic product in the Sub-Saharan countries (exclud- vate sector approaches. 101 ing South Africa), and over 40% in one-third of Expanding access to rural financial services. A those countries. Agribusinesses, which themselves sustained process of income generation depend on agricultural growth, are responsible for requires improved access to rural financial serv- an additional 20% of GDP and about 25% of total ices, including credit, savings, insurance, collater- rural incomes. alization of fixed and moveable property, trans- fer of funds, trade finance, and more complex Agriculture and related rural enterprises are prima- financial instruments and transactions. A major rily private sector activities. Interventions to gener- focus of the rural financial strategy is to bring ate more income fall into five basic categories: the commercial institutions closer to rural clients, and to make the clients more attractive Continuing policy and regulatory reforms in to providers of service. OECD countries and within and among African Improving water control systems. Over 95% of countries to remove constraints to trade and cultivated land is rainfed. Many of these lands are business activities. The faster growing African in arid or semiarid areas where rainfall is unreli- countries have made substantial progress on able and crop failures are common.Yet, providing macroeconomic and sectoral reforms. water at critical stages of plant development Continued assistance may be needed to consol- (such as during the flowering stage of maize) can ANNEXES dramatically reduce risks of crop shortfalls. interventions, educational policies that guarantee Increasing yields on rainfed lands by just 10% poor children access, and actions to stop conflict and would have far greater impact on total agricul- enhance security. Investment in infrastructure and tural output than doubling area under irrigation. measures to help farmers gain access to hardy crop Moreover, such improvements would benefit varieties can assist rural people to reduce the vari- mainly poor farmers living on marginal lands. ability of income. Improving access to rural financial Expanding irrigated agriculture also offers con- services (savings accounts and credit) is also impor- siderable potential in Africa. tant. Other strategic approaches to manage risk include efforts to: Enhancing Management of Natural Resources Find alternatives to the most harmful coping Africa is very diverse--ecologically, socially and mechanisms. Direct interventions to enable the politically--and countries are using a variety of poorest families keep their children well nour- approaches to improve management of natural ished and in school. Help poor families build the resources. Important among these are efforts to: assets they need. Programs must be designed to ensure that they are well targeted and fiscally Avoid harm, through prior screening and use of sustainable. environmental assessments; Give high priority to stopping the spread of Mitigate adverse impacts through use of envi- HIV/AIDS and malaria and helping communi- ronmental assessments, environmental manage- ties cope with its impacts. Poor households ment plans and other measures; facing HIV/AIDS are less able to cope with loss Empower communities and individuals to make a of labor and are more likely to dispose of assets sustainable living using local natural resources to meet medical and funeral expenses than are and to take responsibility for managing them; more prosperous families. Governments and Mainstream environmental issues into broader development partners should target assistance development programs through instruments to the poorest households, especially in the such as national environmental action plans, envi- period immediately following death, when fam- ronmental support programs and others; ilies are struggling to reorganize their produc- Address past damage and assist communities tion systems. improve their management of natural resources Share risks and costs of adopting new tech- through focused investments; nologies by offering matching grants to pro- Improve incentives for long-term environmental ducers' organizations and other groups. Early 102 stewardship rather than short-term exploitation, adopters demonstrate to others the benefits of such as through introducing charges for natural new technologies, but they also bear high risks. resources use; and The public sector can share risks through match- Establish regulations and laws to protect the ing grants to encourage recipients to adopt new environment and build capacity to enforce them. technologies, and initiate their wider acceptance by others. Reducing Risk and Vulnerability of the Rural Poor Instruments and Actions Poor rural Africans face multiple risks everyday, and The program is varied and covers 48 countries. have few instruments for mitigation other than the The pipeline for the next three years consists of traditional ones based on family relationships and about 80 new lending operations per year. As the livelihood strategies.The onslaught of HIV/AIDS has program evolves, the Africa region's lending oper- exacerbated preexisting risks and disrupted tradi- ations increasingly fall into three broad categories: tional coping mechanisms. Risks can be reduced budget support, community driven development through such measures as prudent macroeconomic and capacity building. Among the products in the management, basic public health programs, including work program, the following are most relevant to widespread immunization, cost-effective nutrition rural development: REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Analytical and advisory services. The Africa policy and regulatory issues, technical assistance Region is increasing its commitment to analyti- to help ministries and departments of environ- cal and advisory services, and a portion of the ment increase their capacity, investment proj- increase will focus on rural poverty. ects, and grants for global environmental prior- Multi-sectoral poverty reduction support ities. All projects are evaluated to ensure that credits (PRSCs). These are instruments to pro- relevant safeguards are met. vide budgetary support to countries imple- Basic education and health care services. The menting well defined strategies to reduce Bank in the Africa region supports access to poverty, as expressed in PRSP's. basic health care and primary education with- Projects supporting decentralization. These out user fees, in recognition that these con- assist in developing the fiscal architecture for tribute substantially to the public welfare and to decentralization, provide technical assistance to poverty reduction. build capacity of public entities facing new chal- Water management and irrigation. Water lenges, help put into place processes for partic- management projects focus on simple designs ipation and mechanisms to enhance accounta- that can be implemented and managed by bility, and support design of systems of moni- communities as part of CDD operations. Given toring and evaluation. the increasing importance of water in the Community driven development projects. region, more will be done to help countries and These are closely linked to decentralization, and communities manage shared water resources. focus on community participation in setting of Infrastructure. Infrastructure investments are priorities, creation of financial architecture to needed in roads, electric power, and telecom- get resources to community groups, strength- munications. Cellular technology and new ening of local government, transfer of resources designs in off-grid power generation and non- to the community level, and monitoring and traditional sources of energy, when coupled evaluation. with basic regulatory reform, offer exciting new Rural finance. The newer generation of rural opportunities to reduce the shortage of rural finance projects eschews lines of directed infrastructure. credit, and focuses on regulatory reform, Land reform. Land reform is an important issue capacity building, and reducing the transactions in the region, and one underrepresented in our costs of linking providers and customers of portfolio of assistance. Support for land reform financial services in rural areas. addresses issues of the distribution of owner- HIV/AIDS. Because of the catastrophic implica- ship, tenure security, and resolution of conflict- 103 tions of HIV/AIDS for African development, ing claims. prevention and mitigation of HIV/AIDS has been mainstreamed into most of the projects in The Africa Region is taking a number of steps the portfolio, either in the design stage or more sharply to focus its programs on poverty, through retrofitting of components. which implies a shift toward rural priorities. Agricultural research and extension. Projects Poverty reduction strategies designed by the supporting agricultural services are increasingly countries are intended increasingly to be the responsive to the needs and requests of pro- foundation for country assistance strategies of the ducers, and incorporate innovative features in Bank.The process is still young, and not yet equal- finance, such as competitive grants, cost recov- ly embraced throughout the region, but familiarity ery, and matching grants. is growing and the quality of the strategies improv- Management of Natural Resources. Africa's ing.The Region is using its commitment to increase natural resources are valued at many levels, economic and sector work to assure that the from the very local to the global. PRSP's of the future can draw on solid analytical Environment. The Bank assists clients to main- foundations in the spatial dimensions and corre- stream environmental concerns into decisions lates of poverty and the implications for public on policy and investment, through advice on expenditure. ANNEXES The Africa Region is streamlining the portfolio in stances do not require such an approach, our order to reduce the fragmentation of administra- resources can be more effectively used by incor- tive budgets among many activities, a number of porating existing designs, and allocating more which may not ultimately lead to lending or other attention to learning and revision while projects interventions with substantial impact. As the num- are under implementation. ber of operations declines, the cost of supervision will also fall, allowing a shift toward more generous In order to facilitate the work of multi-sectoral funding for supervision of remaining activities and teams, the Region is orienting its training activities an increase in resources for preparation. toward teams, rather than individuals. This is part of a Bank-wide move, but it is especially relevant The Africa Region has drawn on its experience in in the Africa region due to the evolution of the addressing the HIV/AIDS crisis, and is applying the lending portfolio. lessons to other areas. In the early period, HIV/AIDS was perceived to be largely an issue for The Africa region is decentralizing functions those in the health sector. As long as the to the country offices, along with a limited num- approach was uni-sectoral, little progress was ber of additional staff formerly based in made. Health specialists did not have the expert- Washington. With decentralization of functions ise to address all of the dimensions of the comes a substantial additional need for training HIV/AIDS crisis, and projects to address the pan- and new definition of working relationships demic competed with others in the Human between staff based in Washington and in coun- Development portfolio for space in country lend- try offices. ing programs. The region did not develop an effective approach to the crisis until Country Within the Africa Region's Rural Development Directors recognized HIV/AIDS as an overarching and Environment Unit, a process of reconfigura- multi-sectoral problem of such high priority that it tion and renewal was launched in 2001. The was incumbent upon them to seriously address it. process is intended to improve management of Simultaneously, the region developed a new truly the units in order to better pursue multi-sectoral multi-sectoral instrument (the MAP) designed tasks, to integrate rural and environmental issues and implemented by experienced task team lead- more fully in the PRSP processes, to facilitate more ers from various sectoral units. MAP operations seamless interaction between the various units need not be designed from scratch for each and staff in Washington and in the country offices, country, since the basic elements can be adapted and to move forward with the regional commit- 104 for country conditions. The MAP operations are ment to decentralize functions. multi-sectoral, quickly designed and approved, flexible to adapt as lessons are learned during The rural and environmental units work in part- implementation, and, correspondingly, intensive in nership with other sectoral units within the Bank, supervision costs. with counterparts in government and civil society in client countries, and with other donors. The Elements of the MAP experience are relevant to Bank contributes to the already established Multi- rural development. The Country Directors must Donor Hub for Rural Development under take the lead in seeking interventions and in hold- Southern Africa Development Community locat- ing themselves accountable for measured ed in Harare, Zimbabwe, and is working with progress. In some fields, such as agricultural servic- other donors to establish a hub for food security es and the CDD operations, basic elements of in the Horn of Africa. programs can be treated as modular units taken "off-the-shelf" and customized to suit country With strong partnerships, a streamlined portfolio, conditions. Our traditional models of project renewal within the rural, environment, and social design have much in common with medieval arti- family, and further decentralization, the Africa sanship--hand-crafted each time. Where circum- Region is well placed to make a significant contri- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT A3.1 Summary of Regional Consultations:Africa Region Central and Western Africa: Dakar, Senegal 7­9 May 2001 The workshop was organized in collaboration with CODESRIA (The Council for the Development of Social Science Research in Africa). Participants included representatives of NGOs and civil society, the private sector, academia, consultants, parastatal agencies, governmental ministries, and international organisations and came from Cameroon, Nigeria, Gambia, Niger, Mali, Ivory Coast, Sierra Leone, Benin, Burkina Faso, Ghana, Guinea, Senegal. Participants noted that the plurality and diversity of Africa imply that no single strategy will be appropriate except at a very high level of generality. Participants underscored the importance of agriculture in Africa's rural development and the need to improve agricultural productivity, through improved technology, improved access to markets at all levels, including those of the OECD countries, and macroeconomic policies that do not overly tax agriculture. Issues related to water management need urgent and greater attention in programs to address rural poverty. Other important issues include: Conflict destroys present and future opportunities, and no rural strategy can show accomplishments until peace is secure. Gender equity is integral to agricultural improvement, since women are major economic agents in Africa's agricultural production and trade. Land issues and land reform merit increased emphasis. Rural-urban linkages and the role of small towns should be better understood. Workable mechanisms to mitigate economic risks should be explored, despite the well-known problems, since unmanaged risks can gen- erate high social costs. More attention should be accorded to environmental issues. Rural constituencies need more accountable governments. The concept of public service is not well developed, and decentralization does not always bring improved public service. Rural development should be fully addressed in PRSPs (poverty reduction strategy papers) of individual countries. Eastern and Southern Africa: Nairobi, Kenya 26­28 March 2001 105 The workshop was organized in partnership with the African Economic Research Council. Participants were invited from the public, private, and NGO sectors of Botswana, Burundi, Ethiopia, France, Guinea, Kenya, Madagascar, Malawi, Senegal, South Africa, Tanzania, Rwanda, Uganda, Zambia, Zimbabwe, and several international organizations. Participants noted the importance of community-centered development, and argued in favor of emphasis on change at the community level accompanied by fiscal decentralization. Because African civil and political institutions are in many places weak, explicit measures are need- ed to constrain corruption. The role of the private sector should be explicitly recognized, and their input into formulation of specific strate- gies sought. The supra-national organizations in Africa should devote more attention to rural development. Infrastructure is both a public and private mandate, and better methodologies are needed to guide decisions about investment in infrastructure. Environmental issues should be addressed in a context of sustainable utilization of natural resources. The key issue of trade liberalization should be addressed; i.e., can African smallholders compete in a world of massive subsidies to pro- ducers in high-income countries and high marketing margins in their own? African producers could increase use the internet and other information technologies to overcome high costs of communication and the legacy of poor integration into trading networks. Conflicts and HIV/AIDS pose enormous challenges that will require external assistance as well as strong national and local leadership. ANNEXES bution to reduction of poverty. Actual results, EAST ASIA AND PACIFIC however, will require continued and strong lead- ership by the regional leadership team and a spe- Regional Context and Key Issues cific focus on rural poverty. Without this overar- Rural East Asia has undergone an unprecedented ching focus, the current and projected lending technological and economic transformation in program could fall short in efforts to reduce rural recent decades that has dramatically improved poverty.The existing lending program is one with food security, reduced poverty, and raised incomes. high potential, but also considerable risk unless Despite the 1997 Asian crisis, the EAP region as a the regional leadership gives explicit priority to whole experienced the fastest rate of economic rural poverty in the design of the various sectoral growth in the world over the past 25 years (Figure operations. A3.1). This transformation was partly initiated by the application of Green Revolution methods to Conclusions Asia's agricultural problems. Africa's rural people can contribute much more to their own prosperity and to global growth in But serious problems remain. Despite substantial the future than they have been able to in the rural-to-urban migration, East Asia's rural popula- past. The dynamics of rural growth and the fac- tion continues to grow, and the vast majority of tors that promote it are now better understood people still depend on agriculture, forestry, or than before. Rural institutions are stronger in fishing for their livelihood. These activities place many places and democratic forms of govern- great stress on natural resources and result in ment create opportunities for rural people to degradation that diminishes the income-generat- express their views and priorities. National gov- ing capacity of those resources. Agricultural ernments have tamed fiscal deficits and opened growth in the nine major countries of East Asia economies in ways that improve incentives in lagged well behind growth in GDP during the rural areas. Increasingly, people at all levels under- 1990s. Nonetheless, the agricultural sector still stand how to manage natural resources so that employs about 70% of the working populations of they provide long-term benefits. New invest- these countries, and 80% of the region's poor ments and developments in infrastructure link dwell in the countryside and the mountains. once remote areas more closely to their regional Meanwhile, overall economic growth has not led and national contexts. to improved services, such as health, education, and infrastructure in rural areas, nor to a signifi- Africans are acting on these opportunities cant increase in non-agricultural rural jobs. More 106 despite formidable new obstacles. HIV/AIDS rapid economic growth in urban areas has result- requires changes in behavior and investment of ed in most of the poor, and virtually all of the resources on a scale demanded of few societies "poorest of the poor," being found in rural areas. or treasuries in more prosperous regions. The The irony is that while rural East Asia provides the scourge of conflict creates new victims and dominant share of employment and income, it is destroys wealth. Natural resources are still sub- also the area with the most unemployment, ject to predation and degradation. Climate underemployment, and poverty. change is likely to hit Africa hard. And many OECD countries, despite rhetorical commitment The rural-to-urban transition in East Asia is to liberalization of trade, keep their own markets incomplete. The number of excess workers closed to Africa's most important exports. The remaining in rural areas is in the millions in almost commitment of Africans to reduce rural poverty all the countries of East Asia. Rural areas need the despite these obstacles warrants dynamic and benefit of policies, institutions, and infrastructure effective support from their partners. The Africa which encourage economic development and Region of the World Bank is committed to move provide non-farm employment while urban areas on the actions noted above, and continually to must not be overwhelmed by rural migrants seek- seek new ways to assist. ing job opportunities. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT There have been some improvements in rural Yet despite the policy biases, low public investment, areas in terms of access to education, health care, declining worldwide prices for agricultural products, transportation, and other public services. But it is and natural disasters such as floods and drought, also estimated, for instance, that as many as a bil- cereal production in East Asia (mainly rice) has lion East Asians in rural areas remain without almost doubled since 1970. access to safe water and sanitation. Imbalances like these in the provision of public services that favor Poverty in rural East Asia is also exacerbated by tra- urban areas are often accompanied by policy bias- ditional hierarchical forms of government that have es against agriculture, such as price controls on until recently largely resisted democratic reforms farm products and high tariffs on imported agri- while failing to provide the kind of governance that is cultural inputs. necessary to assure social harmony. In terms of com- merce and trade, what is frequently absent are such The bias against the rural sector can also be things as transparent legal and judicial systems that found in national investment figures. Between guarantee both property rights and the fairness and 1994 and 1998, for example, public investment in sanctity of contracts for both rich and poor. Good the sector never exceeded 10% of all public governance also means the absence of corruption investment in any of the nine major East Asian among those in authority, whether elected represen- countries. In some, it is true, the percentage tatives or government bureaucrats. Corruption has remained stable, but in others it drifted down- been endemic in East Asia, but public outrage against ward except in Indonesia. There, agricultural it has swept through several countries since the investment rose from a mere 3.1% of all national financial crisis of 1997-98. It is often the rural poor investment in 1995 to 5.9% in 1997-98. The who have been victimized most by corruption. Many increase occurred in a context of political insta- steps--legal, judicial, institution--need to be taken in bility in parts of rural Indonesia. East Asia to assure honest government at every level. Figure A3.1: Annual GDP Growth (%) 1980-1999 12 1980 1990 1995 1999 107 10 8 6 4 2 0 -2 -4 World EAP Cambodia China Indonesia Lao Mongolia P. New Philippines Vietnam PDR Guinea Source: Rural Development Indicators Handbook 2001 ANNEXES Lessons Learned Providing food security; and Since the From Vision to Action report we have Supporting natural resource management. learned several important lessons that enhance the effectiveness of our interventions in client coun- Each is emphasized to a different degree in each tries. Some lessons are to: country according to its particular circumstances. What follows are discussions of our four strategic Work at the community level for many projects objectives and the chief actions needed to achieve rather than work at the central government them: level, thus giving rise to more projects modeled on community-driven development; Reducing Rural Poverty Make more effort to consult with all interested In order to reduce rural poverty, EASRD is taking stakeholders, including ministries beyond the two approaches. One is the financing of projects that sectoral ministry, during all stages of project directly attack poverty through targeted, productivi- preparation and implementation; ty-enhancing investments in very poor rural areas Incorporate natural resource management issues such as community development projects.The other into projects where feasible, and to pay strict is the financing of projects that enhance agricultural attention to fulfilling the requirements of safe- productivity and create non-farm rural employ- guard policies; ment--water management schemes, storage and Strengthen local implementation capacity and processing facilities for agribusiness, research facilities. put good governance structures in place (espe- cially important since the onset of the Asian Stimulating Rural Economic Growth Crisis in 1997); To stimulate rural economic growth, EASRD will Convince our partners on the importance of continue to encourage governments to engage in viewing rural issues holistically, and using a holistic projects and to carry out reforms that will create approach when selecting and designing projects; improved conditions for private companies that Have a rural strategy and sufficient economic may be willing to locate in rural areas, especially policy analysis undertaken in order to maintain a those where poverty is widespread. In the broadest coherent country dialog and lending program; sense, we are encouraging East Asian governments and to redress any anti-rural bias that may exist in min- Place more emphasis on off-farm employment istries whose work affects both rural and urban creation. areas. This means establishing or improving rural schools, healthcare facilities, electric power lines, 108 We have also learned that when the Bank places a telephone services, roads, and other facilities that special emphasis on a topic, our clients in country are normally the government's responsibility. respond by making it a topic of special interest. Thus, the first vision to action paper and the com- Rural areas also need a local governance frame- pact resources that accompanied it spawned an work that establishes rules for the operation of increased level of interest and activity in rural devel- economic enterprises--land-titling and registration, opment.This was especially true in Vietnam where honest systems of weights and measures, laws for the rural sector became the central focus of devel- the resolution of commercial disputes, and standard opment. regulations for permits and licenses. Instead of establishing such frameworks, many governments in Strategic Objectives East Asia continue to carry out commercial activi- EASRD has developed four strategic objectives for ties themselves through state-owned enterprises its work that are relevant to a rural renaissance in that provide fertilizer, seeds, agrochemicals, and East Asia.They are: other farm supplies, as well as financial services, including credit. Experience has shown that in most Reducing rural poverty; cases these goods and services can be delivered Stimulating rural economic growth; more effectively and efficiently by private firms. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Providing Food Security In addition to funding traditional projects for land Because of their experience with crop failures and reclamation and flood control, EASRD has begun to hunger over the years, many East Asian countries promote conservation management of forests and have put in place policies designed to support biodiversity conservation projects in several of our domestic production and insulate it from the client countries. We have also begun to make sus- vagaries of the open market. Many have been reluc- tainability of natural resources a condition for tant to embrace the concept of free trade and have approval of adjustment loans. We are adopting instead opted for subsidies for domestic food con- community-based approaches to natural resource sumers. EASRD has placed increasing emphasis on management and we are processing a number of exploring alternative and more efficient ways of pro- grants for projects to be carried out by such NGO viding food security to vulnerable populations. One partners of ours as the World Wildlife Fund, The example is the work done in Indonesia during the Nature Conservancy, and the World Conservation Asian crisis (which also coincided with a crop-reduc- Union. ing El-Nino event). On very short notice EASRD assisted the Indonesian government build a targeted Implementation Plans food security program for Indonesia's urban poor. EASRD is developing an active and ambitious action Establishing similar targeted social safety net pro- plan as a follow up to the consultation meetings on grams in other East Asian nations as an affordable the East Asia Rural Development Strategy.The con- means of providing family food security is a goal. sultation meetings with governments, bilateral and multilateral donors, NGO's, and private sector rep- Supporting Natural Resource resentatives held in March 2001 were very success- Management ful and elicited considerable commitment to move In many East Asian countries, the demand for food, forward with specific actions designed to advance fish, lumber, and other items obtained from natural rural development (Box A3.2, end of section).The resources continue to overshadow the desire to action plan designed by EASRD builds on that conserve and protect natural resources. momentum. In addition to a pipeline of projects Nonetheless, the Unit will continue to try to con- founded on the individual country strategies, a vince all our clients that intelligent management of series of specific activities and actions are planned land, forests, rivers, and oceans is essential to achiev- for each country. Several clients have indicated that ing sustainable economic growth, and we have they wish to participate as "focus" countries in the begun placing much more emphasis on devising region. EASRD plans a broader set of activities and policies and programs to protect these resources. actions for these countries and we will be seeking 109 All countries in the region have natural resource supplemental resources beyond regional Bank management issues to address, and these issues are budget to support this effort. mainstreamed into Bank projects and the policy dia- logue whether or not there are specific natural In designing implementation plans for our country resource management or conservation projects in a work, EASRD is making added efforts to ensure particular country. that the process is participatory, involving not only government counterparts but also NGOs, local Some of the natural resource problems in East Asia government, communities, and other stakeholders, are quite well-known: the continuing clear-cutting of and is also placing added effort into engaging the forests in certain countries; the destruction of coral private sector as a full partner. Since the lending reefs in the South Pacific; overexploitation of coastal program and pipeline is a matter of record and the and inland fisheries in many countries; and the dis- general emphasis of that program has been out- appearance of coastal zones and mangrove areas. lined earlier in this summary, the implementation Other environmental problems, such as conflict plans described here are those for the focus coun- over water resources between urban, industrial, and tries and for the region as a whole.The underlying agricultural users are in the offing and must also be concept is to work intensively with those countries addressed. wanting to move forward aggressively with addi- ANNEXES tional activities in rural development and use them which agencies will do what aspects; and who will to inspire other countries in the region.The imple- fund which activities. It is to be followed perhaps six mentation begins with a country rural consultation months later with a regional meeting (smaller than patterned after the Consultative Group process the original consultation meeting) to monitor and where donors and government officials meet to discuss progress, and showcase the work to other decide on: a specific and time-bound action plan; non-focus countries in the region. Individual Country Action Plans Strategic Objective/ Cambodia China Indonesia Lao PDR Mongolia Papua Philippines Thailand Vietnam Country Action Plan New Guinea Reduce number of rural poor Stimulating Rural Economic Growth Providing Food Security Supporting Natural Resource Management CHINA Agricultural and water development projects will be targeted at the poor interior provinces in the Western region and designed to meet the needs of the poor in those areas. Remove any remaining barriers to rural migration; consolidate market information systems under a single agency; and invest more in rural infrastructure. Re-centralize taxation authority and establish reallocation mechanism that ensure resources are transferred to poor areas. Support continued commercialization and productivity increases through greater emphasis on research and extension, off-farm employment creation through villages and township enterprises and further liberalization of trade and marketing. In response to severe flooding and the subsequent decision to ban logging in the upper watershed of the Yangtze River, the Bank will support the government's new comprehensive framework for sustainable management of forest resources, soil conservation and biodiver- sity protection. INDONESIA 110 Delivering better public services for the poor through local government and community organizations. Encourage local revenue decisions that limit deterioration of the business environment. Establish a strategy that focuses on developing a market-based financial system and decreases reliance on subsidized credit programs. Implement pro-poor rice price policy. Maintain open rice trade, with moderate tariff protection and no domestic restriction. Shift from floor price to procurement price. Establish interdepartmental policy team. Prepare strategy for future rice policy. Implement CGI forestry commitments. Strengthen marine resource management and public participation in forest and protected area man- agement. Establish policy framework for river basin management and irrigation management. MONGOLIA ESW to deepen understanding poverty and livelihood dynamics, including urban-rural linkages and bring rural people's perspective to bear on national policy. Evaluation of lessons from experience under earlier National Poverty Alleviation Program through intensive learning ICR. Encourage fiscal decentralization whereby investments in community-level infrastructure are made with local participation. A coordinated and sustainable strategy for pastoral risk management established and functioning well throughout the country. Amendments to land policy legislation to strengthen implementation and facilitate transferability of land rights. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT PAPUA NEW GUINEA Sustain support for NARI and better-funded role for provinces in supporting agricultural development. Continue dialogue for better credit delivery. Improve rural infrastructure by coordinating with other donors such as ADB and AusAID. Improve governance at ward, district and provincial levels. Dialogue on providing an enabling environment. Improve and expand community participation in forest management; strengthen regulatory apparatus and prevention of illegal logging. Engage communities and NGOs to clarify possibilities in fisheries and work toward a new national fisheries policy. PHILIPPINES Promote community-driven agricultural and natural resources programs targeted to poor/marginalized provinces. Enhance smallholder pro- ductivity and diversification. Promote priority structural/policy reforms in rural development and natural resources. Expand access of rural people to productive assets. Strengthen institutional arrangements, coordination and capacities for planning and implementation with emphasis on devolution and community participation. VIETNAM Intensify agricultural production by developing and transferring new technology. Continue to secure access to and develop market in, land-use rights. Diversify into higher value products and new markets. Promote off-farm employment. Reform rural SMEs, extend Enterprise Law to rural areas to promote rural SMEs. Target remote and upland areas by building rural infrastructure. Prevent and mitigate natural disasters by building on Central Provinces Initiative. Three countries have indicated that they wish to be development and pre-identification of activities with focus countries--Papua New Guinea (PNG), local groups and stakeholders in PNG. It will result Philippines, and Vietnam. What follows is a brief in an agreement on an institutional framework for description of additive activities that represent the taking the rural strategy forward and the modalities 111 rural action plan. to implement the action plan.The next step will be to identify the operational instruments for donor Papua New Guinea. The Bank has a history of support and the main components of a Bank oper- unsatisfactory projects and programs in PNG. Since ation. This will involve consultation with GOPNG, PNG is predominantly rural, most of the projects but more importantly, discussions with local and vil- have been in rural space. Recently a broad rural- lage leaders who will be responsible for imple- development strategy has been completed by menting the plan. Finally, a monitoring and reporting AusAID and the Bank.This work sought to diagnose system will be put in place that will allow cross- the sources of project failure in PNG and design an comparison of performance from village to village approach that might result in improved outcomes (or locality to locality) and cross-fertilization of suc- for the rural people of PNG.The document forms cessful approaches and ideas. the basis for a new relationship in the rural sector with the government of PNG (GOPNG) and gives Philippines and Vietnam. The additional activities details on the action plan.The plan is to commence designed to respond to the rural action plan in the discussions with GOPNG and donors on the strat- Philippines and Vietnam are oriented toward egy at the CG meeting in late June.This will be fol- strengthening the ability of the relevant agencies to lowed with participatory consultations on rural monitor and track rural development, which in turn ANNEXES track changes in the rural development indicators A3.2 Box A3.2: Summary of Regional over time and use the data to improve decision Consultations: East Asia making both in terms of project design and location, and public policy. The third step, now being devel- oped in the Philippines and to be introduced later Two large consultation meetings with government, academic, in Vietnam, is a performance monitoring system for NGO, international organizations (AusAID, ADB, DFID and FAO) the public institutions serving rural space and relat- and business stakeholders of the countries of East Asia and ing performance of the institutions to performance the Pacific were held in March 2001, in Beijing, China, and of key employees in those institutions.The objective Cebu, Philippines. The objective was to gather feedback from the regional stakeholders on the Bank's draft corporate and of this step is to develop structured accountability regional rural action plans. The consultation also sought reac- mechanisms in government agencies and to push tions on the strengths and weaknesses of the Bank's support this accountability down to senior staff in those programs and on how the Bank might improve the effec- agencies who would have performance-based tiveness of its services. employment agreements. The concept is simply to use these agencies as examples to the rest of gov- Main Comments from the consultation: ernment of modern public sector management approaches now in use in several industrial coun- More focus on the rural poverty issue; tries. This approach has been enthusiastically embraced by the Ministry of Agriculture in the Strengthen policies that deal with rural poverty; Philippines and EASRD is working closely with them Improve access to social and economic infrastructure; to develop and implement such a system. For some agencies, such as agriculture, data to implement this Facilitate agricultural growth and competitiveness; system is already available and performance indica- Enhance the development of non-rural and private sector tors have been selected. For other agencies respon- activities; sible for other aspects of service delivery in the rural sector, appropriate indicators will be devel- Improve natural resources and environmental management; oped as the third step in this process. Pay more attention to gender and human resource devel- opment; and As part of our action agenda EASRD is also plan- ning to identify and appraise a completely new rural Pay more attention to governance and institutions. project from our action plan and deliver it to the Board within a one-year period. This would be a 112 pilot to test the feasibility of speeding up the rural lending program in the Region. It is probable that will allow greater precision in targeting interven- China would be our first pilot country and that the tions and improved policymaking ability. The first project would be one capable of being scaled-up. If step is to strengthen the data-gathering and -- successful, this would open the possibility of a large- analysis ability of the agencies responsible for rural scale expansion of our lending in China (and other data. Assistance will be provided to the rural statis- countries where the model is applicable) in subse- tics agency to set up a dedicated server on which a quent years. comprehensive rural database will be mounted.The database will use existing data on agriculture but Initial discussions have been held with the Asian will enrich it with broader socio-economic data Development Bank, AusAID, and JBIC regarding from rural space and rural households. Specific their interest and participation in a "Rural CG" "rural development indicators" will be identified. meeting, seen as the focal point for coordination The data will be updated periodically and will be and monitoring of specific rural development activ- available on-line to other agencies and the public. ities.There is also a willingness among donors and Seed financing to commence this step has already agriculture agencies to design and allocate rural been obtained.The second step is to monitor and development activities in a CDF-type framework so REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT that problems of overlap, duplication, and competi- work on food quality and safety and on off-farm tion, characteristic of previous interactions, can be rural infrastructure. We are still struggling with minimized. Part of the function of successive "rural developing models for jump-starting the private CG" meetings would be to formally monitor and sector (off-farm employment creation, agro-busi- evaluate progress based on agreed performance ness and marketing) but these remain priorities of indicators and targets. The results of this exercise our clients and we are committed to helping them would be used to improve project and program find solutions. design and drive performance.The outcome of the entire "rural CG" process would be shared with We will continue to do investment lending to sup- other clients in a joint consultation in order to port our program.We have found that our empha- demonstrate to them a successful approach to rural sis on community-based approaches and creating development. institutional capacity works best when supported by LILs, SILs and APLs.We have also found that we can support a number of policy reforms with these EUROPE AND CENTRAL ASIA operations and that we gain more commitment from stakeholders when reforms are accompanied Roughly 50% of the poor in ECA live in rural areas. by investment. We will use SECALs sparingly, and This is a considerably lower share than in the rest only when there is a broad reform agenda and true of the world. ECA also has the lowest poverty rates ownership by the Borrower.We will try to integrate of any of the Bank's Regions. However, poverty and broad policy issues into PALs and SALs/SACs inequality have increased faster in this Region than where leverage is greater. anywhere else over the past decade, and these average rates mask considerable differences across Regional Context countries and within countries between rural and urban areas. In more than half of ECA countries, Economy there are more poor in rural areas than in urban The Eastern Europe and Central Asia Region has areas.Thus, making a dent on poverty in the Region 415 million people (7% of the world's total) of will require continued work in rural areas. whom 35% live in rural areas (compared with 54% worldwide). It has 20% of the world's arable land Broadly, the share of ECA's lending program aimed and 24% of its forests. The region is characterized at improving rural livelihoods has probably been by its diversity, with its countries differing widely in commensurate with the share of poverty in rural climate, natural resource base, income and progress 113 areas (unlike in many Regions of the Bank), but this with economic and social reforms. Incomes vary proportion needs to be sustained over time. In con- from nearly $10,000 (Slovenia), with 10 countries trast, rural ESW is generally inadequate. PRSPs do preparing to join the European Union, to $380 not adequately reflect the rural dimensions of (Tajikistan and Moldova). The economies in the issues, and this will negatively affect our ability to north and west are heavily industrialized, with agri- ensure rural issues are appropriately integrated into culture contributing 10% or less to GDP, even Country Assistance Strategies. though rural populations are 25-40% of total.Those further south and east are more rural, with agricul- We have a number of models that work well and ture contributing 30% or more of GDP in most which can be scaled up to national level programs Central Asian countries, but also in Albania and or replicated in other countries. These include, Armenia, and most people living in rural areas. among others, farm privatization and restructuring; micro-credit; development of community-based All countries have struggled with the transition to a irrigation, institutions, forestry and watershed man- market economy, and in all there were sharp drops agement; forest policy reform; land administration in GDP after 1990. In all transition countries, the (registration and cadastre); and dam safety and rural service economy was poorly developed; pro- flood protection. We are doing some innovative duction and processing were closely integrated, and ANNEXES there was a focus on increasing output rather than vatization is well advanced. It has been much more on responding to consumer preferences. While in difficult to build up the institutions, governance Central Europe GDP levels are now well above framework and investment environment for busi- those of 1990, in many CIS countries they remain nesses, banking systems and land, labor and capital below their pre-transition levels (e.g., in Moldova markets to thrive.The "right" balance between pub- and Armenia they are less than one-third the levels lic and private sector responsibilities is still emerging of the late 1980s) despite reasonable progress with in most countries, and civil servants have seen large economic reform. declines in real salaries. Social Issues The Central European countries, geographically and While the Region is highly diverse, there are some historically closer to Europe, have found it easier to common features. All countries of the region reach consensus for economic reform than the except Turkey have experienced profound social countries further east, which are also further from changes over the last 10 years, following the break- western markets. For these Central European up of the Soviet Union and the move to a market countries, policy is now dominated by issues relat- economy. There has been civil unrest and war in ed to EU accession. For the CIS, the key issue several countries (Croatia, Bosnia, Yugoslavia, remains property rights, especially in land and the Tajikistan, Azerbaijan, the North Caucasus). There ability to engage in land transactions. In the has been a deterioration in law and order with Caucasus and especially in Central Asia water widespread consequences, including protection resource policy is a key focus. rackets bribery and extortion. Although absolute poverty is lower in ECA than in other regions, Agriculture and Rural Economy poverty and inequality have increased faster than While the north and west has in general ample elsewhere, even in the most successful economies. rainfall and plentiful forest resources, soils are only On average, only 50% of the poor live in rural areas, of moderate quality and growing seasons are short. but rural poverty incidence is higher than urban in Livestock contributes 30-40% of GDP and forests almost every country, and there are more rural and forest industries are a major employer. The poor than urban poor in most countries. Central belt, stretching from Hungary through parts of Romania, Moldova, Ukraine, Southern Russia and Although poverty has increased, rural populations Northern Kazakhstan, has some of the most fertile have gained greater power and influence over deci- soils in the world.Together with the Southern Cone sions that affect their lives through improved access of Latin America, this area has the potential, if land 114 to land, and freedom in how to use it, and by devel- is sustainably managed, to significantly increase pro- opment of democratic local institutions. duction of basic food crops and to help meet the increase in world food demand projected over the ECA can be distinguished from other regions in a next 25 years. number of other ways as well. Except in Central Asia, population growth is stagnant or negative, lit- Agriculture has become an important social safety eracy is almost universal and basic infrastructure is net as industry has contracted and people have reasonable though deteriorating. Health indicators returned to the land to survive. The share of agri- are quite good, although there have been sharp culture in GDP has increased in many countries. declines in male life expectancy especially in Russian Land has been privatized over most of the region, and Ukraine, and infectious diseases such as tuber- in some cases in small, fragmented plots, and admin- culosis are re-emerging as health systems have istrative complexities with land titling have made it deteriorated. difficult for land to be used as collateral, and for transparent land markets to develop. A special fea- Policy Issues ture of Russia, Belarus and Ukraine is garden plots Prices and trade in most countries have been liber- (of 1 ha or less) cultivated by both rural and urban alized, industries have been privatized and land pri- populations for subsistence, but also for small-scale REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT commercial production. These produce the great based micro-credit). Complex, national-level majority of fruits, vegetables, potatoes and milk in projects have worked less well and this conclu- these countries; they are dependent for cheap sion is supported by QAG and OED assess- inputs on the large-scale former collective farms, ments of our projects. which have mostly been privatized but still face soft We have learned that the weakest dimension of budget constraints. our projects in the past has been development of institutional capacity and sustainability of proj- Lessons Learned in the ECA Rural ect activities after withdrawal of Bank financing. Assistance Program We have learned that improvements in these Our approach to helping our client countries with areas can come through close work with local the transition has evolved. Regarding policy reform, institutions and by supporting bottom up the focus in the early 1990s was on liberalization approaches such as community-driven project and privatization of assets, on deregulation and identification and implementation. We have also reducing the role of government in the economy, learned that institutional capacity building and with the main emphasis on growth and less direct community driven activities work best when intervention for poverty reduction.We argued that supported by LILs, SILs and APLs; this type of we should support investments only when policy development is difficult to nurture with SECALs reforms were well advanced. Since then, we have and PALs. learned the following lessons: We have learned that there is little focus on rural energy, rural infrastructure (other than Fundamental reform takes time, sequencing is water supply and sanitation), rural health, rural crucial, and privatization without a supporting education, rural private sector development by institutional and regulatory framework does not our colleagues in other sector departments and necessarily lead to development of a market that it is difficult to create synergies between economy and prosperity. During regional consul- sector units, despite the existence of country tations our stakeholders emphasized that our teams. reform agenda has often been too ambitious in We have learned that we still do not have good terms of pace. We have also learned that com- models for supporting private sector develop- mitment to reform by technocrats and academ- ment, whether it involves SME development ics is insufficient; and that without support from generically or whether it is aimed at revitalizing elected representatives and civil society reforms or creating critical enterprises serving the rural are frequently not sustainable. sector, namely agro-businesses and marketing 115 Delaying investments until policies are right can companies for delivering inputs and collecting hinder our ability to help large numbers of poor outputs.Yet this bottleneck is a critical constraint and can sometimes significantly increase the on agricultural development and our clients are eventual costs of investments (e.g., for deteriora- eager for assistance in this area. tion of irrigation and drainage infrastructure). Support for modest investments, combined with Objectives and Strategies modest policy and institutional reform, is often a Our overriding objective is to help our client coun- successful approach. tries pursue broad-based, sustainable growth of Simple project design usually works best (and productivity and improved social well-being in the again our regional stakeholders made this point). rural economy.We have five strategic objectives: Successful projects should be geographically focused if they support a complex agenda (e.g. Increased agricultural productivity and value- community based watershed rehabilitation, rural added; infrastructure, land reform and farm restructur- Off-farm rural enterprise growth; ing with redesign of field irrigation systems) or Development of physical and social infrastructure; should support only one area for intervention if Improved land, water and forest management; and they are nationally focused (e.g., community- Risk mitigation. ANNEXES To achieve these objectives, we have individual sub- Sub-regional Plans sectoral strategies. Overarching these strategies, we Our assistance strategy by sub-region depends have certain themes that guide our work: partly on the regional context and priorities. The level of emphasis given to each sub-region is deter- In general, reform of prices and trade, and priva- mined by a combination of three factors: (a) need tization of farms and enterprises remain prereq- (a function of per capita income, geographical and uisites for sub-sectoral investments. However, social endowment, and economic performance); (b) where the economic rates of return for an interest and willingness on the part of our client investment are good, where the investment countries to work as a partners, and to borrow; and would help substantial numbers of rural poor, (c) the capacity, including the institutional frame- where delays would further increase the costs of work and governance, of the client country to use that investment, and where the rural sector is Bank support. "net-taxed," our strategy suggests that we sup- port modest investments. Table A3.1 below summarizes the proposed focus Community driven investments will be the pre- areas of our future assistance program by sub- dominant approach to our work, but we recognize region. In Romania, Bulgaria and Moldova we have that there may be a tension between publicly fund- an extensive program because there is a "congru- ed investments selected in this manner and those ence of need, willingness and capacity," as well as selected using national efficiency criteria.We will try institutions which operate with a reasonable degree to integrate the better of the two approaches. of transparency. In Central Europe, there is less There are trade-offs between equity and effi- demand for Bank assistance (with greater access to ciency considerations. In selecting investments concessional funds from the EU), in the "core" CIS for support, we will accept that satisfactory, countries and in Central Asia the levels of "willing- rather than optimal, economic returns to the ness" and or "capacity" are in some cases lower. economy may best reach poverty reduction Over time we would aim to increase our assistance objectives. Our strategy also takes into account to Central Asia, Ukraine, Russia and Belarus. Our political economy and social well-being and IDA borrowers also have constraints on access to acknowledges that some reforms may have to Bank financing, while even in the IBRD countries the be crafted differently or go more slowly than overall country assistance envelope is determined pure efficiency considerations would dictate. by agreements reached through the Country There are also trade-offs between short-term Assistance Strategy process. social well-being and longer-term economic ben- 116 efits, and between short-term production maxi- Thematic Plans mization and sustainable natural resource man- Our priority interventions are aimed at five general agement. Our strategy aims at balancing these themes where our clients have indicated they want considerations and not pursuing either extreme. the most support from the Bank and where the Our borrowers have legitimate concerns that Bank has a comparative advantage. the move to a market economy from the previ- ous socialist system brings considerable risks and Increasing Agricultural Productivity and uncertainty that require specific attention, partic- Value Added ularly when many of the risk mitigation instru- In most ECA countries, particularly those in the ments of market economies are not yet avail- CIS, agriculture remains a key sector of the econo- able. We will explicitly address these considera- my and interventions to increase inclusive growth tions in our work. will require improvements in factor productivity in We will seek to emphasize institutional develop- the sector itself. Areas for intervention include: sup- ment, capacity building, the involvement of local porting continued policy reforms, pursuing transfer participation and sound governance in all of our of property rights through completion of land pri- work. vatization and farm restructuring, creation of secure Action Plans. property rights and development of land markets, REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT reversing the deterioration of irrigation and involves a heavy emphasis on searching for success- drainage systems and creation of community-based ful models and reaching out more actively to our institutions to own and manage the systems, devel- partners with expertise in this area (IFC, EBRD). opment of knowledge and information systems, and We are testing some new approaches to off-farm establishment of quality and safety standards. employment creation in Poland and will monitor this experience closely for possible replication else- Off-Farm Enterprise Development where. The Bank historically been involved in agricultural credit.We have shifted our focus to development of Social and physical infrastructure sustainable rural financial services, including savings, We are supporting improved water supply and leasing and risk reduction instruments, as well as sanitation in a variety of countries, focusing on micro-credit for all rural enterprises, not only farms. community-based approaches. Increasingly we aim Aside from finance, we have done little to develop to support rural infrastructure projects which a vibrant private economy off the farm. The non- strengthen local government's implementation existent or poorly functioning markets for input capacity and local democratic institutions. We do supply and output marketing and agro-processing not have a clear strategy for either rural energy industries represent a major bottleneck for future and telecommunications, or for rural road infra- agricultural growth. SME development in these and structure. We support "lifeline" energy tariffs other manufacturing and services to support rural where poverty and rising energy prices have led livelihoods are a necessary complement to a grow- to increased use of biomass and land degradation, ing agricultural sector which should shed labor as it and to support increased internet connectivity. becomes more productive. Because of the critical With regard to health and education, our strategy importance of this issue to our clients, our strategy is to improve delivery of services while increasing Table A3.1: Priority Actions for Rural Development in the Region Priority Actions Central Romania Balkans Turkey Core CIS Caucasus Central Europe, Bulgaria Asia Baltics Moldova 117 Policy Reform Land Reform Irrigation and Drainage Knowledge/info Systems Quality and Safety Agricultural Marketing ? Rural Finance Roads, Telecommunications, Energy Water Supply & Sanitation Health Education Land Management Water Management Forests Regional Seas Natural Disasters Financial Risks ANNEXES cost-effectiveness and rationalization of existing es to land restitution, in order to increase the "value- systems, where necessary. We are also supporting added" to the economy and society from sustainably an emphasis on primary health and outpatient managed forests. In the "forest-poor" countries we care and primary education, and improved sup- will focus on community range, forest and water- porting infrastructure (e.g., teachers' housing, elec- shed management for poverty reduction and sus- trification of schools, ect.) with community partic- tainable livelihoods. We will also help our clients ipation. We support creation of incentives for meet commitments to global environmental con- providers in rural areas and investments in basic ventions regarding biodiversity conservation equipment. through supporting improved protected area man- agement and landscape management in the produc- Land,Water and Forest Management tion landscape. (including landscape management and biodiversity conservation) Risk Mitigation Land management. Our strategy involves increasing Improved security against man-made and natural support for new technologies such as minimum disasters is one key element of human well-being. tillage and support for better nutrient management Our strategy, regarding natural disasters, has three and more environmentally friendly farming meth- main elements: (a) helping our countries to recov- ods.We will replicate successful approaches in one er and reconstruct quickly following natural disas- country with appropriate adaptations to others, ters; (b) helping them put in place disaster plan- e.g., participatory natural resource management, ning, preparedness and mitigation programs to where local communities work with local line min- reduce the impact of disasters when they do istry staff to select from and implement a "menu" of occur; and (c) through our regular lending, helping activities that improve soils and moisture retention our countries restructure elements of their and increase local incomes, which has been suc- economies to be less vulnerable to disaster (e.g. cessful in Turkey. We will also aim to replicate else- through more supplementary irrigation in where our successes with community range and drought-prone areas, dam rehabilitation, and sup- forest management. porting better pest and forest fire management systems). Water management. Our focus will continue to be on improved irrigation and drainage management, We will also seek to introduce financial risk mitiga- and we will also support dam maintenance. In tion instruments (e.g., new-style insurance programs Central Asia, our priority will be on support for and hedging) as part of our rural financial services. 118 investments that improve local incomes and man- agement of the Aral Sea watershed.We will aim to Implementation support improved wetland management for ecosystems management and protection of fish- Internal World Bank Implementation eries' spawning grounds. Our strategy will be to Issues and Plans support improved river-basin planning to help In order to implement our strategy we need to clients prioritize and balance water requirement work closely with other sectors, especially the investments at a country level.We will support the Human Resources and Infrastructure Sector Units, range of water resource investments where ERRs but also Poverty Reduction and Economic are adequate, the rural poor benefit and the envi- Management, and Private and Financial Sector ronmental impacts are positive. Development. Few projects outside ECSSD are aimed specifically at rural areas. We aim to put a Forest management. Our strategy in the "forest- particular emphasis on making sure that rural issues rich" countries is to improve public sector manage- are well treated in CASs and PRSPs in the future. ment, including fire and pest management, forest This means ensuring that the appropriate level of land-use planning, greater transparency in forest intervention is supported for the importance of the management, and support for sustainable approach- sector and the degree of rural poverty. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Donor Coordination Issues and Plans by investment. We will use SECALs sparingly, and We are committed to working with other partners, only when there is a broad reform agenda and true recognizing the enormous strengths and assets they ownership by the Borrower.We will try to integrate contribute to our efforts.We have found, however, broad policy issues into PALs and SALs/SACs that this is not always easy and their priorities, pro- where there is more leverage. We find, however, cedures (especially procurement, but also many that this type of adjustment lending needs to be others) and time horizons can be quite different. In complemented by investments to achieve lasting our strategy, we explicitly recognize that partner- impact and to nurture the kind of local involvement, ships, even with IFC, are not cost-free or easy, and development of local institutions and capacity build- we adjust our expectations accordingly. We will ing that we believe are critical. strive to maximize synergies with our partners, carefully balancing the costs and benefits of these In general we will emphasize project lending that relationships for our clients. Partnership agreements combines investment with support for sub-sector reached at high levels often do not have adequate policy reform. Examples of success with this budget support at country level for effective imple- approach include: support to decentralization of mentation and we will seek to ensure that expec- water management and water users' associations tations are clear in light of fiscal realities. through irrigation projects; involvement of local communities and local governments in design and Implementation Arrangements and implementation of natural resources and local infra- Instruments structure improvement projects; improved forest Our key instrument is lending but our ability to use management policies through support to improved this instrument is limited for a number of reasons. forest inventories, planning, financing and protec- For Central European countries, with increasing tion; land reform through support to farm restruc- access to EU funds and to commercial capital mar- turing; development of land markets through cadas- kets, our money is increasingly non-competitive. On tre and land registration projects; and improved the other hand, in the former CIS we are reluctant rural financial policy through FILs requiring market to lend to the slow reformers, and there are debt interest rates and elimination of subsidies. Locally and IDA lending constraints on the poorest coun- driven development is frequently effective in over- tries. On some occasions Bank procedures, particu- coming the governance problems faced in many larly those regarding procurement, financial man- ECA countries and we will aim to use this approach agement and environmental safeguards, are regard- as much as possible. ed as cumbersome and expensive, and decrease 119 borrower interest, even if overall they increase cost- Non-Lending Services.We intend to continue to use effectiveness, transparency and project design. Our IDFs to build institutional capacity. PHRD grants are strategy is to continue to use lending instruments to an essential input into project preparation,and we will the extent possible within these constraints, as we continue to use them to the maximum extent possi- believe the development impact of this tool ble.We will aim to work with the Financial Complex remains significant, but to expand our use of non- to restore their operational flexibility. lending instruments as a complement where there is demand from the client. GEF has financed pilot investments in improved ecosystems conservation and management of inter- Lending. We will continue to do investment lending national waters. It has also often acted as a catalyst to support our program. We have found that for Bank lending operations at a later date. Given developing community-based approaches and cre- the increasing financial and operational constraints ating institutional capacity works best in the form of with GEF, we aim to work more closely with our LILs, SILs and APLs.We have also found that we can clients to persuade them to see the benefits of bor- support a number of policy reforms with these rowing both for rural "public goods" (social servic- operations and that we gain more commitment es, better land and water management, research from stakeholders when reforms are accompanied and extension) as well as for "global public goods." ANNEXES We will put a high priority on doing country-specif- tasks more promptly, to have them carried out, to ic economic and sector work which is country the extent possible, by the person who is responsi- focused and operational, learning from project ble for lending in a particular country, and to have experience. We will aim to complete our ESW local ownership, to improve effectiveness. We will A3.3 Summary of Regional Consultations: Europe and Central Asia Region Consultation took place in Moscow (March, 2001) with over 80 participants from 22 countries. It provided valuable feedback and also an opportunity for members of the rural development community from so many countries of the region to meet one another. There were informal exchanges of views and a sharing of experience in several areas. Overall approach: There was support for a broader approach to Rural Development, to go beyond agricultural productivity and include off-farm enter- prises, physical & social infrastructure, natural resource management and risk mitigation. The strategy should address rural poverty especially the need for ECA to develop social safety nets to reduce growing rural poverty. Differences between countries were emphasized; there was a need for a strong sub-regional, country-specific and local focus in strate- gy development and implementation. The World Bank should be more sensitive to the political aspects of rural development The group expressed frustration with the tough policy requirements and conditions set by the Bank. Thematic Areas: Western ECA region priorities emphasized EU accession, WTO, and market access, while eastern ECA region priorities emphasized land reform, institutional development, progressive pro-rural/farmer credit policies, and pursuing market reform. The Bank should support new emerging privatized farming structures and both small and big farms. Credit access is a priority, but there was concern at the lack of Bank support to the institutional development of private sector aside from credit. 120 Development of agro-processing facilities as well as the private non-agriculture sector are critical to increased competitiveness of the region. The Central Asian region identified natural resource management as critical to rural development; especially irrigation, forestry and bio- diversity. Bank Instruments The World Bank should be flexible, quicker, and less bureaucratic, and use more local experts and expertise from the region. Bank lending should be combined with pilot grants for the projects. There should be more focus on simple, small grass-root projects rather than complex large-scale projects (APLs and SALs). REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT also put an increasing emphasis on providing "just- LCR is a highly urbanized region. Of its estimated in-time" sub-sector notes that respond to specific 519 million inhabitants for the year 2000, 391 are issues raised by our clients, and we will draw more urban, and 128 are rural. About one third of the on international experience to provide our clients population is poor, and about one sixth extremely with options as they pursue reform. We support poor. Poverty incidence in 1998 is lower than in having country units hold a reserve for this type of 1992 but it is only back to the level of 1986. ESW, for all sectors, not just rural. Projections for the year 2020 show that while the urbanization trend will continue and the share of Measuring the Success of our Work the rural population will decline, the absolute num- Our individual investment operations generally bers of people living in rural areas will remain include outcome indicators. Broader indicators, roughly the same. Moreover, serious problems of such as the decline in the number of rural poor or equity exist and are particularly evident with increase in off-farm employment in rural areas, can respect to land distribution. LCR possesses the be measured but are difficult to link to our assis- highest GINI (inequity) coefficients in the world. For tance strategy We will measure the success of our example, it is over 0.9 in Peru, Paraguay and strategy implementation in the following ways: Venezuela and close to those levels in Colombia and Brazil. In the sub-regions summarized above, new lend- ing and CAS objectives should reflect the prior- During the 1990s, most countries in the region ities outlined in the strategy; made a radical departure from heavy state inter- The priorities and approaches followed in the vention in prices and markets towards private sec- new projects should reflect the sub-regional tor-led models of development, reducing barriers strategies; and to competition in domestic markets, and accelerat- New ESW should focus on the priority objec- ing the process of trade integration with the global tives of the strategy and should be operational. economy. Several countries, however, lagged in these reforms; e.g., Venezuela, Ecuador, Haiti, and A regional consultation was held during March Jamaica. The region as a whole benefited as evi- 2001 to discuss this strategy. A summary of the denced by the return of macro economic stability, major conclusions from that consultation are pre- and the decline in the average public deficits. sented in Box A3.3. Growth resumed, but for many it was sluggish, not sustained and with recurrent crisis (Argentina, Brazil, Mexico). Growth of per capita GDP was 121 LATIN AMERICA AND CARIBBEAN below 1.5% per year in the 1990s and was accom- panied by increasing inequality. Regional Context and Key Issues The Latin America and the Caribbean Region The high rate of urbanization notwithstanding, the (LCR) is a middle-income region well endowed in strategic importance of agriculture and the rural natural resources. LCR is the wealthiest of the sector remains for four major reasons. developing regions with an average per capita GNP of $3,940 in 1998.At the regional level, it is also the Contribution to employment and to GDP. least dependent on agriculture--an average of only Despite their modest contribution to GDP, pri- 8% of GDP in 1998. However, this average ratio mary agriculture accounts for a large share of hides a great variation that ranges from 5% in the labor market: 20% in Mexico, 57% in Central Mexico, 8% in Brazil, 15% in Colombia, and 24% in America. However, when agriculture is broadly Nicaragua.The region is also well endowed in natu- defined to include agro-industry, its share of ral resources. It has abundant tropical and temper- GDP is much higher. For example, in Argentina, ate natural forests, with more than half the world's Chile, Brazil and Mexico (which together tropical forests, major biodiversity reserves, and account for more than 70% of AGDP of LCR), around a third of the world's fresh water. agriculture accounts for around 40% of GDP ANNEXES (1996). Opportunities offered by the sector are Sectoral policies and programs may skew incen- still large and untapped. tives. Some countries implemented explicit or Impact on the environment. Any growth at the implicit taxation policies towards the sector, cost of natural resource degradation is a short- through overvalued exchange rates regimes, indus- lived victory. If nothing else, degradation weakens trial protection or taxation of export commodities the resource base, exacerbates the destructive (with strong comparative advantage) and protec- impact of natural calamities, and worsens the vul- tion of import substituting food (with little compar- nerability of the poor. Agriculture is one of the ative advantage).These protection and taxation pat- sectors where the importance of integrating envi- terns were highly inefficient. In a number of coun- ronmental and economic policies is most obvious. tries the incentive framework for agriculture The rural sector contributes to the develop- remained relatively unfriendly with negative protec- ment of the other sectors of the economy. tion rates and negative real prices to producers for High-productivity agricultural transformation has most crops, e.g., Mexico. Also, the use of subsidies fuelled the growth of most high-income industri- to address poverty had perverse effects. Subsidized alized countries. Urban demand for processed directed credit through parastatals was highly ineffi- foods is rising and so is the demand for cient in terms of its fiscal cost, delinquency rates and processed goods of higher quality.Also, the qual- outreach capacity. It also crowded out and inhibited ity of urban development will be determined by the development of local self-sustained savings and a successful transformation of the rural sector. loans initiatives. Subsidies for investment and equip- Higher incidence of poverty in rural LCR. Rural ment are difficult to target and risk accruing dispro- areas have the highest incidence of poverty portionately to medium and large commercial (63%). Social and economic indicators in rural farmers.This also drives up land prices, induces con- areas are low and much worse when compared centration of land, and makes access to land by the to urban areas. Also, rural poverty dispropor- poor more difficult.Also, productivity improvements tionately affects some groups. should be more closely associated to competitive- ness as subsidies may skew the incentive structure Lessons Learned of the various crops. Macro reforms were necessary but insufficient to remove the structural impediments constraining Need to find the right balance. This rural action the rural poor. While the macro reforms helped plan argues that LCR cannot succeed in its poverty put in place a policy framework more conducive to alleviation efforts without the contribution of the growth and private sector involvement, they were rural sector. However, finding the right balance is still 122 not complemented by "second generation" a challenge.The development community has gone reforms.These are measures to improve the com- from one extreme to another, searching for the petitive functioning of factor and goods markets, appropriate instruments and approaches to trans- reduce the high inequalities and the deep-seated late an holistic vision into effective actions. Too structural problems that severely limited access of often, implementation capacity falls short of con- the rural poor to economic assets, markets, servic- ceptual sophistication or poor policies impeded es, technology, and infrastructure. The macro good projects to bear fruits. reforms did not reverse the long history of un-egal- itarian development.The rural sector remained rel- Integration through a territorial, decentralized atively disconnected from the rest of the economy approach. While the integrated rural development and many structural distortions and regional dispar- projects of the 1970s were right about integration, ities were left untouched as the micro agenda was they were wrong about the way they were carried overlooked. In terms of its contribution to rural out. These projects were implemented top-down, poverty, the structure of growth is as important as with no participation, no decentralization and in an growth figures per se. In many cases agricultural adverse policy environment.There is a lot that can growth was concentrated in the commercial sector be recovered from the concept of integrated rural and did not trickle down. development in the new context of decentraliza- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT tion, differentiation, democratization and better pol- the missing links, and work better together across icy framework which characterize most of LCR networks so as to better balance the different ele- countries today. There is a compelling need to ments of a complex package and achieve synergism. address equity issues in the context of a rural devel- A rural development strategy has to include sever- opment strategy repositioned in the context of its al differentiated elements directed at different pop- "rural space." Under this approach, agriculture, off- ulation groups while acknowledging that an ade- farm activities, employment opportunities, social quate overall macro and policy framework is essen- cohesiveness, municipal development, access to tial. In addition, the strategy wants to convey the markets and services, are seen as equally important message that while the rural sector confronts many elements of a strategy that blurs traditional divides challenges, it also presents many opportunities that among sectors and among rural and urban makes it potentially attractive to investors and to approaches. rural dwellers, if the right mix of policies, institutions and support programs can be put in place. Need to build bridges beyond the community level. Community participation approaches helped Better addressing the rural-urban dynamics. While build social capital and proved to be an effective an important preoccupation of policy makers is to mechanism for delivering micro-projects and pro- maintain rural-urban migration at manageable levels, ductive investments. However, to ensure institution- this migration will continue. More training and edu- al sustainability, there is a need to link these com- cation opportunities for the rural poor are impor- munity-driven projects to local governments. Such tant for facilitating their absorption into other sec- an approach should also build the bridges with the tors of the economy. However, outright promotion rest of the economy, promoting producers' organi- of migration as a rural poverty alleviation strategy is zations and providing the critical linkage to integrat- not viable, because it would exclude from a rural ed supply chains, where the private sector would modernization process a large smallholder sector play an increasing role in the development of the with growth and employment potential and convert family farms sector. it to slum dwellers. For the millions who continue to stay in rural areas, improving living conditions will Need a culturally- and gender-sensitive approach. depend on improvements on several fronts. These It is clear that the pervasiveness of poverty rates include intensifying small-holder agriculture and among ethnic minorities and the increasing role of increasing productivity; providing infrastructure and women in rural society raises the issue of social services; improving access to assets such as land, inclusion and access to productive factors and education and financial services, and to markets; 123 assets. Government programs should devise ensuring the sustainable management of the natural approaches more adapted to cultural preferences resource base on which they base their livelihoods; and gender needs. and providing better risk management tools. Objectives and Strategies Integration through regional development and a Main objectives. The overarching objective of the new "institutionality." A "rural space" approach proposed regional action plan is to reduce rural based on regional development will provide the poverty and promote broad-based growth in the underlying vehicle to pursue sectoral integration. context of the sustainable management of natural This requires improving the absorptive capacity of resources. secondary towns in the context of increasing urban- rural integration and interaction. It also calls for Strategic thrusts. The strategy revision process investments in basic infrastructure, promotion of emphasizes the holistic nature of rural develop- new off-farm opportunities, better integration with ment, as opposed to focus on a single sector--agri- the labor markets, continued emphasis on commu- culture, and the urgency to go beyond vision into nity-driven development, municipal strengthening action.The strategy is to build on successful experi- and the building of social and human capital. It also ences and scale up what is working well, strengthen allows for better integration of environmental issues ANNEXES in an effort to build consensus around possible"win- cy issues that affect the rural sector. It also supports win" opportunities. In this context a new "institu- renewed engagement in economic and sector work tionality" will need to be built around the concept of to provide better underpinning and understanding increased participation of the local actors, farmers' of the factors that determine rural poverty, the organizations, civil society, local governments, and incentive framework, the functioning of land, labor the private sector. This means a revision of roles and financial markets, the decentralization process where beneficiaries of Government programs for the sector, etc. become clients and take leadership of regional plan- ning and priority setting, guide and negotiate local Promote a new "institutionality" for the sector development processes, and create the conditions and good governance. The combination of for more accountability and better governance. increased decentralization and the development of local democracy are key elements to progressively Productivity, competitiveness and increased pri- create the conditions for greater participation and vate sector involvement are key engines of accountability at the local level. The main debate growth. Agricultural productivity, competitiveness, around the issue of how to better articulate the access to technology and markets will remain criti- social demand for services with the institutional cal for many producers independently of their size. supply calls for a re-thinking of the respective roles However, in many cases the smallholder sector of the public sector (both central and sub-national working for the domestic market should be subject governments), civil society, interest groups, private to more attention and support in view of its poten- sector, etc. tial and untapped contribution to growth and employment. Conditions for increased private sec- Develop a credible regulatory framework. This tor involvement will need to be studied and barri- includes a number of elements conducive to more ers removed through private-public partnership. effective private sector participation and better functioning markets. It includes: a) establishing bet- Social safety nets for the severely marginalized. ter-integrated price and market information sys- There is a group of rural poor who will remain mar- tems; b) developing appropriate regulatory frame- ginally productive and will not be able to benefit from works and enforcement capacity as critical factors the rural non-farm economy or to migrate.Members for secure transactions, inventory-based financing, of this group are typically older and female heads of crop insurance, non-bank financial institutions, con- households and farms in poorly endowed areas. For tract farming, and "collateralization" of assets; and c) this group, social safety nets and risk management facilitating the development of commodity quality 124 combined with the promotion of income generating standards based on industry participation and activities, both off-farm and on-farm, are critical to needs, and the development of food safety norms. assure basic decent living standards. Lines of Action The Action Plan Raise productivity and competitiveness as the The proposed action plan contemplates a series of engine of agricultural growth. This proposes to priorities organized along a two-pronged approach. pursue public/private partnerships for the delivery The enabling factors can be considered as critical of public goods and services (such as agricultural underlying elements in the implementation effec- research and extension, animal and plant health tiveness of the strategy in any country.The priority control), facilitate access to adapted technology and lines of actions describe the possible applications equipment, while improving quality and cost-effec- subject to country circumstances. tiveness. It also promotes more efficient cropping patterns and better vertical integration in the sup- Enabling Factors ply and marketing chain. It argues in favor of basing Maintain a supportive macro-economic and trade future irrigation projects on a decentralized inte- environment. This advocates a more pro-active grated approach to sustainable management and role in the discussion of macro-economic and poli- use of water resources. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Pursue a systematic approach to improve the Build human and social capital. Expanding the competitive functioning of markets. This addresses delivery of basic education and health services are three essential markets. Land regularization and powerful tools for poverty reduction in a region administration are to increase access to land and with high rural-urban migration. Education should promote more efficient functioning of land markets. be seen as a priority for the rural population, and Rural financial services are in need of urgent revival especially education for girls. It improves employ- and rethinking in terms of both the efficiency of ment opportunities, prepares future migrants to existing public or semi-public credit delivery mech- access better jobs, and helps families to better plan anisms and the importance of the non-bank sector their own future. Development programs need to through savings and loans "mutualistic" approaches. promote social inclusion, build social capital and Product and storage markets should be made more respect cultural diversity and preferences of minor- competitive and efficient through the development ity and ethnic groups which shoulder a dispropor- of farmers' organization, higher value transforma- tionate burden of rural poverty. tion activities, better information system and inven- tory financing mechanisms. Strengthen risk management and safety nets. Finally, a series of relatively new activities and instru- Foster a "rural space" approach and regional ments would be developed and expanded to development. It proposes a more integrated reduce the vulnerability of poor people both to approach that blurs the traditional urban-rural economic shocks and natural disasters.This covers divide and repositions rural development in the a range of tools like early warning systems, preven- framework of a territorial approach.This approach tion activities, price hedging tools, and crop insur- will foster better integration with the supply chain, ance schemes. Also social security, safety nets and labor and financial markets, the provision of basic income support programs can be very effective infrastructure and services, sustainable natural instruments to reach the poor and they should be resources management and will go a long way in developed according to local circumstances. rendering rural areas more attractive to migrants and to the private sector. Community-driven devel- Implementation opment would be scaled-up as an effective vehicle for building social capital, and delivering basic serv- Internal WB Implementation Issues and ices and small infrastructure. However, the key links Instruments with local governments will be strengthened includ- Cross-network participation. A major departure ing more emphasis on building municipal capacities from the past is developing systematic partnerships 125 in the context of increasing decentralization. between the rural network and other networks: Manage natural resources in a sustainable way. The Environmentally and Socially Sustainable This is a key issue for the long-term sustainability of Development (ESSD) network and the Poverty development programs but one that presents con- Reduction and Economic Management (PREM) siderable trade-offs between short-term benefits network would work jointly to ensure that the and long-term social costs. A number of experi- impact of the macro policies would be sup- ences exist in LCR that have developed win-win sit- portive of rural development. PREM would uations and instruments capable of better integrat- continue to focus on promoting macro stability, ing productive, management, and conservation con- adequate trade policies, competitive exchange cerns. These initiatives are still relatively scattered rate regime, more supportive public expendi- and will need to be scaled-up so as to demonstrate ture programs, the removal of distorting gov- their potential in ensuring a more sustainable use of ernment policies in rural markets. In addition, the resource base.The Global Environment Facility they will develop decentralization strategies, should continue to play an instrumental role in facil- and better understanding of the analytical itating better mainstreaming between conservation underpinnings of poverty and of the incentive and development. framework for the sector. ANNEXES ESSD and the Human Development (HD) net- A holistic approach with a country focus. The works would work jointly to elaborate more con- Action Plan recognizes that only a multi-sectoral sistent programs in addressing social sector issues, approach can work and offers the strategic direc- participation of minorities and indigenous people tions and actions to be undertaken. However, it rec- development.They would also promote the inclu- ommends a selective implementation at the country sion of culturally consistent components in the level in view of the Bank's added value, on-going dia- health and education programs.They would work logue and local circumstances. It is not a "one-size- together to ensure consistency of implementation fits-all" approach. Country Directors and Sector of Social Funds and Rural Investment Funds, and Leaders will be instrumental in ensuring adequacy strengthening safety nets in rural areas. and adaptation of the action plan so that it is con- ESSD and the Finance and Private Sector and sistent with the country policies and development Infrastructure (FPSI) networks would develop agendas.The comparative strength of each network joint strategies and programs on how best to and family in each country context would determine help governments in the development of rural- leadership for the various initiatives and operations, urban linkages, deliver public goods and basic but in most cases this will mean stronger inter-sec- infrastructure services in rural areas, especially toral teams. This in turn requires the key involve- at the level of municipalities. They would also ment of Sector Directors and Sector Managers that develop rural finance approaches that are con- would revisit the strategic skill-mix required for sistent with the specificity of the rural sector implementation of the action plan, guide the consti- and with the overall financial sector policies and tution of teams with adequate skills, and promote regulatory frameworks. the review of the current budgetary process which hinders cross-network partnerships and support. A3.4 Summary of Regional The high cost of safeguard policies may be a Consultations:The Latin deterrent. While it is acknowledged that good America and Caribbean Region compliance with safeguard policies is simply better quality business, it needs to be recognized that proj- A regional consultation was organized in Panama City on April 3-4, ects in the rural sector present a high level of com- 2001, under the auspices of the International Center for Rural pliance requirements which imply more resources Development (CIDER, the rural branch of the Inter-American Institute and time to prepare.This may play as a disincentive for Cooperation on Agriculture, IICA), to discuss the draft Strategy and Action Plan. The workshop brought together a wide array of coun- if transaction costs become excessive. Also, it is important to recognize the higher level of risk that 126 tries and institutions including representatives from the Government, the National Congress, the Church, the private agro-business sector, staff confronts and to remove possible biases producer organizations, academics, and all the donors active in the against innovation and risk-taking. region. The participants hailed the Bank's initiative of reviving the discussion on rural development, a sector that has experienced an Instruments for cross-network integration. Country increasing neglect despite its importance. They recognized the remark- Assistance Strategies (CAS), Poverty Reduction able convergence of opinion in the definition of the key strategic ele- Strategy Papers (PRSP), and poverty assessments will ments of a renewed action plan for the sector. Some themes pre- be the ideal strategic instruments to ensure that rural vailed in the discussion such as: the importance to "operationalize" issues are fully incorporated and internalized. With an holistic approach for the sector and to redefine the institutional respect to lending instruments, investment projects set-up through an effective participation of the key social and pri- vate actors in the decision making process; the necessity to maintain will continue to play an important role especially for a strong link between the macro and micro agenda; the need to specific poverty targeted approaches and innovative define differentiated policies with special reference to the youth, interventions, which require strong implementation women and marginal or excluded groups; the promotion of regional support and field supervision. More effective integra- development, urban-rural integration and off-farm rural employment; tion can be pursued through the use of lending and how to pursue the concept of sustainable development. The con- instruments along thematic lines that require blurring sultation considerably enriched the final document and provided to the "silos" and sectoral frontiers. New instruments to the document an invaluable client perspective. explore are programmatic loans. By their nature REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT (quick disbursing) they will require an adequate poli- implementation capacity, and more accurate and spe- cy environment for the particular sub-sector to be cific analytical work to deepen the reciprocal under- financed, and solid institutions with sound procedures standing around rural development issues. and implementation rules in place. Performance Indicators and Monitoring Donor Coordination Monitoring and evaluation indicators need to be Promoting partnership is good business. It is gener- country-specific. In all operations and on a country ally felt that the strategic thrust of this rural develop- base, the Bank will develop simple but effective ment strategy for LCR countries is widely shared monitoring and evaluation systems adapted from among donors.The Bank should continue to explore Millennium Development Goals (MDGs) on which and develop regular channels for communication and international consensus already exists. While we consultations with other potential partners, to ensure should maintain flexibility in implementation and consistency of strategies, and to explore co-financing admit that trial and error will still be necessary as possibilities.Partnerships should be sought on a coun- part of the learning process, a minimum set of try-basis with the objective of learning and transfer- robust indicators that are reliable, user-friendly, and ring experiences and developing common ground in cost-effective will be developed.Indicators should approaches among partners. Better consistency be built on the basis of the level of progress among donors will enhance the chances to leverage achieved by each country and the nature of the dif- the establishment of a "rural constituency within ferent programs being supported, so as to increase Governments and pursue a coherent dialogue for their relevance and realism. increased effectiveness. Implementation Approaches MIDDLE EAST AND NORTH AFRICA Strengthening client ownership. Without client own- In 1997 the World Bank issued its rural development ership this strategy and action plan are moot. strategy, Rural Development: FromVision to Action. The Moreover, it has to be acknowledged that, in most sit- purpose of this exercise is to update that strategy and uations, development efforts take the form of pro- to render it much more region specific and action ori- gressive quantum leaps that require considerable dia- ented than the previous undertaking. logue and buy-in from various constituencies in the country. In some countries there is already a high Our approach is to characterize the current situation 127 degree of convergence with the proposed action plan in Middle East and North Africa (MNA) countries, and most of it may already be under implementation; examine the implementation of the Vision to Action in others, agreement and interest may be only partial. strategy in MNA, develop a series of lessons learned This strategy and action plan should be seen as a con- from Bank activities in recent years--and then use all tribution to the on-going discussion on LCR rural that material in developing the objectives, strategies, development issues and the way forward.Many of the action plans and implementation approach for future elements of the proposed action plan are already rural development in MNA. This process is illustrated under implementation in a country or another, and in Figure A3.2. the document essentially tries to coalesce and build on what seem to be best practices and innovative Current Situation in MNA Countries successful approaches. Countries in LCR could seize this opportunity to provide momentum to their rural Economy, Policy, and Agriculture development agenda and, as a priority, look towards Per capita income in MNA (excluding the Gulf implementation with a sense of urgency. The Bank countries) averages about $2000 and ranges from could contribute to a partnership that would offer $350 inYemen to $3700 in Lebanon. renewed commitment and support for action on the GDP growth has generally ranged between 2 and ground. In addition, it could contribute with enhanced 5% per year, but for Morocco, Jordan, and West ANNEXES Bank & Gaza, it has been zero or negative for the and which leaves a large fraction of the rural popu- decade of the 1990s. lation vulnerable. Variability in agricultural income from year to year is high in MNA, with the standard deviation of the Lessons Learned agricultural GDP growth rate reaching 33% and The Bank has learned valuable lessons in its opera- 25% for Morocco and Jordan respectively. Thus tions over the past few years. These lessons con- countries with high variability have been experi- tribute significantly to the formulation of strategies encing negative growth or stagnation in agricultur- for improving success in future rural development al value added over the decade. operations. Following are production systems typical of the MNA region: 1. More attention needs to be paid to political constraints and institutional capacities. There is Rainfed mixed; a need for Bank activities to accurately assess the Dryland mixed; political and institutional setting in planning and Pastoral; implementing rural development projects. Irrigated; and Highland mixed 2. Non-lending activities should have greater importance in some countries. By emphasizing Although water availability is crucial to all its comparative advantage in analytical and poli- agricultural systems in MNA, variability, and thus vul- cy advice, the Bank can make strides in rural nerability,varies significantly across production systems. development. Lending activities should have built in flexibility, and analytical work should serve as Water policies are crucial in all MNA countries. support to that flexibility. Other important policy areas include natural resource degradation, land tenure issues, food sub- 3. Variability in climate and incomes has differen- sidies, and rural infrastructure tial effects on policy decisions in the MNA region. Many governments seek consumer and For the development of the irrigated and humid producer price stability as an objective, but the mixed system, access to export markets is also economic and agricultural policy frameworks essential. The largest trading partner for most may not match the climatic variability and pro- MNA countries is the European Union (EU). The duction conditions in the country. EU's policies are quite restrictive and limit export 128 expansion by MNA countries. 4. Encourage private sector and mandate com- munity participation. A need for local participa- Social tion for sustained success is not a new theme. Illiteracy rates are high, especially for women. On However, unsatisfactory project results across average, half of women are literate in the region. In varying rural development programs are often rural areas, literacy rates fall even from these levels. caused by a lack of community participation. InYemen and Morocco, only half of school-age chil- dren in rural areas are in school, as compared with 5. A greater emphasis on small-scale projects in 80-90% in urban areas. rural infrastructure and natural resource man- agement is warranted. Small-scale rural infra- Access to safe drinking water and sanitation for the structure projects have at least four desirable rural population is quite low in many MNA coun- traits applicable to rural development in the tries and well below access in urban areas. MNA region: i) They often are more labor-intensive than Public social safety nets are generally quite weak in large-scale projects; rural areas, a problem which is accentuated by the ii) They tend to involve the community more in high variability in rainfall and agricultural production, the implementation; REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Figure A3.2: Vision to Action Overview Current Vision to Action Lessons Conditions Experience Learned Reducing Vulnerability Reducing Ensuring Sustainable Use of Rural Population Rural Poverty of Natural Resources Rationalizing Improving Facilitating Enhancing Rural Improving Natural Water Use Access to Social Agricultural On-Agricultural Resource and and Policies and Economic Growth and and Private Sector Environmental Infrastructure Competitiveness Economic Activity Management Country Region-Wide Action Plans Thematic Initiatives Community-Driven Development and Policy Reform Instruments Implementation Challenges 129 iii) They may be more sustainable in that rural on issues, even when it is only marginally effec- asso-ciations may have the ability to carry out tive in bringing about immediate change. This operations and maintenance; and may particularly be the case for natural iv) From MNA experience, small-scale projects resource management, but is also true in MNA have the advantage of generally being able to for regulatory and tariff reform. In the latter target poorer quintiles of the population. cases, the lesson may be that disbursements made that ignore compliance with an agreed 6. The Bank needs to be sensitive to the negative reform agenda may send the same signal of a implication of accepting a status-quo stance on lack of concern by the Bank. issues requiring long-term, re-institutionalizing efforts. Decades may be required in certain 7. The Bank's awareness of the need for integrat- instances to implement policy change. Thus, ed water management should be reflected in the Bank should launch and continue dialogue policy dialogue with governments and users. ANNEXES The Bank needs to ensure that all projects and planning system reforms. This strategy calls involved with supply creation or restoration are for an examination and possible revision of leg- integrated with a participatory demand manage- islative, policy, and institutional framework for ment element. water resources, along with actions to strengthen the role of rural communities, the public, and the 8. A lack of indicators for rural development is private sector. inhibiting project planning and evaluation. Often projects cannot be adequately planned or 2. Improving access to social and economic infra- impacts measured because baseline data do not structure. Social infrastructure here encompass- exist. The capacity to understand development es especially health care and education for rural needs and to address policies to raise income in areas. Economic infrastructure includes rural rural areas and in particular in remote locations roads, rural water supply, and rural electrification, is hampered by such information deficiencies and and today also access to information technology. mechanisms for on-going monitoring. To increase rural agricultural and non-agricultural incomes, it is imperative to increase access to Objectives both social and economic infrastructure in rural areas. Particular attention needs to be paid to Reducing rural poverty. Rural poverty reduction is enhancing women's access to these services. our overall objective.This objective is the real guid- Egypt, Morocco and Yemen provide encouraging ing principle by which all other rural development examples where school enrollments in rural objectives and policies are implemented. areas, and for girls, are increasing. Reducing vulnerability in rural areas. Income vari- 3. Facilitating agricultural growth and competitive- ability in rural areas is high, which means that the ness. Reversing deteriorating agriculture per- percentage of the population that is vulnerable to formance and facilitating growth to increase rural income swings is quite large. Reducing vulnerability income (farm and non-farm) is a fundamental is not synonymous with poverty reduction and means of realizing poverty reduction. Policy goes beyond policies that endeavor to bring the change, secure land tenure, creation of economi- poor to an acceptable minimum level of consump- cally viable and efficient farms, facilitating the tion. It also means putting in place a safety net to emergence of competitive and farmer-friendly prevent the non-poor from falling below the processing and marketing infrastructures, and poverty line, along with the creation of opportuni- support of farmer-induced technological change 130 ties that will help improve living conditions for the in agriculture are critical for the promotion of poor and non-poor. competition in the region. Ensuring the sustainable use of natural resources. Increasing growth in agricultural exports, which There are four important components of the natu- requires the removal of anti export bias, namely high ral resource base of rural life to address ­ water, protection of importable agricultural or industrial land, forests, and pastoral areas.These resources are goods and real exchange rates overvaluation. In scarce and fragile and our objective is to ensure the MNA, increasing agricultural exports also will long term sustainable use of these natural resources. require changes in the protectionist policies of its primary trading partner, the European Union. Strategies Formulating agricultural pricing and trade policies 1. Rationalizing water management and policies. In that consider reducing farm income variability as MNA, efficient and effective water use is one of the strategic priorities (see lesson learned absolutely critical for success in rural develop- three). Agricultural policies must be better aligned ment. Improving performance and productivity in with the climatic reality of the region, which is high water management requires institutional, policy, rainfall variability and frequent drought. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Agricultural research and extension must be resource management. Examining the impacts of improved especially in adapting crop varieties to projects on the sustainable use of natural the drought-prone regions (and associated climatic resources must be a part of the design and variability) plus research on efficient use of irriga- implementation of all of our activities. Water is tion water and irrigation techniques appropriate to very scarce in MNA, and the productive agricul- each crop and region. tural areas, particularly pastoral zones, are increasingly threatened by human interventions. Land tenure reform. Land tenure issues in some MNA countries have become a major impediment Action Plans to agricultural productivity growth. Rural develop- Indicative action plans were produced for each ment programs must address these issues. country and major theme in MNA. The country plans are linked to the five strategies mentioned Investments are needed in developing the public above and will serve to guide Bank actions linked institutional capacity in policy analysis, particularly to those strategies.The plans also include monitor- related to agriculture and natural resources. ing and performance indicators tied to the specific actions. In other words, the actions constitute the 4. Enhancing rural non-agricultural and private sec- specific implementation measures for the five tor economic activities.A full integration of non- strategies, and the monitoring and performance agricultural rural activities is one of the major indicators will help determine in what measure suc- challenges of this exercise. Following are some cess has been achieved in future years.These action actions that can serve to effectively enhance the plans will be further elaborated in line with evolv- non-agricultural rural economy: ing issues, changing country priorities, and interven- tion by other donors. Agricultural policies can promote non-farm activities such as agro-processing and the other The action plans are cross-sectoral; hence, success- industrial, commercial and service sectors that ful implementation will depend upon strong sup- characterize modern agriculture. Projects and poli- port for cross-sectoral units in the Bank, technical cies aimed at promoting the non-farm economy ministries in client countries, non-governmental should not just focus on improving the capacity of organizations and other agencies. households to become involved in the non-farm economy, but should also stimulate the engines that While these plans were developed by Bank staff to pull rural households into the non-farm economy. guide Bank actions, they also are presented to stim- 131 Engines of non-farm growth that offer employment ulate discussion and collaboration with govern- to women in particular should be emphasized. ments and the development community as a whole.The Bank will need to look for synergies and Local government and institutional participation partnerships with other lenders and donors to will have to be engaged in a whole variety of capac- completely implement the plans. ities, ranging from land-use planning, education pro- vision, infrastructure investment, regulation, training Monitoring implementation of action plans will and financing. depend on having effective country teams within the Bank and client country support for acquisition Facilitating the growth of small urban poles for of data on rural social and economic indicators. regional development may be an attractive means of creating non-agricultural employment and Implementation incomes. In implementing these plans, the Bank and other donors must recognize the diversity of situations in 5. Improving natural resource and environmental rural areas of MNA countries, both across coun- management. Sustainable rural development is tries and even within the same country.This diver- inextricably linked with sustainable natural sity means that instruments must be tuned to the ANNEXES specific region, with its unique economic, social, and Rural Development Fund (RDF) being piloted in cultural characteristics. Therefore, flexibility will be Morocco. Based on demand from the beneficiaries essential in developing programs tailored to each as expressed through a participatory planning unique region. process, the RDF would be used by the Governors of selected provinces, on the advice of a Provincial The evolving experience in allowing communities to Rural Development Committee composed of rele- participate effectively in seizing opportunities to vant line ministry representatives, to complement or improve their well-being is an encouraging approach fill gaps in existing sectoral programs in a coordinat- for rural development. Our approach will be to pro- ed way, without any predetermination of funding by mote locally and spatially focused rural development line ministry.These holistic, multi-sectoral approach- (holistic approach to rural well-being) with strong es constitute a major component of the MNA community participation. Sectoral interventions implementation strategy for accomplishing our rural would generate maximum development impact if development objectives. It will also entail improving they are appropriately coordinated and communi- local institutional mechanisms for planning, coordi- ties are part of the decision-making process (Figure nating, and implementing projects with greater com- A3.3). For example, for a given region of a country, munity participation. we might have an education project operated by the education sector in the Bank in conjunction with the Another important issue for implementation is the Ministry of Education and local authorities in the implication for MNA staffing and resource allocation. country. At the same time and in the same region, We foresee a growing demand for MNA staff to there might also be irrigation, health, or other proj- work with government officials in strategic sectoral ects.These projects will operate in parallel with col- issues, economic policy analysis and knowledge shar- laboration across sectors and country departments ing. For example, experience in other regions indi- in the Bank and similar collaboration among line cates that quick policy notes are increasingly proving agencies in client countries.Another approach is the very effective compared with the traditional sector Figure A3.3: Parallel Project Orientation World Human Agricultural Infrastructure Other Bank 132 Development Development Sector Sectors Country Sector Sector Team Governmen Social Ministry of Infrastructure Other t Ministries Ministries Agriculture Ministries Ministries (Linkage Challenges) Spatially Coordinated Rural Projects at the Local Level REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT reports. We may not need to build full in-house Summary of Regional capacity for all such services but to have the A3.5 Consultations: Middle East and resources to be able to tap the best technical serv- North Africa Region ices on short notice. We also need to foster cross- sectoral task teams to address effectively our rural Consultations took place in Beirut, Lebanon and Montpellier, France poverty reduction objective. (March 2001). A summary of the major conclusions follows: To enhance development assistance effectiveness, The scarcity and fragility of natural resources (mainly water) in close collaboration among bilateral and internation- MNA is the main characteristic of the Region and should consti- al agencies is imperative. Interagency collaboration tute the basis for the design of rural development strategies in could take various forms. The most conventional the Region. Agriculture should continue to be considered as the method is participating in financing operations. driving force of the rural economy, but given the rather low potential of natural resources in the Region, non-agricultural Many MNA countries have access to grant and con- income generating activities should be introduced and developed cessionary resources from bilateral and internation- at the local level which requires a competitive private sector. al agencies. The Bank is well positioned to avail its technical expertise for policy analysis and project Conditions in the rural areas of MNA are highly diversified, both formulation with a view to developing a multi- between countries and within the same country, a fact not ade- donor financing plan for an agreed rural develop- quately reflected in the regional development strategy document. ment program. Collaboration among the interna- In general, the proposed strategy was accepted, although certain tional community could also be enhanced by participants underscored the difficulty of implementing such a improving the exchange of information on country multi-sectoral approach, both in the Bank and borrower countries. strategies and programs. The need for participatory development was strongly endorsed, but many participants thought that the Bank's approach did not A summary of the major conclusions of the region- adequately take into account the complexity of the social and al consultation to discuss this strategy is presented institutional processes involved and the profound change in the in Box A3.5. role of the State that it implied. Rural development is not receiving a level of support commen- SOUTH ASIA surate with its importance for poverty alleviation, which creates a "credibility gap" for the Bank and other donors in this area. Introduction In contrast to its declared emphasis on poverty alleviation, Bank The South Asia Region (SAR) consists of eight projects in rural areas where most of the poor live have declined 133 countries: Afghanistan, Bangladesh, Bhutan, India, in recent years. This reinforced the perception that the Bank was Maldives, Nepal, Pakistan, and Sri Lanka. Rural more concerned with policy issues (e.g. removal of subsidies, fis- South Asia is the home of over two-thirds of the cal reform, trade liberalization) than development operations tar- population in the region, representing about one- geted to the poor. third of the total rural population in world. The There is a need for the Bank to strengthen coordination with region is characterized by highly diverse agro-cli- other international and bilateral aid agencies to help developing matic conditions across and within countries, rang- countries to increase their bargaining power in world bodies like ing from the atolls of the Maldives to the deserts the WTO. in western India, the tropical fertile Gangetic Plain National rural development strategies would help formulate spe- to the temperate hills and mountains of the cific and locally adapted solutions to a number of issues identi- Himalayas in Nepal, which in turn also pose fied as common to the whole MNA Region. diverse development potential and challenges. For the past decade, South Asia has been the second The participants expressed their deep appreciation for the oppor- fastest growing region in the world, after East Asia, tunity given to them to share their experiences in dealing with its GDP growing at an average annual growth rate rural development issues, and asked the Bank to consider the of 5.3%. The region has made some progress in possibility of institutionalizing this kind of forum on an even broader scale. improving the social well-being of its population, ANNEXES especially as measured by the human develop- government priority to ensuring a holistic and inte- ment index (UNDP), although by world standards, grated approach to rural development. While gov- they are still quite low. The agricultural sector ernments have implemented a large number of remains an important sector in the economy of all programs in key sectors such as the social, agricul- countries, employing at least two-thirds of the ture, natural resource, infrastructure, and non-farm labor force and contributing from 16% to 40% of sectors over the last few decades, several factors the gross domestic product. Sustained food pro- undermined their effectiveness in fully achieving duction growth in the 1980s and 1990s enabled their objectives of fostering equitable rural growth SAR countries to achieve on average, food self- and poverty reduction in rural areas.These includ- sufficiency in cereals. ed: (i) a predominantly centralized, top-down approach in the design and implementation of gov- Despite strong economic performance, South Asia ernment programs, which undermined their longer remains among the most impoverished regions in term sustainability and also often bypassed vulnera- the world.About 500 million people are still living in ble groups in society (women, tribal groups and the a state of severe deprivation, lacking sufficient access landless); (ii) the lack of coordination among various to adequate nutrition, health, housing, safe water, sectoral programs in rural areas that hindered sanitation, and employment, the region is home to greater synergies in their development impact; (iii) over 43% of the world's poor. Moreover, the UNDP the creation of a highly restrictive policy and regu- Human Development Index (HDI) rates South Asia latory environment, which stifled private sector ini- lower than all other regions (except for sub-Saharan tiative, participation and investments in the farm Africa) in terms of average achievements in basic and rural non-farm sectors that is instrumental for human development. greater employment and income generation in rural areas; (iv) public expenditure patterns charac- Rural poverty is sizable and significant throughout terized by insufficient priority to social and human South Asia. Poverty in South Asia is largely a rural development in rural areas and an increasing share phenomenon. While all SAR countries have made absorbed by highly distortive subsidies which took progress in reducing the levels of poverty, it remains away resources for productivity-enhancing invest- high in rural areas. About one third to almost one ments and in some cases (i.e. fertilizer, fuel, and half of the rural population is poor in all SAR coun- water) are contributing to natural resource degra- tries, except Maldives (22%). Based on national esti- dation; and (v) weak public sector institutional mates, about 80% of the total 300 million poor in capacity which contribute to poor delivery of basic India reside in rural areas. In Nepal, the poverty rate services in rural areas, especially to vulnerable 134 in rural areas (44%) in 1995/96 is almost double the groups. In recent years, the SAR countries have rate in urban areas (23%). taken some positive steps to redress some of these constraints, but a lot remains to be done. Rural poverty goes beyond inadequate incomes. Interviews of poor people in India for example, The development agenda for achieving the goal of reveal their acute vulnerability to disease, crop fail- fully eliminating rural poverty in South Asia and ures, labor market fluctuations, domestic violence, achieving social and economic well-being and broad- natural disasters, floods and cyclones, which fur- based rural development is enormous. It will require ther exacerbate their sense of insecurity. Any one the strong and unrelenting commitment from our such event hits the poor particularly hard, causing client governments, if this goal is to be achieved them to fall, or fall deeper, into poverty. A sense of quickly this millennium. In support of this commit- powerlessness, alienation, and inability to influence ment, the South Asia Region of the World Bank, in the environment in which they live, pervades close partnership with government and other local being poor. stakeholders, and in coordination with other donors and international agencies, has put together an assis- Faster progress in reducing rural poverty in South tance strategy and action plan for the short to medi- Asia, however, has been hampered by inadequate um term for moving this agenda forward. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Lessons Bank, in close partnership with government and Several important lessons for achieving more rapid other local stakeholders, and in coordination with poverty reduction in rural areas could be drawn other donors and international agencies, has put from the Bank's long involvement in the region.The together an assistance strategy and action plan for most critical is supporting an integrated and holistic the short to medium term for moving this agenda approach to rural development, bringing together forward. This agenda also contributes to achieving efforts across critical sectors, including the social, the Millennium Development Goals. agriculture, natural resource, infrastructure, and the rural non-farm sectors. This approach requires The World Bank aims to support an integrated, actions in several key areas, the most critical of holistic strategy for rural development that would which are: foster sustained rural growth and poverty reduction in all countries of the South Asia Region. This Defining and orienting the roles of Government regional strategy for eliminating poverty has three (at all levels), communities, and private sector to major objectives: build synergies among various sectoral develop- ment efforts, especially fostering community par- 1. fostering rural growth and opportunities for ticipation and rural decentralization to ensure rural households, especially for the rural poor; greater government accountability and effective- 2. empowering communities and the rural poor to ness; meet their priority economic and social needs Creating an enabling policy and regulatory envi- and thus enhance their well-being; and ronment (i.e. land, inputs, credit, output markets) 3. enhancing the capacity of rural households, and developing appropriate institutions to especially the poor, to overcome and manage encourage private investments in rural areas and insecurity and risks. ensure sustainable use of natural resources (water, marine, forests, land); Action Plans Ensuring appropriate levels and composition of To achieve the above objectives, while recognizing public expenditures towards productivity- the wide diversity of development needs across our enhancing investments for sustained human client countries in South Asia, the scope of, and pri- development and long term rural growth; ority areas for, development assistance varies signif- Supporting research and technological innova- icantly across countries.They also reflect the Bank's tions to improve and sustain agricultural produc- strengths and technical and financial capacity, rela- tivity growth; and, tive to our other development partners. Thus in 135 Ensuring development initiatives are inclusive to translating the rural development strategy into also benefit vulnerable groups (e.g. women, trib- action, our program falls into four strategic priority als, landless). areas.They are: Objective and Strategies Enhancing human and social capital development The overarching objective of the World Bank's Rural in rural areas. These include our program of assis- Strategy is to assist our client countries to eliminate tance to improve the delivery and quality of the rural poverty in South Asia. In view of the fact that health, nutrition and education services in rural the largest share of the poor in the world reside in areas, addressing the problem of HIV aids and other the rural areas in the region, the development agen- major diseases, and support for local government da for achieving the goal of eliminating rural pover- decentralization and community driven initiatives ty in South Asia and achieving social well-being and targeted to the rural poor and vulnerable groups. broad-based rural development is enormous. It will require the strong and unrelenting commitment Facilitating rural and non-farm growth and com- from our client governments, if this goal is to be petitiveness. These would involve support for: (i) achieved quickly this millennium. In support of this improving the effectiveness of government through commitment, the South Asia Region of the World fiscal and governance reform; (ii) the adoption of ANNEXES decentralized, participatory, and beneficiary-driven of efficient fisheries management systems that approaches designed to improve the delivery of would balance both economic and environmental rural infrastructure and services (drinking water and priorities. This would also include assistance to sanitation, irrigation, extension, micro-credit); (iii) the reduce the risks from, and to assist rural households rationalization of expenditures in rural areas to to cope with, the damages caused by natural catas- focus on investments that meet the social and eco- trophes such as floods, droughts and cyclones. nomic needs of the poor, including improving access to other key infrastructure (rural roads, electricity Notably, the above measures will also contribute and markets); (iv) the reform of the policy and reg- not only to promoting growth and human develop- ulatory environment to foster more efficient input ment in rural areas, but to reducing the vulnerabili- (fertilizer, seeds, land, credit, etc) and output markets ty and risks faced by the rural poor. In addition to (trade, agro-processing, rural industries) and greater risks brought about by natural catastrophes, participation of the private sector in rural areas; and increased reliance on markets, hastened by (v) re-orienting public institutions for more social increased globalization, exposes the rural poor to a inclusiveness across income, gender and ethnic broader range of risks of income and other shocks. groups and to enhance their effectiveness in deliver- The Bank's assistance program described above will ing services in agriculture, water, forestry, energy, contribute to reducing the vulnerability of the rural health, education, finance, and infrastructure sectors poor in several ways. Ensuring more reliable and and through government safety nets.These activities sustainable delivery of surface irrigation and ground will build on supporting analytical work to draw les- water, drainage management, improved watershed sons from past and best practice experiences in management, rural infrastructure and agricultural India and other parts of the world. support services will strengthen the capacity for the rural poor to increase and/or diversify their income Fostering efficient, sustainable and equitable use of sources as well as mitigate the risks brought about water resources. We will continue our support to by droughts, floods and other weather related the water sector, with increased emphasis on the catastrophes. Support for greater clarity of security adoption of a comprehensive and integrated of property rights would permit greater access by approach to planning and management of water the landless and the rural poor to land through bet- resources (surface and groundwater) on a multi- ter functioning land sales and rental markets. The sectoral and river-basin level; fostering greater par- Bank's assistance program would also involve ticipation of users in the development and manage- reducing the vulnerability of the rural poor by ment of systems and in financing operations (cost securing access to forest resources and by diversi- 136 recovery) to ensure longer term financial (and fis- fying the community asset base and sources of cal) sustainability, particularly for surface irrigation income. It would also include improved access to systems; and shifting the orientation of water agen- health services, education, nutrition, and safe water cies towards greater client orientation and the and environmental sanitation services, which would delivery of high quality water services. reduce household shocks due of ill health or death due to disease. Improving natural resource and environmental management. We will continue to support joint India, by virtue of its large size, population, and num- government and community management of natu- ber of poor, occupies one end of the development ral resources (joint forest management and water- assistance continuum.To meet its sizeable develop- shed management, fisheries) to ensure their sus- ment needs, our program of rural development tainable development, use and management. In assistance to India is the most extensive in scope forestry, the program aims to improve the liveli- and scale in the Region (Table A3.2). Adopting a hoods of the rural poor, while keeping as priorities focused approach to a number of reform-minded forestry protection and the provision of environ- States, the Bank's assistance program brings togeth- mental services (including conservation of biodiver- er a coordinated, multi-sectoral package of assis- sity). In fisheries, we will support the development tance at the State level, that aims to address in an REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Table A3.2: Summary of Short to Medium Term World Bank Action Plan for South Asian Client Countries Actions India Bangladesh Nepal Pakistan Sri Lanka Maldives Bhutan Enhancing Social and Human Capital Development Improving delivery of health, population and nutrition services Improving access to and quality of education Supporting poverty targeted community driven programs rural water supply) (self-help groups, credit, watershed and forest management, Supporting socially inclusive decentralization and local governance Enhancing effectiveness of safety nets for the rural poor Facilitating Rural Farm and Non-Farm Decentralization and improved fiscal management and governance Liberalization of land, input and output markets Rationalizing public expenditures in agricultural sector Improving access to rural infrastructure: markets, roads, electricity/energy Strengthening access to rural services: credit and telecommunications Improving delivery of agricultural support services (research, extension, livestock services, etc) Fostering Efficient, Sustainable, and Equitable Use of Water Resources Strategic inter-sectoral planning and allocation of resources, policy reform and institutional restructuring of government agencies and greater user participation in management of 137 systems, following a river basin approach Supporting community based rural water and sanitation programs Improving Natural Resource and Environmental Management Sustainable development and management of fisheries resources Sustainable development and management of forest resources, watersheds, biodiversity Disaster management/Coastal Management ANNEXES integrated fashion the critical constraints to rural program for Bangladesh. For these countries, our growth, development and poverty reduction. This program will include non-lending and lending activ- integrated program rests on a package of sector ities. Our lending activities will involve individual specific interventions, that links investments to key projects and multi-sectoral adjustment and/or policy and institutional reform, in tandem with investment operations. adjustment assistance for overall improved state fis- cal management and governance to increase the The Bank will focus support on three critical areas development effectiveness of government where it of major regional concern.These are trade and food is needed. The sectoral interventions are primarily security, riparian water issues, and disaster manage- targeted at the poorest sections in rural areas of ment.We will provide technical assistance and sup- the state and attempts to reach the most vulnera- port forums for fostering joint initiatives among var- ble groups (women, children and scheduled castes ious stakeholders. and tribes). Our rural development and poverty reduction program for India would include non- Implementation lending and lending assistance for water, natural resources management, rural infrastructure and Implementation of Action Plans energy, agricultural support services, social (health, One of the critical factors that has hampered education, nutrition) and focused poverty reduction achievement of the desired development outcomes programs. Our lending activities will involve individ- from Bank assistance is weak or lack of ownership ual projects and multi-sectoral adjustment and/or of the programs by country counterparts and proj- investment operations. A common feature of these ect beneficiaries.This is a critical issue as the region operations is the emphasis on community/benefici- is politically volatile resulting in changes in govern- ary empowerment to make decisions on design ment and which in turn often results in frequent and implementation. The Bank will also support changes amongst senior bureaucrats/ tech- selective assistance in critical areas (e.g. drinking nocrats/practitioners. Future investments support- water) in other States. ed by the Bank will be preceded by joint Bank and client government analytical and advisory activities At the other end of the continuum are the small (AAA) to understand the issues and to explore countries of Maldives and Bhutan. In coordination options for addressing them, drawing on local and with other development partners and through non- international best practice experience.A key aspect lending and lending assistance, the Bank will be sup- of the AAA work would be assisting government porting fiscal and macro-economic reform and with, and facilitating consensus building among all 138 more selective programs of the government in the concerned stakeholders on the sectoral develop- rural sector, focusing on rural infrastructure, and ment strategies. It will also involve developing com- human development (education and health) and munication strategies for our AAA and identifying the sustainable use of fragile natural resources (fish- and working with "champions for change" who eries in Maldives, land and forests in Bhutan). would lead the change process. Our investment assistance will be guided by these sectoral strategies In between are the medium-sized countries of formulated and owned by our client countries. In Bangladesh, Nepal, Pakistan and Sri-Lanka, where the case of rural water supply in India, for example, the strategy for rural development and poverty the World Bank contributed significantly in facilitat- reduction covers a broad range of non-lending and ing the process of consensus building on a sustain- lending activities. In these countries, the Bank's able approach to rural water supply development. assistance program encompasses several sectors: In 1999, such a consensus was achieved in what is health, education, nutrition, agriculture, forestry, now known as the "Cochin Declaration." water, and infrastructure sectors , while also sup- porting broad fiscal, governance and policy and Building on lessons learned and best practice regulatory reform.Assistance for disaster mitigation approaches developed, in past projects and innova- and coastal management will be key part of our tive pilots, and mainstreaming these into new proj- REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ects, are critical elements of the Bank's implementa- rural poverty reduction are addressed adequately tion plan. The Bank will continue not only to sup- and in an integrated fashion in the Bank's country port innovative and best practice approaches, but programs. We will work closely with them in the also to assist clients in scaling up successful and preparation of the poverty reduction strategy effective programs. For example, two areas, where papers (PRSPs), country assistance strategies (CAS) considerable knowledge and successful experience and other ESW activities linked to rural poverty have been accumulated and where there is consid- reduction and participate in the conceptualization erable scope for replication and scaling up are the and preparation of multi-sectoral national and sub- watershed and rural water supply development ini- national operations (adjustment operations, pover- tiatives in India. ty reduction support credits, and investment proj- ects). It will also involve more active participation in Within the Bank, we will work closely with other country teams and country management team SAR colleagues to ensure that the constraints to activities (e.g. sectoral strategy and PCD/PAD A3.6 Summary of Regional Consultations: South Asia Region South Asia engaged in a broad process of consultations to help prepare the regional strategy and action plan. The approach focused first on dialogue between the rural staff and their counterparts in each country. These discussions led to the production of country-specific strategies and action plans for rural development. These country-specific documents were then synthesized into a draft regional strategy and action plan, which was presented and discussed at a two-day workshop (February 28-March 1, 2001) in Kathmandu, Nepal. The workshop was attended by 50 participants including officials from Government, academic institutions, NGOs, private industry, and other donors. A small delegation from the World Bank also participated and independent consultants were appointed to facilitate the workshop. The workshop consisted of presenta- tions of the global and regional rural strategies and action plans, country-specific and thematic breakout sessions, and a panel discussion on regional issues affecting South Asia. Open discussions (questions and answers) on these issues were interspersed throughout the two days. Detailed proceedings from the workshop were prepared by the independent facilitators with support from the Bank. The main recommenda- tions emerging from the workshop are stronger emphasis on: Empowering community level institutions and local governments: The regional and country strategies should be tailored (even more strongly than is currently the case) around the themes of community-based development and rural decentralization. Participation, 139 capacity building of local institutions, and issues surrounding sustainability are all areas that should receive high priority. Alternative service delivery mechanisms: Governments should focus on the delivery of public good and services and create an enabling environment for CBOs, private sector, and NGOs to deliver private goods and services. Efficiency and sustainability objectives would be better met with alternative forms of delivery. Stakeholder identification and negotiations for natural resource management: Sustainable management of land, water, and forest resources requires proper identification of local stakeholders and local capacity to make plans and negotiate between competing uses. The role of government, NGOs, and the private sector is to facilitate this process. The approach will vary based on biophysical and sociocultural conditions. River basin management and user participation in water resource development: A holistic approach to water resource development and user participation in planning, implementation, and system operation and maintenance should characterize Bank support. Policy and institutional reforms and strengthening would be central to this assistance. Capacity building: Strengthening the capacity of central, state, and local government institutions was highlighted as an important com- parative advantage of the World Bank. Regional issues: The World Bank is also well positioned to help the region address cross-country issues (e.g. water basin management, trade, food security, etc.). The Bank's role as a convener and honest broker between countries should be leveraged more effectively. The final strategy and action plan incorporated these important findings. ANNEXES reviews) to insure that rural issues receive ade- composition of teams addressing multi-discipli- quate attention, including funding. The South Asia nary issues (lending and non-lending); Region has had good success in knowledge sharing completion of activities for building ownership through AAA activities and in cross-sectoral partic- (conferences, workshops, published reports and ipation in project preparation and implementation. pace at which policy and institutional reforms We will continue to build closer cross-sectoral link- take place); and ages and collaboration with our other SAR col- progress in meeting the performance outcomes leagues. We will also build closer links to the Rural and development objectives of our rural lending Anchor and Thematic Groups, to draw on the program. knowledge-base on the experiences in other coun- tries and regions. This will also ensure that the A regional consultation was held in March 2001 to design of projects and programs incorporate global discuss the new rural strategy.The major conclusions best practices. of that consultation are presented in Box A3.6. In implementing the country action plan, we recog- nize the importance of committing to a longer-term horizon in some sectors, where significant policy and institutional reform is involved. This would require adopting a phased program of assistance that will build towards achieving longer-term goals. For example, this is particularly relevant to the restructuring process occurring in the water and agricultural support services (e.g. research, exten- sion, livestock services) sectors. We will encourage our clients to make more use of the project preparation facility (PPF) and techni- cal assistance in developing and implementing innovative pilot activities that could eventually be scaled-up.The use of PPF in SAR has been negligi- ble in the past. 140 The ambitious action plans to deliver the country strategies would require close collaboration with our partners in development, i.e. UN agencies, Asian Development Bank (ADB), bilateral donors and international and national NGOs.We will build on our experience of successful models of intera- gency cooperation. While being selective in our assistance (e.g. Nepal, Bhutan, and Maldives), we will aim to complement efforts of other donors. Performance Indicators and Monitoring We will assess the progress in implementing the action plan by monitoring performance in the fol- lowing areas: adequacy of treatment of rural issues in the CAS and sectoral strategies; REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ANNEX 4: Water Water is an essential input into the production of food supplies is likely to be imported as agricul- food as well as into the livelihoods of rural com- tural trade barriers are lifted in many countries.Yet munities and into the health of the ecosystems on the efficient production of food for local con- which those communities depend. This strategy sumption and for export will become even more encompasses all aspects of water as a resource: soil essential in safeguarding food security. Considering and land management, watershed management, irri- present constraints on available physical and finan- gation, drainage, environmental flows, and the man- cial resources, additional production has to come agement of the water resource itself. However, the from improvement of existing irrigated agriculture. strategy's primary focus is the irrigation and drainage subsector, which accounts for well over In many regions, irrigated agriculture is the primary half the Bank's investments in rural space.1 source of rural employment. It offers higher pro- ductivity than rainfed agriculture and provides an Re-Visioning Irrigation opportunity to introduce higher intensity technol- Irrigation is one key basis for agricultural develop- ogy at lower risk. There are several ways in which ment, which continues to be the main engine for enhancing the productivity of irrigated agriculture broad-based rural development.2 Irrigation was can benefit the poor both directly and indirectly. instrumental in the success of the Green Revolution Firstly, targeting poor regions and focusing on farm- of the 1960s and 1970s when food security was the ing systems and technologies most critical to the objective. In the outcome, the Green Revolution not poor offers ways of delivering irrigation's benefits to only averted famine, but also stimulated real eco- those who are currently shut out. Secondly, greater nomic growth beyond the agriculture sector. Today, empowerment of the poor can result from partici- however, we face a different prospect: changing glob- pation in management. Thirdly, new economic al environment, declining performance of the irriga- opportunities can be gained through increased pri- tion sector, challenges emerging from outside the vate sector investments. sector, and pressing social and environmental issues demand a new vision and a new strategy for irriga- What Does the Current Bank I&D tion and drainage. With the benefit of hindsight and Portfolio Look Like? the perspective of foresight, our strategy embraces Trends in Irrigation and Drainage Lending. As of economic growth as the primary objective of future January 2001, there are 58 active irrigation and irrigation investments but with the equally important drainage projects (agricultural irrigation (AI) classi- 141 linked goals of: (1) poverty reduction; (2) food secu- fication) with a total commitment of $5,736M.The rity; and (3) environmental protection. number of projects has remained stable during the last three years, but at a level roughly half what it Irrigation, Food Security, and Poverty was in the 1980s to early 1990s (Figure A4.1).The Reduction portfolio, both in numbers of projects and in pre- Over the last three decades, the world's net irri- project commitment is expected to decline even gated area3 has increased by 73%, from 150 mil- further as the number of approved projects and lion ha in 1965 to 260 million ha in 1995.4 In the per-project cost are declining. Irrigation com- developing countries overall, the proportion of ponents within projects outside the AI portfolio the total water supply that is utilized for agricul- (e.g., social funds, area development, etc) repre- ture exceeds 85% of total diversions.5 Today irri- sent a growing feature, one that partly offsets the gated agriculture represents only 17% of the reduction in AI investments. A total of seven non- cropped land but provides 40% of the world food AI projects include an irrigation or drainage com- supplies. In 50 years global food production will ponent totaling $368 million. Between 1975 and need to double, yet there will be (at most) only 2000 the average number (5-year moving aver- 10% additional land in which to grow this food.6 age) of drainage projects dropped from 16 to 6, An increasing proportion of developing country and investment levels of new project approvals ANNEXES Figure A4.1: Lending Approvals for Irrigation and Drainage Loans FY 1979­2001 1500 30 1000 20 $M n 500 10 0 0 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 Loan Amounts by FY Number of Projects by FY Figure A4.2: I&D in Active Portfolio, January 2001 142 $579 ­ 10% $195 ­ 3% Latin America $630 ­ 11% Africa East Asia $334 ­ 6% $2240 ­ 39% South Asia East Europe & Central Asia Middle East & North Africa $1758 ­ 31% REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT dropped from $1 billion (5 year average) to below sector participation within a context of broader $400 million. national reforms. The 1997 Irrigation Portfolio review indicated that Economic Incentives. The most commonly used Bank lending had shifted away from the develop- incentives are water pricing (90% of projects) and ment of new irrigated lands to rehabilitation and user participation (59% of projects). However, in upgrading of existing systems. Many of the new most cases `water pricing' focuses mainly on various projects emphasized sustainability and institutional degrees of O&M cost recovery, instead of using it to issues in addition to infrastructure investments.The signal the scarcity value of water. Relatively little has regional distribution of investment varies consider- been done on recovery of investment cost. The ably, with EAP and SAR regions alone accounting OED report7 acknowledged the role of water pric- for 70% of the total investment (Figure A4.2). Key ing (along with good management and appropriate findings from the active I&D portfolio review fee collection) for ensuring efficient water service include the following. delivery by enabling system operation and mainte- nance--and thus meeting the Bank's poverty allevi- Institutional Reform. The dominant reform which ation objectives. However, the Bank's water portfo- was introduced was federated water-user associa- lio showed few pertinent examples, and most of tions (WUAs), based partly on the Mexico model. those were outside the irrigation sector. This is particularly popular in South Asian and Latin American projects. Some transitional economies Poverty in the Irrigation Portfolio. Irrigation and projects tend to emphasize financially autonomous drainage projects are increasingly focusing on utilities that sell bulk water to corporatized groups poverty reduction as an explicit project objective. of water users. Relatively less has been done on However, there is still a long way to go to integrate restructuring of irrigation agencies and on private irrigation projects into the mainstream of the Bank's Figure A4.3: Drainage Objectives in Active and closed Projects (Aug. 2000) Active projects Closed projects 0 20 40 60 80 100 143 Waterlogging Control Salinity Control Flood Control Water Quality Environment Measures Planning (Master or Basin) Research/ Pilots/ Studies Institutions M&E ANNEXES poverty reduction work. Of the 47 projects that ture must come from within the sector by increas- became effective after 1997, less than half (47%) ing "use efficiency" through improved management include any data on basic poverty issues.8 Only 11% practices and new investments.These include: of the projects included special assistance compo- nents for the poor (usually in the form of matching More crop per drop.Water management on both grants for equipment purchases). Only 6% of the farms and in delivery systems can be improved projects monitored the impact on small-farmer through the use of new technologies, reforms in income, 23% included specific provisions to benefit management institutions, practices leading to real women farmers. The OED report acknowledged water gains,13 greater attention to water rights,and that irrigation projects were effective in reaching the use of economic incentives. Improvements in the poor, however the perceived success was crop genetics as well as in cropping patterns, culti- strongly affected by macroeconomic conditions. vation methods, and soil-moisture management practices are also possible. Much of the increased Infrastructure Investment. Such investments did production and increased value of production per not address the changing needs of irrigation servic- unit of water consumption will come from these es within the basin framework. Rehabilitations of aspects. However, promoting deficit irrigation in existing systems were mostly carried out to restore water-scarce areas and improving yields in rainfed original project objectives rather than meeting cur- areas will also contribute substantially to the more rent and future needs.9The declining investments in crop per drop objective. drainage can hardly be justified while many coun- tries (e.g. India, Central Asia, East Asia's humid trop- Pollution control. Reducing waste loads in return ics and some countries of Latin America) have great flows from agricultural, municipal and industrial potential to enhance their productivity through users can improve the availability of water for all improved drainage.10 On the other hand, projects uses, including agriculture (through reuse of treat- in the active portfolio are becoming more environ- ed effluent and agricultural drainage water). mentally strategic (Figure A4.3) with increased inclusion of salinity control, water quality improve- Improving reliability of supplies. Developing new stor- ments, environmental measures, planning, research, age to replace capacity lost to sedimentation and to institutional aspects, monitoring and evaluation. save water lost during flood flows for use during times of scarcity, adopting a broader economic, social and Challenges and Opportunities environmental approach covering several sectoral uses Declining availability of renewable freshwater and improving water supply infrastructure and services. 144 resources in terms of quantity and quality is the major problem facing development in the future. It Utilizing the rainfed option. Improving water is particularly so for irrigation, which consumes management in rainfed agriculture (through flood about 85% of the available water. Growing compe- control, drainage, water harvesting) can enhance tition for the same resources from M&I and envi- productivity and in some cases obviate the need ronment, combined with increasing trend of water for conventional irrigation development. pollution and impact of projected climate change, aggravates this problem. A WWF report11 esti- Institutional Reform. Water management improve- mates that by 2025 countries in the Middle East, ments entail significant adjustment in the institution- South Africa, parts of western India and northern al arrangements. Focus should be on identifying and China will not have sufficient water to meet all their characterizing institutional options that target: irrigation needs. Managing irrigation within the context of inte- Productivity and Irrigated Agriculture. In some grated water resources management at the expectations, irrigation water requirements will basin/sub-basin level. Priorities include the increase by 15% over the next 25 years.12 The enabling policy environment, appropriate institu- largest share of increased water supply for agricul- tional structures, and land and water rights. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Reforming public sector agencies that currently Establishing appropriate rules and standards for manage most of the world's large irrigation sys- managing the use/reuse of low quality water in tems.This is arguably the number one priority for irrigation. improving overall performance of the sector. They need to change into autonomous and self- Creating a supporting environment and capacity financed agencies more directly accountable for adaptation to climate change. both to farmers and to civil society. In this con- text, benchmarking and related M&E, volumetric Adopting environmental planning in the design measurements, regulations, economic incentives, of new irrigation and drainage schemes as well and water rights are key factors. as in the modernization of existing ones. Promoting private sector participation in service Investments in Irrigation and Drainage Infrastructure. provision and irrigation investments guided by As a general rule, priority should be given to making experiences from other sectors (water-supply better use of existing infrastructure. In this regard, the and hydropower). following issues should be addressed: Up-scaling user participation in irrigation man- Investing in modernization, rehabilitation and agement (notably through WUAs) and ensuring drainage to increase productivity and enhance their professionalism and financial independence. growth without the need for additional land and water resources to extend irrigation to new Building capacity to reform policies and organi- areas. Such plans require characterization of the zational structures is an important part of the current systems to define the potential benefits reform process. The linkages between the insti- due to improvement. tutional capacity to reform and the end result of the reform process are too important. In realiz- Considering the high-need areas, particularly in ing this strategy the inputs of the World Bank Africa, and their urgent requirements for infra- Institute and other capacity-building partners structure development to provide access to (e.g., CAPNET) will be critical. water, as well as building the capacity to con- struct, maintain, operate and manage new and Environmental Sustainability. The future of irriga- existing infrastructure.The challenge, particularly tion development is tied in with the environmental in Africa, is finding lower cost solutions that give problems related to irrigation management. Both greater emphasis to local technologies and par- 145 the problems caused by irrigation and those that ticipatory management. impact irrigation need to be addressed. Priority issues in this area include: Using modern technologies that improve water productivity through more efficient conveyance Controlling waterlogging and salinity through systems, and most importantly, through better improved water management and adequate on-farm water applications and improved irriga- drainage. tion methods. Managing the disposal of drainage water to avoid Promoting technologies tailored for small hold- mobilizing salts and agricultural chemicals, pollut- ers. Affordable, small-scale technologies (e.g., ing downstream water bodies, and damaging treadle-powered and small-engine powered wetlands. pumps and low-cost drip/sprinkler systems) have a particular role to play in the total effort to Regulating and monitoring abstraction of water improve productivity and reduce rural poverty. for irrigation to ensure sufficient environmental stream flows and to avoid "mining" groundwa- Tapping the energy and dynamics of the private ter aquifers. sector is a high priority for stimulating a demand ANNEXES for information and services that will lead to ments (e.g., WUAs and participatory project local investments and technology adoption. design processes) that give greater voice to their interests. Economic Viability and Social Sustainability of IrrigatedAgriculture.This could involve the following: Using irrigation development as an opportunity to support the interests of rural women who Crafting economic incentives (prices, subsidies, use irrigation water directly (43% of the rural taxes) that recognize the opportunity cost of labor force is female) and indirectly (for house- swater and water services as a key step in the hold use and livestock). overall reform process. Both the infrastructure (capital costs, operation, and maintenance) and Priorities for Bank Assistance the water itself require incentive systems to Given its comparative strengths, where can the ensure sustainability. Bank make a difference? Based on the experience gained and challenges facing the sector, as well as Giving greater attention to water rights that the demonstrated contribution of water users, incorporate principles of equity within the con- NGOs, and the private sector to improving water text of customary rights; generate desirable eco- management, there is a great need to pursue signif- nomic, employment and environment effects; icant policy and institutional reforms. There is also and provide a workable basis for water transfers an unprecedented opportunity for partnership in among owners and uses. such a pursuit. In this regard, the Bank can: Ensuring that investments in irrigation are linked 1. Promote Productivity for Growth and to the agricultural production systems in the Poverty Alleviation client countries and associated with sufficient development of the rural infrastructure. Access Facilitate the adoption of new technologies and to information and markets for agro-inputs and water application practices that will improve irri- agro products, agricultural credits, farm roads, gation efficiencies, sustain the resource base, save telecom services, etc. are basic requirements for water, improve incomes, and enhance food secu- realizing the full benefits of irrigation and rity, keeping in mind the need to save "real" drainage investments. water and improve overall basin efficiencies.The Bank should also invest pro-actively, at the tech- Addressing the food prices and trade issues that nical level in new approaches to irrigation and 146 prevent increases in productivity. Low global irrigated agriculture that will yield benefits dis- commodity prices depress the vibrant entrepre- proportionately for the poor: small-scale drip neurial energy that is needed to foster rural and sprinkler systems and the knowledge for cul- development. Implications of agricultural trade tivating and marketing high value crops. for water use need careful evaluation (virtual Meanwhile, the Bank should continue to finance water). Trade arrangements should encourage rehabilitation and modernization of irrigation water scarce regions to focus on production and and drainage infrastructure within a strategic export of high-value crops while importing framework of linked reforms that address the water intensive lower value staple crops. management failures symbolized by the faulty infrastructure and occurrence of waterlogging Ensuring that marginalized segments of the farm- and salinization. ing population (including the poor, women, and ethnic minorities) stand to benefit from tech- Facilitate the adoption of new irrigation manage- nologies tailored to very small land holdings, as ment techniques and practices. These include well as from improving the performance and modernization of delivery and on-farm systems enhancing the productivity of large scale irriga- to meet current and future needs, rather than tion and through local decision-making arrange- rehabilitation to restore the system to original REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT objectives. Support adoption of much-needed rights and a forum for water users to negotiate water measurement systems, benchmarking and management plans and potential water trades. performance standards. Given monopoly service providers in irrigation, measurement, M&E sys- Adopt a "demand-oriented" approach to helping tems and user feedback are critical. New water our clients develop the capacity to introduce and management practices at the farm level include sustain institutional and management reforms. improved water application practices and instal- The Bank can help engage our clients in a con- lation of water measurement systems. structive policy dialogue to identify specific prob- lems and possible solutions, and then provide Support drainage, flood control, and land reme- expert assistance in formulating policies (e.g., diation to improve output from low-productivity water rights, water pricing, etc) or restructuring areas. Examples include lands that require agencies (e.g., utility arrangements instead of drainage to permit double cropping of diversi- departmental management). Through dedicated fied crops, and lands damaged by salinity that financing of capacity building activities (including require treatment to restore their productivity. strengthening university curricula on irrigation Options and approaches that encourage the operations and management), or through techni- participation of local communities and farmers cal assistance within larger project loans, the Bank should be encouraged (e.g., Sodic Lands Project can guide and accelerate the reform process. in Uttar Pradesh, India). Provide and disseminate best practices and lessons (e.g. from Australia, Provide specific support for innovative institu- Egypt, Pakistan, Western United States) of tional reform pilots aimed at enhancing account- drainage and salinity control from R&D for bet- ability of irrigation service provision, as well as ter design of strategies and programs; in particu- the adoption of new institutional arrangements. lar, operating rules for water and salt manage- The reorientation of irrigation agencies to focus ment, drainage water disposal and reuse. on overall resource planning functions and the involvement of the private sector through man- Help meet the new challenges of using marginal agement and service contracts, BOT or other water in irrigation through improving knowledge, appropriate arrangements (country specific) in institutional arrangements, building capacity, irrigation operations management are important piloting and use of appropriate monitoring of areas for study, piloting and sector-wide action. economic and environmental effects. There has been some success with the promo- 147 2. Promote Irrigation Reforms Within a tion of the concept of user management in irri- Basin/Sub-Basin Framework gation and drainage and thereby advancing oper- ational and financial sustainability. The Bank can Help our clients address the competing interests help actions towards empowering WUAs and of the multiple sectors involved in water up-scaling participation of farmers and commu- resources development generally, and irrigation nities in management and decision making. and drainage specifically. Improved management Further support can be extended through of irrigation and drainage must begin with this organized use of the wide network of consult- larger resource perspective. In this context, assist ants and international organizations with expert- irrigation agencies to establish links with basin ise in participatory irrigation management. agencies, M&I and environmental interests to: a) jointly establish water allocation rules; b) prepare 3. Stimulate the Reform ProcessThrough: seasonal water management plans; c) negotiate agreed inter-sectoral re-allocation or water Linking irrigation reforms to broader issues of transfers. In relation to water allocation, some development and political economy. Irrigation countries facing acute competition for water and drainage reform efforts may have greater would require assistance in establishing water impact when linked to broader Bank (or other)- ANNEXES financed investments in governance reform and Knowledge and process. Designing reforms decentralization. Internally this implies partner- implies careful analysis and, most importantly, ship with PREM, FPSI, and SDV (e.g., privatization dialogue and capacity building among the rele- and decentralization). In terms of clients, it implies vant stakeholders. National dialogue on "water greater interaction with ministries of finance, for food and rural development in the context planning, environment, etc. Creating a national of integrated water resources management" can debate on search for options and adjustments in be facilitated by the Bank, and organized by irrigated agriculture will provide the policy envi- national agencies, institutes, or NGOs.The Bank's ronment for specific interventions that bring irri- role could grow out of the approach we bring to gation reforms to the broader context of eco- such stakeholder consultation and sector work. nomic and political reforms in the country. Sequencing and blending investments.The targets Linking irrigation strategy with agricultural strat- of irrigation and drainage investments include: a) egy. In many countries, choice of agricultural policy adjustments; b) institutional reforms; and c) strategy has serious implications for water use in infrastructure and technologies.All three types of irrigation. For instance, promotion of agricultural investments are needed simultaneously but at dif- export strategies results in "virtual water" ferent intensities over time. Investments in infra- import or export. Systematic policy-oriented structure should be leveraged to advance institu- studies of impacts of agricultural policy choices tional reforms over the short-term and be on water consumption are critical for advising appropriately sequenced. Investments in policy policymakers. Often much more "real" water need to continue.The Bank has the comparative savings can be achieved through focusing on advantage to help the client countries to design crop genetics, cropping pattern and agricultural projects that are realistic in scope and objectives and irrigation practices that result in less evapo- and programmatic in nature. transpiration, than can be achieved through irri- gation system efficiency improvements because much of the existing water losses in inefficient systems return to the surface or groundwater systems and therefore is not lost to the hydro- logic system. The objective of achieving more crop per drop requires very close linkages between irrigation and agriculture strategies. 148 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ENDNOTES 1 As used here, the terms "irrigation" or "irrigated agriculture" include the capture, use, disposal and/or re-use of water for agriculture. 2 Mellor, Keynote Address, Rural Week 2000. 3 The net irrigated area is defined as the area irrigated at least once during the calendar year (FAO 1999). 4 The State of Food and Agriculture 1997 (FAO 1998). 5 International Water Management Institute,Water for Rural Development, (IWMI 2001). 6 L.Thompson, Keynote Address, Irrigation Institutions Workshop, December 11, 2000. 7 Bridging Troubled Waters. Assessing Water Resources Strategy since 1993, OED, December 2000. 8 The relevant "poverty issues" include data on land ownership, special project components targeting the poor, selection of poor regions for project benefits, monitoring income of the poor, focus on off-farm employment, a focus on livelihoods or well-being, and a particular focus on including women as project beneficiaries. 9 W. Easter, H. Plusquellec and A. Subramanian. 1998. Irrigation Improvement Strategy Review. 10 Vast tracks of once prime agricultural lands have been taken out of production over the past few decades, while only a small pro- portion of such lands have been treated and returned to agricultural use. 11 Vision Report on Water for Food and Rural Development. The Hague, 2000. 12 World Water Forum 2000, based on IFPRI and IWMI models. 13 For example, minimizing non-beneficial evapotranspiration in all water uses. 149 ANNEXES ANNEX 5: Physical and Social Infrastructure The sustainable management of natural resources The Bank and Rural Infrastructure. Rural infra- has traditionally been a basic pillar of the Bank's structure constitutes a substantial and growing com- rural development strategy. This new strategy puts ponent of Bank activities. Currently, over one-fifth of new emphasis on the importance of improved Bank lending in the rural sector is spent on infra- access to rural physical and human infrastructure. structure.That is substantially higher than the 1994 level of only 3% of total lending. Combined invest- Rural people of course have their own aspirations. It ments in rural transport and in rural water supply is important that assistance programs do not impose and sanitation account for 15% of rural sector proj- choices, but instead give rural people access to assets ects and 20% of the funds approved for rural activ- and the tools to manage those assets. It is also impor- ities in FY 1999 and FY 2000. When other infra- tant to assist them in making informed choices for structure sectors are considered--e.g., rural energy sustainable livelihoods.The more access rural people and rural telecommunications, as well as alternative have to natural resources, infrastructure and human multi-sector delivery arrangements (including, social assets, the more livelihood choices they can make, funds and rural development funds)--the propor- thus reducing their risks and vulnerabilities. tion is likely to be significantly larger--as much as 50 to 70% of total rural funding.2 Access to Rural Infrastructure Despite widespread recognition of the potential That the actual value of investment is substantially impact of rural infrastructure investments, the rural higher than indicated by single-sector investment areas' access to infrastructure remains low.A review data is supported by a detailed analysis carried out of investments in 14 developing countries reveals by the Bank's Rural Development Group. This wide disparities in infrastructure availability review of 500 projects approved Bank-wide in between rural and urban areas (Figure A5.1).1 FY99 and FY00 found that more than two-thirds Average access to electricity in those countries is involved rural infrastructure or related activities, 46% in rural areas, compared with 89% in cities. In- even though the majority of them were not identi- house water taps are available to only 12% of rural fied as rural infrastructure projects. Notwithstanding households, compared with 59% of urban house- this analysis, the Bank does not have a clear under- holds. And only 8% of rural households have tele- standing of the size of the rural infrastructure port- phones, compared with 38% of urban households. folio. Most projects are not coded. As a result, the 150 The rural-urban disparity is true across all regions, total amount of investment in rural infrastructure except in the case of electricity in Eastern Europe cannot be captured. and Central Asia. The focus and type of Bank lending for rural infra- There are three challenges to providing universal structure have also changed. After the failure of access to rural infrastructure. centralized integrated approaches in the mid- 1970s, the focus shifted to building infrastructure, The first is how to ensure that infrastructure will with little or no attention paid to how infrastructure be maintained. Because of the small number of was to be operated and maintained in the long beneficiaries normally served in rural areas, eco- term. This resulted in short-lived projects. In nomic considerations dictate that infrastructure response to the need to improve investment investments be designed to fairly low standards. longevity, the concept of local participation was The second is how to ensure that financing increasingly incorporated into rural infrastructure arrangements can be scaled up to universal cov- delivery, whereby communities became actively erage. involved in project implementation. One study The third is determining how to ensure the right found that beneficiary execution of projects rose balance between cost sharing and reaching poor from nothing to 40% of rural infrastructure projects communities. between the mid-1970s and the mid-1990s.3 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Figure A5.1: Access to Rural Infrastructure: Percentage of Households in the Bottom Decile with Infrastructure in the Home Electricity (Percentage of Households) 100 Urban Rural 80 60 40 20 0 Kazakhstan Bulgaria Albania Kyrgyz Panama Jamaica Ecuador Nicaragua Pakistan Vietnam Nepal South Cote Ghana Republic Africa d'Ivoire In-House Water (Percentage of Households) 100 Urban Rural 151 80 60 40 20 0 Kazakhstan Bulgaria Albania Kyrgyz Panama Jamaica Ecuador Nicaragua Pakistan Vietnam Nepal South Cote Ghana Republic Africa d'Ivoire Notes:The Urban and rural households in each country were separately divided into deciles based on the per capita consumption of each household.Albania does not include Tirana. Source:World Bank LSMS surveys, as cited in Komives, footnote 1. ANNEXES Increased emphasis on 'software' issues--i.e., train- or national governments. But accountability cannot ing, capacity building, sustainability--has been be taken for granted. Local communities are not accompanied by a shift to smaller subprojects, less immune to corruption, incompetence and which increased from 20% to 60% of the portfolio cronyism than central governments, and without during the same period.The consequence has been competition and transparency the private sector is a focus on local-level actors and growing realization no guarantee of efficiency. of the need to coordinate rural infrastructure proj- ects with national decentralization strategies. Financing Rural Infrastructure Services. Three broad principles should be applied in determining Actions for Developing Rural Infrastructure. financing. First, adequate cost recovery is not only Institutional and financing arrangements for rural the simplest, but also often the only way to deal infrastructure should be tailored according to: the with lack of resources. Cost recovery is also critical nature of the service in terms of its public good to attracting `profit-seeking' private sector investors. versus private good characteristics (a rural road While subsidies to pay for operating and mainte- tends to be public in nature, an in-house electric nance costs are often well-meaning attempts to connection a private good); and the scale of the address poverty, experience shows that they often service--whether the service helps a single com- do poor consumers more harm than good by forc- munity or many communities. As a rule, the poten- ing them to rely on alternatives that are more tial for private sector interest in providing infra- expensive than paying the full costs of adequate structure increases as the activity shifts from public service. Achieving cost recovery for the delivery of to private. A shift from smaller to more extensive some types of infrastructure services, such as rural coverage also tends to transcend community- electrification and feeder roads, can be a formidable based solutions. challenge in rural areas with low populations densi- ties and low income levels. Second, upfront contri- Institutional Arrangements for Managing Rural butions from beneficiary groups should be maxi- Infrastructure. The dispersed nature of most rural mized, bearing in mind the affordability constraints infrastructure means that decentralized arrange- of the poorest. Community contributions are an ments are a necessity; there is little sense in trying important component of any cost recovery strate- to manage the construction of village wells from the gy and increase the likelihood that decisions will be capital. But rural infrastructure services are also het- made in responsible fashion.There is little incentive erogeneous, ranging from energy grids to local for a community to turn down a cost-free invest- health centers. Given this heterogeneity, decentral- ment, but if it has to make a significant contribution 152 ization cannot mean the same thing for all types of to the cost, it is more likely to think seriously about infrastructure. Similarly, the degree of decentraliza- relative priorities. Third, promoting private sector tion may not be the same in all facets of the invest- provision of services must be complemented by ment cycle (i.e., while planning and allocation should simple and fair regulatory mechanisms, as well as be highly decentralized, financing may need to be effective financial intermediation. centrally driven). Principles Behind Bank Actions in Rural To date, the involvement of the private sector in the Infrastructure. In the new strategy, Bank actions are provision of rural infrastructure has been limited, envisaged as: but growing evidence suggests that private sector partners can increase the efficiency and effective- promoting decentralized arrangements for pro- ness of service delivery. Moreover, private sector viding infrastructure; management and financing of infrastructure servic- facilitating private sector involvement; es can relieve overburdened public resources and ensuring accountability in rural infrastructure administrative capacity.Accountability is the key fac- projects; and tor that argues for preferring the private over the ensuring adequate cost recovery and encourag- public sector and local communities over regional ing upfront contributions from beneficiary REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT groups to guarantee the sustainability of rural staff in-service training. As agriculture grows, quality infrastructure investments. training is needed to maximize production efficien- cy and foster sustainable output. At the same time, Improved Education for Rural Populations it must be recognized that the value of extension There are two educational needs in rural areas.The services has diminished as farmers become more first is general education (primary and secondary able to obtain information from the private sector. schooling), while the second is education for agri- cultural and natural resource management. The Bank and Rural Primary Education. The Bank Empirical evidence shows that the social rate of has made appreciable contributions toward getting return to primary schooling in most low-income more children, both rural and urban, into school. countries is high (23%) and is substantially higher Bank research has shown how to make better than the return on second and tertiary education investments in schools, and the Bank's own invest- (15 and 11%, respectively).4 ments have enlarged small-scale projects. It is diffi- cult, however, to determine the volume of the Rural Primary Education. The divergence between Bank's educational investment. Project documents the global goal of universal primary education and in the education sector seldom separate rural from reality is especially stark in the rural areas of devel- urban data, and such analysis is further complicated oping countries.There are also wide gaps in educa- because rural and urban environments are often tional attainment between rural and urban children. not clearly distinguishable. In countries where cultural factors undervalue girls' education, male/female differentials in educational The Bank is committed to achieving free universal attainment create a further challenge. Girls in primary education. Rural development specialists Central Africa, North Africa, and South Asia are at need to ensure that the rural poor have access to particular disadvantage. a good primary education and better opportunities to get a secondary education. It is also important to Secondary Education. While universal primary ensure that governments distribute public funds for education is of paramount importance, extending education in an equitable manner. There is also a secondary school opportunities to rural areas is need for closer collaboration between education also critical and is likely to have high marginal specialists and rural development specialists. The returns. Secondary education is essential to main- CDF and the Poverty Reduction Strategy Papers taining a well-qualified supply of primary school generally focus on community-driven development, teachers and also provides an incentive for children which is effective in providing access to public 153 to complete primary school. But promoting sec- goods within the management capacity of commu- ondary education in poor rural areas is hampered nity organizations. by the same supply and demand factors affecting primary schools.The opportunity cost of schooling Principles behind Bank actions in rural education. increases as children get older and labor market In the new strategy, Bank actions are envisaged as: opportunities increase. Since many rural communi- ties cannot operate secondary schools efficiently, placing great importance on achieving universal children have to travel long distances to get sec- primary education; ondary schooling. Eliminating the gender gap in sec- advocating gender equality in rural education; ondary education in rural areas is also difficult. advocating quality improvements in rural schools; Agricultural Education and Training (AET). ensuring that public funds for education are dis- Education specifically for the management of farms tributed equitably; and natural resources has played an important role promoting closer collaboration between educa- in rural economic growth. AET systems range from tion specialists and rural development specialists; those providing degrees in agricultural knowledge encouraging greater community participation in to extension services for farmers and extension rural education; ANNEXES increasing investments in rural secondary educa- growth rates by at least 0.25% in the Sub-Saharan tion, particularly in countries close to attaining countries most affected by the disease.6 universal primary education; promoting literacy and training opportunities for Trends in Rural Health and Nutrition. In develop- unschooled rural adults; and ing countries the health and nutritional status of ensuring that investments in agricultural training rural residents continues on average to be worse programs are in line with current needs. than that of urban populations (Figure A5.2).7 Combining evidence on the global burden of dis- Rural Nutrition and Health ease with the fact that the majority of the poor still Disease and illness are frequent consequences of lives in rural areas indicates that communicable dis- living in poverty, while at the same time illness and eases and maternal, perinatal, and nutritional condi- disease are leading factors in pushing families into tions are the primary causes of disability and death poverty. Communities routinely mention that poor in rural areas. Non-communicable diseases, health is a characteristic of the poorest.5 Disease although on the rise, are less prevalent. and illness also affect labor productivity and eco- nomic growth. The health and nutritional status of The prevalence of disease is closely related to adults affect labor force participation and the inten- socioeconomic status. Low family income, cramped sity of work effort, while nutrition and health status living conditions, low maternal education, low occu- affect the cognitive development of children. pational status, and unclean living conditions, for example, have all been associated with increased A growing number of studies show the economic risk of diarrheal morbidity and mortality.8 Malaria benefits of improving nutrition and health. Other and tuberculosis are also closely linked to poverty. studies reveal the significant negative impact of dis- ease on economic growth. One study, for example, HIV/AIDS is also a formidable challenge in rural concluded that malaria reduces per capita GDP areas. There are currently 36 million people with Figure A5.2: The risk of dying at a dollar a day--Under-five Rural 0 30 60 90 120 150 Urban Brazil 1996 154 Cote d'Ivoire 1988 Ghana 1987/88 Guyana 1992/93 Indonesia 1993 Morocco 1990/91 Nepal 1996 Pakistan 1991 South Africa 1993 Tajikistan 1999 Vietnam 1998 Source: Alderman, H. 2001.What has Changed Regarding Rural Poverty Since Vision to Action? World Bank Rural Strategy Discussion Paper 5.Washington, D.C. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT HIV/AIDS, of whom some 5.3 million became from a survey in Ghana, for instance, reveals that infected in 2000.9 Currently, the region most while the average distance to healthcare facilities affected is Sub-Saharan Africa, where approxi- in rural areas was 4.8 miles, it was 0.6 miles in mately 9% of the adults carry the disease. urban areas.13 Many children in rural areas do not However, it is estimated that by 2010 Asia will get basic immunizations. Large percentages of overtake Sub-Saharan Africa in absolute num- women in rural areas do not receive antenatal bers.10 Although HIV/AIDS has traditionally been care and are not attended by skilled personnel regarded as an urban problem, it is gradually being during childbirth. recognized that rural communities are perhaps more vulnerable to the problem. In the 25 most- Even when health services are accessible in rural affected African countries, for example, more than space, they often offer low quality services and two-thirds of the victims live in rural areas.11 The hence are underutilized. Income and time con- costs of HIV/AIDS are largely borne by rural straints pose additional barriers to healthcare for communities because many urban dwellers, at rural people. Rural facilities generally have difficul- least in Africa, return to their village when they ty attracting staff and often fail to have essential become ill. drugs and other supplies available. A study com- paring geographic imbalances of physicians in 12 Rural areas are also the scene of widespread mal- least developed countries found that only 3 of the nutrition, which compromises natural immunity 12 had a rural physician to population ratio that and contributes to the disease burden. In 1995, an was better than 5% of the urban ratio. In 14 other estimated 36% of children under 5 years of age in developing countries included in the study, none developing countries were stunted. It is predicted had a rural physician to population ratio greater that stunting will be reduced to 29% by 2005.This than 41% of the urban ratio.14 would represent a decline from 182 to 165 million children, which is still an unacceptable number, and Poor rural infrastructure contributes to the bur- there is mounting evidence that child malnutrition den of ill health in rural areas. Clean water and rates are stagnating or increasing in Sub-Saharan adequate sanitation are key to reducing the threat Africa. Childhood malnutrition rates are generally of waterborne diseases. Roads are critical in ensur- higher in rural than in urban areas. ing access. Electricity is essential for the operating of health centers and maintaining the cold chain Adult malnutrition in developing countries has for vaccines. serious repercussions since the health of working- 155 age adults is an important determinant of house- The World Bank and Rural Health. The Bank has hold income. Recent evidence on fetal malnutri- long recognized that effective health services are tion and low birth-weight further stresses the critical links in the chain of events that allow devel- importance of adult health and especially maternal oping countries to break out of poverty. The nutrition status. Regionally, adult malnutrition Bank's recent work in this area ranges from appears to be particularly widespread in South improving immunization and healthcare for chil- Asia and Sub-Saharan Africa. Data from dren to improving access to clean water and sani- Bangladesh, for example, reveal that 54% of rural tation. As the Bank increases the poverty focus of women were underweight. In Africa, the preva- its projects, it is likely that the rural population will lence of adult malnutrition appears to be consid- benefit proportionately more.The traditional pre- erably less than in Asia, ranging from 21% of rural scriptions for improving nutrition and food securi- women in Madagascar to about 9% in Côte ty, such as increasing agricultural productivity and d'Ivoire.12 ensuring that national policies do not excessively tax the agricultural sector, remain valid. However, Challenges to Improving Rural Health. Rural res- the strategies recommended attempt to go idents in developing countries typically have less beyond the traditional solutions to improve health access to healthcare than urban populations. Data and nutrition. ANNEXES Principles behind Bank actions in rural health. In This last point is of special importance. As primary the new strategy, Bank actions are envisaged as: caregivers, women are key to improving health and nutrition, but their ability to invest in their own and increasing collaboration with the health and nutri- their children's health and nutrition is hampered by tion sector as well as the education sector, so that their lack of control over household incomes, their rural development specialists can help to improve poor education, and the health risks arising from their the health and nutrition of the rural poor; reproductive role. Currently, rural women produce advocating the interests of the rural poor to between 60 and 80% of the food in most develop- ensure that government resources for health are ing countries, but they continue to be disadvantaged not biased toward urban constituents; in terms of access to land and non-labor inputs, such promoting community-driven cross-sectoral as fertilizer, credit, and extension services. approaches to improving health and nutrition as these are likely to yield high returns; placing greater emphasis on food-based strate- gies to improve dietary quality and micronutrient status; and promoting the status of women in rural devel- opment to improve rural health and nutrition. 156 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ENDNOTES 1 Komives, K.,Whittington, D., and Wu, X. 2000. Infrastructure Coverage and the Poor: A Global Perspective. Infrastructure for Development: Private Solutions and the Poor. Conference Paper, 31 May­2 June 2000. London. 2 This value is extrapolated from a comprehensive study of the 1999 portfolio of rural water supply and sanitation projects.This study by the Bank's Infrastructure group showed that 25 Rural Water Supply and Sanitation projects worth a total value of $700 million were approved in 1999. However, only 4 (combined value $300 million) were focused single sector projects--the rest were under taken by a variety of sectors, predominantly as multi-sector social funds and rural development funds.This suggests that only 16% of the portfolio (by number of projects) and 43% of total funds (by project value) were single-sector projects, with the weight of the portfolio `hidden' as multi-sectoral interventions. It is likely that the same scenario exists in the other infrastruc- ture sectors, particularly in rural roads and to a lesser extent in rural energy and telecommunications. 3 Pouliquen, L. 2000. Infrastructure and Poverty.The World Bank.Washington, D.C. 4 Psacharopoulos, G. 1994."Returns to Investment in Education: A Global Update." World Development. 22 (9): 1325­43 5 Narayan, D.; Patel, R.; Schafft, K.; Rademacher, A.; Koch-Schulte, S. 2000. Voices of the Poor: Can Anyone Hear Us? Published for the World Bank, Oxford University Press, New York, N.Y. 6 McCarthy, F.D.;Wolf, H.;Wu,Y. 2000. Malaria and Growth. World Bank Policy Research Working Paper 2303.World Bank, Policy Research Department,Washington, D.C. 7 One should, however, be aware that looking at aggregate statistics on rural versus urban health masks the fact that the health of the urban poor is often as bad or worse than that of rural populations. 8 Jamison, D.T.; Mosley,W.H.; Measham, A.R.; Bobadilla, J.L. (eds.) 1993. Disease Control Priorities in Developing Countries: A Summary. World Bank.Washington, D.C. 9 UNAIDS (Joint United Nations Programme on HIV/AIDS). AIDS Epidemic Update: December 2000. [http://www.unaids.org/wac/2000/wad00/files/WAD_epidemic_report.PDF].April 2001. 10 Barnett, A.; Rugalema, G. 2001. HIV/AIDS, Health and Nutrition: Emerging and Reemerging Issues in Developing Countries. IFPRI 2020 Focus 5 Brief 3. IFPRI Washington, DC. 11 FAO. 2001. AIDS a Threat to Rural Africa. [http://www.fao.org/Focus/E/aids/aids1­e.htm.] March 26, 2001. 12 World Bank. 2001. Country Reports on Health, Nutrition, Population and Poverty. [http://www.worldbank.org/poverty/health/data/index.htm] March 2001. 157 13 Lavy,V.; Strauss, J.;Thomas, D.; de Vreyer, P. 1996. Quality of Health Care, Survival and Health Outcomes in Ghana, Journal of Health Economics 15: 333­357. 14 Blumenthal, D.S. 1994. Geographic Imbalances of Physician Supply: An International Comparison. The Journal of Rural Health 10(2): 109­118. ANNEXES ANNEX 6: Natural Resources Lessons learned from past Bank Natural Resource to have exceedingly short planning horizons in their Management (NRM) activities confirm the strong use of the land. In more arid areas where pastoral- relationship between resource degradation and ism may be a dominant land-use, and where regu- poverty. For one thing, natural resource degrada- latory controls are limited, similar situations con- tion significantly increases the level of poverty. For tribute to processes of desertification. Failures to another, the lack of income sources for investments produce sufficient public goods in the form of bet- in natural resource management by the poor often ter understanding of such processes is yet another leads to increased resource degradation. For the source of market failure. Externalities associated most part, though, these resource-degradation with practices of farmers high in a catchment, with phenomena can be attributed to either market or disregard for the downstream consequences of government failures. The following are brief sum- their actions for other farmers and other water maries of the extent of the degradation of four of users, is another important source of market (and the principal resources (land, water, forests and sometimes too government) failure frequently biodiversity). Also, included are projections relating encountered. Such diverse sources of market failure to the effects of climate change. provide scope for cogent policy analysis and inter- vention, as is also noted for the other resource cat- Land egories discussed below. Most of the land available to meet current and future food requirements is already in production; Overall current trends indicate that land has any further expansion must necessarily involve frag- become a limited natural resource, and that it is ile and marginal lands.This is particularly so in devel- being rapidly depleted. This depletion is still only oping countries where population growth is high, moderate in AFR and LCR, strong in EAP, and poverty is endemic, and existing institutional capac- severe in MNA and SAR. In three of the regions, ities for land management are weak. land that is not suitable for sustainable agricultural production is currently being cropped, or will have Only about one-third of the world's land is gener- to be cropped in the future. While AFR and LCR ally suitable for sustainable arable cropping, with have still much land that could be brought into cul- perhaps another third suitable for sustainable tivation, major investments and socioeconomic rangeland use. Land that is not really suitable for changes would be required to convert those lands 158 agriculture requires intensive labor or maintenance to arable farming, and due account must be taken (as on slopes), or is highly prone to erosion, of the environmental costs of any such conversion. (steeply sloping), or is not amenable to mechaniza- Many such lands are forests or wetlands with signif- tion (too stony, too steep). On these lands, agricul- icant option value for their biodiversity and other ture may be feasible for a few years by people lack- environmental (including global climate-related) val- ing alternatives, after which the topsoil will be lost ues, and therefore they are candidates for conser- or exhausted and the land will be abandoned. For vation rather than conversion to agricultural land. these reasons there is a severe limit to the expan- sion of the land area suitable for agriculture. At the The review of regional land-use developments indi- same time, some suitable land is being lost in an cates that the situations in EAP, MNA and SAR call irreversible manner by degradation.1 for major interventions to reduce further degrada- tion, and that massive food imports are the only The sources of market failure involved in such alternative to meet current and future demands. degradation are several. Insecure property rights in the land resource is a major problem in many coun- In areas with marginal agriculture but where crop- tries (such as Ethiopia), whereby the usual custodial ping could be sustainable, interventions are roles of farmers are compromised by an obligation required to improve the prospects for economic REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT A6.1 Key Issues Regarding the Future returns to land management investments by farm- Global Water Situation ers thus reducing land degradation. But on lands where agriculture will be unsustainable in the long run, non-farm employment and income generation Water is becoming a more and more scarce resource in programs will be required.At the same time, strong many countries, with growing demands and increasing com- intensification of production in favorable areas is an petition across sectors and uses.With rapid growth in urban- ization and industrialization in most developing countries, effective way to increase food security and, in areas there is increasing pressure to transfer water from agricul- where most suitable land is already used, is the only ture to these sectors. real food-supply option, in addition to international food trade. Water allocations to environmental sector, which received lit- tle attention in the past, are expected to increase with grow- In AFR there is still adequate and suitable land for ing recognition of the need and benefits of water in this agriculture. However, there is the problem of inac- sector. cessibility, and constraints to human settlement due Despite the expected large growth in water withdraws for to climate and diseases. The situation in EAP indi- the above sectors, agriculture will remain the dominant water cates that the region as a whole is close to utilizing user in most developing countries. all suitable land for cultivation, and that since popu- Pollution due to return flows from agriculture, municipal and lation distribution and activities are not homoge- industrial uses, as well as other wastes deliberately disposed neous, increasingly, land is being cultivated in a man- or caught by floods, has begun to show far-reaching health ner that is ecologically unsustainable. impacts with serious economic and ecological implications. LCR is, of course, a highly heterogeneous region. it's Agriculture is expected to rely increasingly on treated the relative size of South America means that it wastewater and agricultural drainage water which puts the rather dominates Central America in the regional rural community at the forefront of environmental and economic risk. picture, although the degradation problems in the latter are typically more severe. Waterlogging and salinization are long-term problems that cannot be treated adequately through the time frame of Water ordinary project cycles. Water is the key ingredient for life, and its interac- Economic incentives important as methods for addressing the tion with land and forests provides the refuge for all twin problems of water scarcity and deteriorated quality. terrestrial species.Water use is often categorized as 159 agricultural, domestic, or industrial. In recent years Climate variability will become and institutions for improved the environmental use of water for aquatic habitats management at supplier and user levels will become increas- has become important. Water is distributed across ingly an important factor, affecting both the supply and the demand for water by the various sectors. countries and regions very unevenly. At one extreme, LCR with only 8% of world's population is endowed with 34% of the world's total renewable water resources, while at the other extreme, SAR alarming concerns about managing the competing with over 20% of the world's population has only demands of the different sectors in an integrated 5% of the renewable water resources.An increasing framework (Box A6.1). number of countries are suffering from water stress (insufficient water supplies for sustainable use) as Agriculture is the largest single user of water, populations rise and aquifers are exploited at faster accounting for 74% of the total amount withdrawn rates than they are replenished.Water scarcity leads in 1995. Irrigation increases agricultural productivity to increased competition between sectors and and was a primary factor (along with high-yielding increases the potential risk of damage to ecosys- varieties and fertilizers) in the success of the Green tems from which water is withdrawn and where Revolution from the 1960s to the 1980s. It is perti- return flows are discharged. This situation raises nent to pose the question, can today's rural devel- ANNEXES opment challenges be met through a second Green ment agencies that have neglected financial account- Revolution? The countries most in need of help no ability, user participation, and pricing while not deliv- longer enjoy the surpluses of water that character- ering services effectively to users and to the poor in ized the period of the initial Green Revolution.The the particular; and (c) public investments and regu- opportunity cost of irrigation water is much higher lations that have neglected water quality, health, and today, not only because of scarcity within the agri- environmental consequences. culture sector, but because of much higher compe- tition from other sectors vying for the use of the Problems related to scarcity of water resources same water. Projections indicate that water with- continue to increase. Policies for development of drawal for agriculture will not exceed 67% of the water resources are also undergoing change. The total water supplies in 2025. The biggest challenge current environment for water resources policy can will be to increase agricultural productivity with less be captured by the following key observations: water available for irrigation.2 the best sites for the construction of large dams Environmental impacts of irrigation water are sig- and reservoirs have already been developed; nificant, and there are enormous potential payoffs from improved environmental management. the growing demands for fiscal austerity in most Waterlogging and salinization are the most perva- countries have stimulated interest in least-cost sive threats from irrigated agriculture; about 80 mil- alternatives for meeting water needs; lion hectares of the world's irrigated lands suffered from salinization by the late 1980s. Discharges of there is heightened public awareness and con- saline effluent from irrigated lands have caused cern about the environmental impacts related to serious downstream environmental problems (as the construction of hydraulic infrastructure, par- in the case of the Aral Sea Basin and Indus Basin). ticularly dams; and As agriculture is forced by other sectors to reduce its use of freshwater supplies, reuse of treated increasing competition by various sectors for wastewater and agricultural drainage water will scarce water resources adds further pressure to continue to increase. In Jordan, 20% of the irriga- water development decisions. tion water is treated wastewater with a potential to increase to 60% by the year 2025. Egypt reuses These changes have caused a fundamental shift in about 7 billion cubic meters of agricultural drainage the way that water resources development is con- 160 water in irrigation. This trend involves economic, sidered--a shift from relying on construction, as a environmental and health risks due to the high means for solving water needs to a reliance on contents of salts, nutrients, sediments, agricultural improved policies and management as the solution. chemicals and pathogens.3 The strategy of achieving substantive improve- ments in water-use efficiency and water quality Since water is critical for human survival, it can be through better policies and management relies characterized as a public good, and public authorities heavily on detailed knowledge on which manage- in most countries have assumed central responsibil- ment decisions can be based, and on a system of ity for its overall management. Reliance on market management, which can implement the decisions forces alone will not yield satisfactory outcomes. At taken. Most developing countries are markedly the same time, however, government actions often deficient in both respects. Information needs cause serious misallocations and waste of water for effective management include data on how resources. Three problems related to government water is presently used, interactions between activities are of particular concern: (a) fragmented water-use sectors and users along a watercourse, public sector management that has neglected inter- equity/poverty considerations, conditions of water dependencies among government agencies and supply, accurate and timely forecasts of meteoro- jurisdictions; (b) reliance on overextended govern- logical events, alternative institutions for water REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT management (e.g., basin planning organizations and forest cover has been reduced by at least 20% since water markets), and conditions requisite for their pre-agricultural times and possibly by as much as effective operation. Management needs include the 50%. Forest area has increased slightly since 1980 in institutional structures (policies, organizations) for industrial countries, but has declined by almost 10% implementing water management and also the in developing countries. Tropical deforestation governance resources for reforming the existing probably exceeds 130,000 km2 per year, and per- institutional structures. haps the greatest threats to forests currently are conversions to other forms of land use. These Forests include fragmentation by agriculture, logging, road Forests, woodlands, and scattered trees have provid- construction and mining. Mining is notably responsi- ed humans with shelter, food, fuel, medicines, building ble for opening up intact forests to pioneer settle- materials, and clean water throughout recorded his- ments, and to increases in hunting, poaching, fires, tory. Forests have recently also become sources of and exposure of flora and fauna to pest outbreaks new goods and service--including pharmaceuticals, and invasive species.4 industrial raw materials, recreation and tourism. Forests regulate water quality by slowing soil erosion, Although human actions have caused the world's and filtering pollutants, and they help regulate the forest cover to shrink significantly over the past sev- timing and quantity of water discharge. In addition, eral millennia, precise measurements of this shrink- protection of forests, afforestation and reforestation age are difficult to make. FAO in its 1997 forest also play very important roles in preventing and assessment, attributes the principal causes of forest reducing land degradation. loss in the various regions of the world as follows: a) Africa--the expansion of subsistence agriculture Forests cover about 25% of the world's land sur- under pressure from rural population; b) Latin face, excluding Greenland, and Antarctica. Global America--large scale cattle ranching, clearance for Figure A6.1: Changes in Forest Area from 1980­1995 Percent -12 -10 -8 -6 -4 -2 0 2 4 6 Europe 161 Temporal and Boreal North America Australia, New Zealand and Japan Developed World Developing Asia and Oceania Africa Latin America and Caribbean Developing World ANNEXES A6.2 Effects of LandTenure and Agriculture on Forests Facilitating access to credit for beef cattle, mechanized agricul- Uneven land distribution associated with production systems that ture, and large-scale forest and tree crop plantations in areas provide limited employment may encourage poor rural families with substantial natural forests promotes forest conversion and to migrate to forested areas. Under these circumstances, pro- provides limited long-term local employment. viding tenure security will only lock in existing inequalities. Reducing poverty at the forest margin through improved mar- Poorly designed agrarian reform policies can endanger forest ket access, technology, and credit supply can potentially increase remnants on large landholdings by either stimulating large forest conversion by attracting migrants to the forest frontier. landowners to remove forest or transferring land to smallhold- ers under conditions that induce them to do so. Agricultural research and technology transfer will tend to encourage forest conversion when it promotes innovations that Tenure security promotes long-term investment. Whether this are: a) capital intensive, b) applicable to agricultural frontier sit- favors forests depends on what producers invest in. They may uations, c) for export products, and d) used by farmers who either invest in planting trees and managing natural forests or face few labor or capital constraints. in converting forests to agricultural use. Making forest removal an explicit or implicit precondition to obtain ownership securi- Irrigation investments and infrastructure and support services ty promotes that activity. for labor-intensive fruit, vegetable, dairy, and flower production outside frontier regions can offer alternative sources of employ- Land taxes that favor reforestation, conservation, and intensive ment and reduce migration to agricultural frontiers. land uses over extensive agriculture can promote sustainable land use, but are difficult to implement and most countries Policies favoring small-scale agriculture in areas with little nat- exempt smallholders from payment. ural forest can discourage migration to the agricultural frontier. Forest fragments and planted trees in these areas often provide Recognition of indigenous territorial rights reduces pressure on substantial environmental services and forest products. forests, at least in the short term. These groups lack the means to engage in highly destructive agricultural and forest activities Eliminating fertilizer subsidies in regions where they influence and may refrain from doing so due to cultural factors and local farmers' decision whether to use more or less land-extensive regulatory norms. Nevertheless, timber sales to external pur- cropping systems can lead to greater forest clearing. chasers can lead to forest degradation. Directed settlement not only leads to forest clearing but also rarely appears cost effective in the medium-term. In the longer- term, it may raise small farm incomes and regional production. Source: David Kaimowitz and Arild Angelsen. 1999. The World Bank and Non-Forest Sector Long-term effects on land concentration and the sustainability Policies that Affect Forests. Background Paper World Bank Forest Policy Implementation 162 of local agriculture vary. Review and Strategy. Center for International Forestry Research (CIFOR), Bogor Indonesia. government-planned settlement schemes, and other human disturbances that further change the hydroelectric reservoirs; c) Asia--pressure from characteristics of the local ecosystem. subsistence agriculture and economic development schemes, equally (Figure A6.1). In addition to outright conversion and fragmenta- tion of forests, a third human-related pressure is Growing road networks are a prime cause of for- fires.Wildfires are a natural and necessary phenom- est fragmentation, resulting in two significant areas enon in many forest ecosystems, helping to shape of impact: a) the direct effect on species biodiver- landscape structure, improve the availability of soil sity by diminishing the amount of natural habitat nutrients, and initiate natural cycles of plant succes- available, blocking migration routes, providing sion. In fact some plant species cannot reproduce avenues for invasion by non-native species, and without periodic fires. The human-related fires, changing the microclimate along the remaining however, greatly exceed naturally occurring fires in habitat edge; b) the indirect effect by providing their frequency and intensity. Some are set inten- access for hunting, timber harvest, land clearing and tionally for timber harvesting, land conservation, or REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT shifting agriculture. Fires also result from disputes medicinal and spiritual requirements. In the soil, a over property and land rights. wide range of organisms from fungi to beetles pro- vide nutrient cycling and the fertility crops require, There is no single answer to the question as to while flying insects, bats, and other species perform what causes deforestation and forest degradation. essential pollination services and help protect crops Due to the complexity of the issues, the indirect from increases in pest populations. nature of many of the causal relations involved and the wide diversity of situations, it is difficult to gen- The findings of a study entitled the "Global eralize. However, in many cases, inappropriate poli- Biodiversity Assessment" suggest that the earth con- cies and market failures often lead to inappropriate tains some 14 million different species, the majority forest clearing and degradation of forest resources living in tropical forests and marine systems. Despite as well as increased poverty. Often those who use recent significant investments in biodiversity studies, it the forest, or who cause negative impacts do not is believed, that decades, if not centuries, of further have to pay, or pay too little for the use of this research will be required to provide anything more resource or for the damage they cause. than the most rudimentary level of information Governments have often not been effective in regarding these species. Existing knowledge, however, introducing economic and institutional (regulatory) provides some measure of appreciation of the measures to tackle market failures (Box A6.2).5 extent of the diversity that exists, for example, rough- ly 3,000 bacteria have been scientifically described Despite significant resource flows, international con- (although a recent study of one gram of forest soil in cern, and political pressure, the potential of forests Norway uncovered 5,000 seemingly different to reduce poverty, realize economic growth, and be species), and barely eight million species of insects valued for their contributions to the local and glob- even have a scientific name. al environment has not been realized. A combina- tion of market and institutional failures has led to While our knowledge of nature's diversity is forests failing to contribute as significantly to rural extremely meager, there is enough evidence that incomes, economic growth, or the local and global this heritage is being rapidly eliminated, with environment as would be possible under good adverse consequences for natural products and economic and technical management. Instead, the sustainable use for economic activities.There is evi- forest sector often demonstrates the failure of mar- dence of an "extinction momentum" in the earth's kets and governance to capture the full value. biodiversity with present rates of losses in the range 163 Forests have often been disregarded in economic of one to ten thousand times higher than historical policy or considered a resource to be plundered for rates. For example, 12% of all mammals and 11% of short-term gain and at the expense of rural people all bird species are threatened with extinction.Also, who depend on forest resources for their liveli- 52% of freshwater fish species are declining, while hoods. It is not surprising that forest policy has only 11% are increasing. With regard to habitat become one of the most controversial and heated degradation, there is evidence that 58% of the coral issues in development. reefs are degraded, and over 80% of the world's mangroves have disappeared, while 50% of all wet- Biodiversity lands have been lost.6 Biodiversity lies at the heart of sustainable agricul- tural systems.Agriculturists have created an impres- It is important to recognize the root causes of bio- sive storehouse of knowledge through the devel- diversity and habitat loss, and the relationship opment of landraces--genetically distinct varieties between specific socioeconomic factors and the of crops--and complex techniques to select store environment.The consensus is that these root caus- and propagate valued species.The Tzetal Mayans of es may fall into the following five categories: a) Mexico for example can recognize more than 1,200 demographic changes; b) poverty and inequality; c) species of plants that can be used for agricultural, public policies, markets and politics; d) macroeco- ANNEXES nomic policies and structures; and e) social change severe water stress in the arid and semi-arid land and development.7 It is important to emphasize areas in Southern Africa, the Middle East and that the losses, generally speaking, are occurring at Southern Europe; the local level.They result from such things as farm- decreased agricultural production in many tropi- ers clearing trees for new land to plant crops, tim- cal and subtropical countries resulting from ber companies opening forests for logging, and increases in temperature; hunters gathering game meat for urban markets. In higher worldwide food prices as supplies fail to various ways the factors listed above lead to loss of keep up with the demand of an increasing pop- biodiversity essentially because the value of biodi- ulation; versity, to the global society and the national socie- increased vector-borne diseases, such as malaria, ty, is not recognized sufficiently by market forces. In in tropical countries; other words, those who make decisions affecting major changes in the productivity and composi- biodiversity (farmers, logging companies, etc.) do tion of critical ecological systems, particularly not consider the loss as part of their cost.This mar- coral reefs, and forests; and ket failure is not always fully resolved by govern- increased risk of flooding and landslides due to ment actions (e.g., conservation). In some cases, rising sea levels and increases in rainfall intensity national government is reluctant to bear a high cost in coastal areas. on behalf of the global community, or on behalf of future generations. Predictions that climate change will mean severe flooding of coastal areas, an increase in storms and In the area of agricultural biodiversity, which is of pri- heavy rains in some regions, and more rapid deser- mary importance for agricultural growth and pro- tification in others have enormous implications for ductivity, the past century has seen an erosion of the agricultural productivity, water resources and natu- genetic resources needed to sustain agricultural pro- ral ecosystems.8 duction, leaving the world's food supply more homo- geneous and vulnerable to pests and diseases. Of the Investments in programs for better management world's major food crops,just three--rice,wheat and of these and other major climate change effects maize--account for 60% of the world's caloric should be in three key areas: a) mitigation of intake.The tremendous gains in yield since the Green green house gas emissions; b) reduction of vul- Revolution have come at a cost of greater depend- nerability and adaptation to climate change; and ence on fertilizers and pesticides, reduced diversity, c) capacity building to promote and implement 164 and reliance on a narrower gene pool. these interventions. Climate Change With regard to agriculture and climate change, evi- dence shows that the past two decades have been the warmest in the past 100 years. Climate change caused by human activities (primarily burning of fossil fuels, deforestation, and agricultural activities) is already occurring, and further climate change is inevitable. There is evidence that manmade greenhouse gases have probably already contributed most of the observed warming over the past 50 years. Unless concentrations of these gases are stabilized, the probable rise in their concentrations in the atmos- phere could mean: REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT ENDNOTES 1 The International Board for Soil Fertility Research and Management (IBSRAM). 2001. Land Degradation in Selected Regions and Some Consequences for Rural Development. Background Study, IBSRAM Bangkok,Thailand, p20. 2 The International Water Resources Management Institute (IWMI). 2001. Water for Rural Development. A Background Paper pre- pared for the World Bank. IWMI, Colombo, Sri Lanka, p94. 3 S. Abdel-Dayem. 1999. Sustainability of Low Quality Water Use in Agriculture. Keynote address, International Congress on Irrigation and Drainage, Granada, Spain, September 1999. 4 The World Bank. 2001. Forest Policy Implementation Review and Strategy. Draft Discussion Paper,The World Bank, Washington DC USA. 5 D. Kaimowitz and A. Angelsen. 1999.The World Bank. And Non-Forest Sector Policies that Affect Forests. Background Paper,World Bank Forest Policy Implementation Review and Strategy. Center for International Forestry Research (CIFOR), Bogor, Indonesia. 6 The World Resources Institute. 2000. World Resources 2000­2001; People and Ecosystems. World Resources Institute,Washington DC, USA, p389. 7 The World Wildlife Fund. 2000. The Root Causes of Biodiversity Loss. Wood, A. Stedman-Edwards, P. and Mang, J (Eds). Earthscan Publications Ltd. London and Sterling VA, p. 399. 8 CGIAR. 2000. The Challenge of Climate Change: Poor Farmers at Risk. CGIAR Annual Report,Washington DC, USA. 165 ANNEXES ANNEX 7: Successful World Bank Operations in Agriculture and Rural Development Project Project description Impact on rural poverty Fostering an enabling environment for broad-based and sustainable rural growth Turkey The ARIP is a hybrid operation with invest- A recent supervision report noted that the ment and adjustment components. Investment Government is on track in implementing the key Agricultural Reform components are: to help set up the direct elements of the Program supported by the ARIP Implementation income support (DIS) system; to mitigate as outlined in the Letter of Sector Strategy on Project (ARIP) potential short-term adverse impacts of sub- Agriculture Sector, and all specific conditions of sidy removal; to facilitate the transition to effi- the tranche release have been met.With pay- 2001 cient production patterns; and, to build public ments to over 2.18 million farmers, more than support for the reforms. Components of the 50% of all farmers eligible for DIS payments have adjustment portion include: the establishment been paid, exceeding by four-fold the require- of the National Registry of Farmers; support ment that 12.5% of all farmers be paid. In 2001, for land registration; support for agricultural direct and indirect agricultural subsidies are esti- diversification; and, assistance in the implemen- mated to have totaled $2.02 billion, compared to tation of the Law on Agricultural Sales $3.17 billion in 2000, and no new direct or indi- Cooperatives. rect agricultural subsidies have been introduced. Thailand The major objective of the program is to issue As of 1998 about 5.5 million title deeds had been to all eligible landholders secure real property issued to about 2 million households.This was Land Titling Projects rights supported by title deeds registered in been achieved with massive community participa- decentralized public offices. It has also focused tion in an innovative systematic, village by village, 1984 ­ present on strengthening the implementing agency, the parcel by parcel, approach involving local govern- Department of Lands. A secondary objective ment and community leaders, the landholders was to improve the real property valuation and departmental staff. About 10 million people system mainly geared to boosting property tax (16% of the national population) have directly revenues and facilitating compensation for benefited from the program mainly as a result of expropriated properties. agricultural productivity increases and improved household incomes.The program has had a demonstration impact world-wide and served as an example for many of the 13 land titling proj- ects under implementation (with Bank support) 166 plus for 10 more now under preparation. Bulgaria The ASAL I&II sought to promote efficiency in Under the loans, Bulgaria has transformed into the agricultural sector, contribute to rural one of the most open economies in the region. Agricultural Sector employment generation, better living standards The loan has had significant institutional develop- Adjustment Loan I&II and more consumer choice through compo- ment impact through privatization in the areas of (ASAL I&II) nents including: promotion of a land market; grain marketing, input marketing and farmer serv- development of a private grain market; priva- ices. Grain crop production in 2002 was 4 million 1999 ­ 2002 tizing agricultural enterprises; privatizing decen- metric tons - the highest since the start of tralizing irrigation system management; improv- reforms following increased access of farmers to ing agricultural financing; and, liberalizing trade high quality seeds and fertilizer.These achieve- and market regulation in most agricultural ments are particularly significant given the poten- products. tially politically challenging nature of the reforms needed. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Project Project description Impact on rural poverty Vietnam The Rural Finance Project had several key Since 1998, nearly 650,000 loans have been made components: to 250,000 households throughout rural Vietnam Rural Finance Project 1. assisting in the transition to a market through seven participating banks.Thirty percent economy; of borrowers were women. Most loans were 1992 ­ 2001 2. strengthening the rural finance system small, averaging VND 5.4 million, equal to $360, through finance targeted to agriculture and and applied to expand farm production (crops, small and medium enterprises in rural areas, livestock and aquaculture), agricultural processing, accompanied by technical assistance; and services and trading.The repayment rate recorded 3. reducing poverty by promoting growth and to date is 98%. A study of the socio-economic enabling the poor to respond to opportuni- impacts include: a) outreach to a large number of ties to improve their welfare. household borrowers; b) income of household The project comprised the following compo- borrowers has been increased remarkably; c) nents: a) a rural development fund; b) fund for Small and Medium Enterprises helped create the rural poor; c) equipment; d) vehicles; e) about 3,000 new jobs. training; and f) technical assistance. Encouraging non-farm economic growth Colombia The idea of the project was to bring applied The competitive fund has expanded to all five research and extension closer to the priority regions of Colombia within two years, providing Agricultural Technology problems of the target beneficiaries, who national coverage. In total over 600 projects have Development Project should henceforth participate in characterizing, been funded with an average expenditure per (PRONATTA) prioritizing, and solving their problems. Main project of about $50,000 of which nearly half is components: co-financed by beneficiaries and others. From 1995 A competitive fund in which resources are PRONATTA projects are demonstrating impacts assigned to proposals responding to the in the field in terms of higher productivity, and technology needs of small rural producers. adoption of sustainable management practices An institutional development component to among small producers, especially through build capacity of municipal and regional insti- reduced use of agricultural chemicals and tutional mechanisms in which a variety of improved soil management practices. Projects stakeholders participate, especially small pro- based on similar principles have also been imple- 167 ducers. mented in Peru, Ecuador, and Nicaragua, in differ- ent ways in Brazil, Mexico, and some countries in Eastern Europe and Central Asia. Venezuela Ensuring extension accountability to clients is a The new institutional structure has had a dramat- fundamental premise of the new institutional ic affect on extension services. Extension agents Agricultural Extension structure supported by the project. are now in the countryside, accessible to and in Project Services are planned and implemented at regular contact with clients. Countrywide, 488 the municipal level to ensure that activities extension agents deliver services to 43,000 farm- 1995 to 2003 address local problems and opportunities. ers in 122 municipalities and have introduced Extension agents are contracted through pri- over 4,000 innovations in different municipalities. vate firms and NGOs to provide flexibility Preliminary impact studies indicate that 73% of and responsiveness to clients. municipal projects have had good to excellent Client participation is encouraged through impacts on crops and livestock yields and 83% of establishment of Civil Associations for participants have increased family incomes. ACEs Extension (ACEs). are the most obvious example of increased social Finally, co-financing by clients and local govern- capital with 78 established ACEs and a total of ment ensures that recipients valued services over 10,000 members. being provided. ANNEXES Project Project description Impact on rural poverty Côte d'Ivoire The objectives of the project are to support Workshops designed by farmers' organizations sustainable agricultural growth through increas- declared roaming herds as the primary issue for Second National es in farm-level productivity by improving the sustainable land management and agricultural pro- Agricultural Services relevance and cost-effectiveness of the nation- ductivity growth. In cooperation with scientists, Support Project al research and extension system. By strength- the farmers' organizations developed a plan: the ening farmers' associations, the project fosters technology was not new, but the organization 1998 ­ ongoing their capacity to be effective partners of rural was.They decided to plant thorny hedges and development agents, including government, shrubs around the crops to keep out herds. and provide services to their members and Within six months, they had planted an unprece- promote private investment in agriculture and dented 60 kilometers of hedges. A similar chal- related activities. lenge had farmers' organizations establishing regional rules to prevent bush fires--applied and controlled by the farmers themselves. China This project aimed to increase production, The project supported the establishment of productivity and marketability of fruit in the almost 12,000 ha of new fruit orchards and reha- Mid-Yangtze Agricultural low income areas of Sichuan and Hubei bilitated a further 2,500 ha. New technologies for Development Project provinces and Chongqing Municipality.The virus-free fruit stock production were created approach included: and successfully introduced, and profitable new From 1991 developing new orchards on heretofore management systems were set up for fruit pro- uncultivated hilly slopes and rehabilitating duction and marketing. 300,000 farm families in existing ones; the project area have benefited from the project increasing abilities to identify, propagate and - incomes doubled from 1990 to 1995, including distribute healthy, disease-free planting that of underemployed and landless farmers. material; Harvesting and post-harvest activities have, and providing technical assistance for research will increasingly, provide job opportunities in both and extension with staff training in fruit orchards and packing houses, where 30 percent development and marketing; and of the workers are women.The project also establishing new and strengthen existing com- reduced soil erosion by promoting the terracing mercially independent Fruit Development of hilly land and by introducing vetiver grass to Corporations. stabilize the soil. 168 Egypt The projects aimed to improve the technology Over 5 million acres [hectares?] have been pro- and management of irrigation and drainage vided with subsurface drainage and 7 million National Drainage systems to improve agricultural productivity, acres are now served by the main drainage sys- Project 1 & 2 reclaim land lost to water-logging and salinity, tem. Crop yields increased by up to 20% for and increase the incomes of smallholder farm- major crops on 7 million acres. Estimates show 1992 and 2000 ers in the country. Phase one targeted that the share of improved drainage accounts for 309,600 ha for drainage improvement.The 15-25% of the yield increase. Significant advances second phase will build on the successes and have been made in recovering the costs for lessons of the first to target another 700,000 investment and maintenance. Local users are also hectares of irrigated land for improved becoming more involved in operation & mainte- drainage. It will continue to build the capacity nance of subsurface schemes through Drainage of the Egyptian Public Authority for Drainage User Groups/Collection User Groups. Projects (EPADP) through a program of insti- tutional support. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Project Project description Impact on rural poverty India The project sought to alleviate rural poverty in Fish catch has increased by up to 250% (up by five states in India by increasing shrimp and 200% in Bihar, 200% in reservoirs and 400% in Shrimp and Fish Culture inland fish production and employment.The ox-bow lakes of Uttar Pradesh). In Bihar, Andhra Project concept was to tap the potential of generally Pradesh and Orissa, approximately 15,000 fisher under-utilized inter-tidal resources for shrimp members of the 118 project-assisted coopera- 1992 ­ 2000 production and expand fish production from tives are actively engaged in the fishing activity. inland water bodies. Activities were targeted on The per capita income of fishermen has risen the poorest segments of the rural populations by Rs. 6,000 (Uttar Pradesh) to Rs. 13,250 in Bihar,West Bengal, Andhra Pradesh, Orissa (Bihar). Although the shrimp component was and Uttar Pradesh states. badly effected by an outbreak of White Spot Disease, in shrimp farms that did not develop the disease, the average production exceeded the appraisal target by 34%, with an output of 1.3 tons/hectare/crop. Mexico The project aims to help the government 3.4 million hectares of irrigated land transferred move from a centralized, grant-based system to the management of farmers. Irrigated agricul- Irrigation and Drainage of irrigation management to a decentralized tural production increased from 0.4% (1982- Sector Project system based on water user organizations, util- 1989) to 4.8% since the transfer program has ities, and bulk suppliers and a system of cost been in operation (1992-1998). Payment of user 1995 ­ 2000 recovery.The project also sought to increase fees increased from 20% to 90%.Water user efficiency of the irrigation system by rehabili- organizations have federated and formed 10 tating and upgrading existing schemes. new companies working in the irrigation sector. The government has passed a new Water Law allowing the sale of water use rights and addressing other changes needed for transition to a more commercial agricultural system Albania The project is an irrigation modernization pro- By 1998, the irrigation intensity had increased gram that deals with reforming institutions by from 20% in 1993 to 60%.The scope of water Irrigation Rehabilitation changing the roles of governments, users and user associations (WUA) responsibility far 169 Project private sector: exceeded what was planned. More than 200 communities operate and maintain the irri- WUAs had been established over an area of 1995 ­ 1996 gation and drainage systems at the farm 100,000 hectares involving 50,000 families, and through secondary network level; 42 secondary irrigation canals covering about government invests mainly in headwork 98,000 hectares had been transferred to these infrastructure, provide regulation and emer- WUAs.The WUAs collected funds from mem- gency assistance; and bers for operation and maintenance of the sec- the local private sector is contracted to do ondary canals. Staff numbers in the public water the work on most of the activities. enterprises were reduced within the project by 40% and 6 federation of WUAs had been established to manage irrigation canals. ANNEXES Project Project description Impact on rural poverty Mali The project sought to reduce poverty, increase The government has liberalized the rice trade and agricultural production, and reduce govern- markets and sustained that reform and restruc- Office du Niger ment subsidies and support for agriculture by: tured the ON. Rice production increased from Consolidation providing strong incentives to farmers to 98,000 to 271,000 tons and the production of 1990 ­ 2000 increase production, non-rice crops, such as onions (71,000 tons), garlic improving the efficiency of irrigation manage- (800 tons) and pepper (600 tons) increased. Real ment and per capita income increased by $70/annum. 57 km creating mechanisms for sustainable irriga- of canals and main drains were rehabilitated and tion development. modernized, and meter fee collection rate increased from 60% to 97%. The method included reforming the irrigation agency Office du Niger (ON), rehabilitation and modernization of irrigation canals/structures, and agricultural policy reforms (rice price/mar- ket liberalization and land tenure). Niger Niger potentially has 270,000 ha of land that The ANPIP grew gradually from a small group of ten can be irrigated, however, only 22% of the people to 19 decentralized committees comprising Pilot Private potential land is being fully or partially irrigat- 13,500.A follow-up of this campaign facilitated the Irrigation Project ed.To address the situation a private sector formation of 1,521 economic interest groups (GIE), irrigation development strategy was launched. comprising 15,000 farmers.The increase in areas cul- 1995 ­ 2001 The project was implemented by a private irri- tivated was 63% in the case of the manual technolo- gation association--the ANPIP--which tested gies, and 24% in the case of the mechanized tech- and evaluated new, low-cost technology for nologies.The increase in yields of the farms moni- small-scale private irrigation and built local tored was around 27% for onion and 32% for sweet capacity in the irrigation sector through private pepper.These two crops cover 70% of the land sector development and access to credit areas farmed in the sites covered by the surveys. Encouraging non-farm economic growth The project reached 2.8 million people living in 170 Peru The overall objective of the project was to provide a well-integrated and reliable rural 390 villages, surpassing the target of 200 villages. Rural Roads road system through rehabilitation and mainte- Travel time have decreased markedly and trans- Rehabilitation and nance of rural roads and key links connecting port tariffs have declined by 15% for freight on Maintenance Project to the primary road system.The specific objec- busses and 8.6% for trucks on project roads. tives were to reduce transport costs and raise Improvements of tracks/footpaths to facilitate 1996 ­ 2001 the reliability of vehicular access to expand non-motorized transport have brought the most markets for non-farm and agricultural products isolated and the most impoverished communities and to build up institutional capacity and gen- to the mainstream of economic activity.The proj- erate employment for the rehabilitation and ect generated 32,300 seasonal unskilled jobs maintenance of rural roads. through the rural roads rehabilitation program, and about 4,700 permanent jobs through the development of micro-enterprises that routinely maintain the rehabilitated roads. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Project Project description Impact on rural poverty Latvia The project's objectives were to lay the The Commercial Credit Line (CCL) has provided groundwork for increasing incomes living stan- working capital and investment loans for rural Rural Development dards of the rural population by promoting enterprises with commercially viable and bankable Project diversification and growth of economic activi- projects with adequate collateral, financial rates of ties by: return, and demonstrated repayment capacity.The 1998 ­ 2002 strengthening institutional capacity for for- Special Credit Line (SCL) has provided small-size mulating rural developing strategy and policy; loans for diversified rural businesses at prevailing stimulating the flow of commercial bank commercial interest rates to first-time borrowers. financing to rural clients by improving the The government has modernized the Land Book, efficiency and self-sustainability of the finan- which has resulted in a boom in property and cial institutions; and land markets. From 1997 to 2001, the number of facilitating rural business development and properties registered increased by four-fold, the continuing support for land reform. number of transactions increased five times, and the number of registered mortgages increasing more than eight times. Bangladesh The goal of the Third Rural Electrification Consumer connections in the existing and the Project was to increase the use of electric four new RECs were 60% higher than original Third Rural power through expanding the distribution net- estimates, with an excellent mix of households Electrification Project work and rehabilitating old systems, and to and businesses. Eight times more km of lines strengthen the institutional capacity for rural were taken over from parastatals (and rehabilitat- 1990 ­ 2000 electricity delivery, including strengthening the ed) than originally planned. Network losses for performance of the Rural Electrification Board these lines have fallen from the 30-50% range to (REB) and the system of rural electricity coop- 25-30% within 18 months of transition from the eratives (RECs). parastatal system. Institutionally, all the coopera- tives met the financial covenants and manage- ment targets agreed and a system of perform- ance targets was put in place in which each cooperative annually discusses and negotiates acceptable targets with the national Rural Electricity Board. 171 Improving social well-being, managing and mitigating risk, and reducing vulnerability Tunisia The project aimed to alleviate poverty and Family incomes from agricultural production on improve natural resource management small farms have recorded real annual growth Northwest through the use of a participatory approach rates of 6.3%. Increased agricultural production Mountainous Areas that emphasized community organization and also raised on-farm employment opportunities. Development Project training to increase local capacity to partici- The proportion of target groups having difficulty pate.Through these processes, communities with access to rural roads, potable water, and 1993 would identify development priorities. It rec- water for livestock was reduced from the baseline ognized the need to target special groups estimate of 48% to 18% by project completion. It including women, unemployed youth and the is estimated that school building coupled with landless because of the special challenges they improvements in rural roads contributed to represented in terms of illiteracy, unemploy- reducing average illiteracy rates from baseline ment and lack of access to basic infrastructure estimates of 60% to approximately 44% among and social services. beneficiary populations. ANNEXES Fostering an enabling environment for broad-based and sustainable rural growth Project Project description Impact on rural poverty Benin Targeting about 250 villages in the Borgou, the Two years after implementation 229 communi- project sought to: ties had completed 296 infrastructure subpro- Borgou Region Pilot improve rural communities' capacity to bet- jects, of consistently high quality, and made more Rural Support Project ter manage their socio-economic environ- than 30 natural resource management improve- ment by supporting communities' implemen- ments. Over 14,000 Borgou residents had partic- 1999 ­ 2002 tation of sustainable development activities; ipated in capacity-building activities, from 5,638 meet the Borgou's immediate needs in serv- people trained in basic literacy to the 22 women ice delivery and productive and social invest- trained as midwives.The construction of new ment; and schools brought 5,400 new students to school, test new resource mobilization and imple- representing a five percent increase in the mentation arrangements, as a prelude to region's school enrollment. By shifting procure- Benin's 1999 Decentralization Law. ment responsibilities to communities, almost all of the sub-project works were contracted to local firms, providing work to 70 to 80 informal enterprises. Indonesia The projects sought to reduce poverty in The first project achieved, and in some cases sur- poor rural areas in new ways, and more passed, its objectives. A total of 1,230 villages Village Infrastructure specifically to: compared to 1200 foreseen built a total of: 3,680 Project I & II promote village participation, empower vil- km of rural roads; 7,790 meters of bridges; 2,427 lagers to decide priority uses of a grant and water systems; 1,230 communal sanitation units; 1995 ­ 1999 to implement infrastructure works; and 2 piers totaling 61 meters.The benefits from 1997 ­ 2001 provide public infrastructure needed in poor the infrastructure are significant, in addition to villages; the construction having provided employment create jobs paid in cash for unemployed/under- for cash to villagers. employed villagers especially in the seasons of low agricultural activity. The second project far exceeded its targets: Infrastructure was built in 7,044 villages compared to the intended 2,600.The construction of 15,069 km of roads and 42.5 km of bridges provided criti- cal access to poor communities.With new access roads, transportation costs are estimated to have 172 decreased by 40%.Also, a few villages received electricity connection. Clean drinking water avail- able through construction of 8,722 communal water supply units not only improved health but also reduced the time spent on obtaining water. Brazil The NRDP/RPAP programs support commu- A total of 43,750 community subprojects have nity-managed investment in about 100 differ- been financed at an average value of $26,000 in North East Brazil ent types of subprojects in three categories: a total of 1,400 (of 1,665) municipalities, 30,000 Rural Development (a) rural infrastructure (water supply, power); community associations and some 1.9 million and Rural Poverty (b) productive activities (minor irrigation beneficiary families in Northeast Brazil. Sub-proj- Alleviation Programs schemes, manioc and corn mills, small livestock ects include 5,100 community water systems raising, communal tractors); and (c) social serv- (600,000 families) and 8,000 rural electrification 1985 ­ present ices (for example, day care centers, community subprojects (320,000 households and 4,300 centers). schools connected). It is estimated that 38% of poor rural families in the region have benefited with at least one subproject from the program. REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Project Project description Impact on rural poverty Ghana The program evolved out of a set of national Now two years into implementation, the project workshops on improving water supply and san- has taken off and is working simultaneously in Community Water itation in Ghana. It used the community-driven, 1000 rural communities. In addition, it increased Supply & Sanitation demand responsive approach where rural the capacity of NGOs, so that they could provide Project communities identified their needs and the technical assistance for water supply and built level of services they could manage and for capacity of small entrepreneurs to supply equip- 2000 ­ 2003 which they were willing to pay.The new institu- ment for the infrastructure.The increased com- tional arrangements included all levels of gov- petition, created in response to increased ernment, NGOs, communities, and the private demand from communities, led to a 50% reduc- sector to provide and co-manage services. tion in the price of boreholes.The project also made specific achievements in gender represen- tation with women comprising 50% of water and sanitation committees. Enhancing the sustainability of natural resource management India The objective of the project was to build upon Project staff worked with farmers to divide the Uttar Pradesh's programs by developing mod- land into parcels and negotiate the complex Uttar Pradesh Sodic els for environmental protection and improved process of ensuring clear title.Thousands of for- Lands Reclamation agricultural production through reclamation of merly landless farmers have obtained titles to Project I sodic lands. Additional objectives were to rein- land.Within six months of the beginning of recla- force local institutions to enable effective man- mation activities, productivity and income began 1993 ­ 2001 agement of such programs and to improve the to increase: yields of rice and wheat doubled orig- incomes of families managing sodic lands. inal project estimates, wage rates doubled, and land values quadrupled. Farmers have continued cultivating reclaimed lands even after the with- drawal of project assistance--a strong measure of project sustainability. India Primary project objectives were to increase Under the project, 2,666 community groups forest productivity and quality, protect the (VSSs) have been established for protection and 173 Andhra Pradesh environment, alleviate rural poverty and management of forest resources and 849,000 ha Forestry strengthen/streamline sector policies to be were brought under improved management and consistent with these objectives.These were to protection. Four new protected areas (PAs) were 1994 ­ 2000 be achieved by (a) introducing local participa- created; 11 PAs were brought under improved tion in protection and management of public management and protection with positive effects forests; (b) supporting forest regeneration and on biodiversity conservation.There has been an rehabilitation; (c) supporting biodiversity con- improvement in family incomes (average increase servation; (d) increasing private participation in in income within sampled VSSs was Rs. 5,600 per sector development; and (e) improving public annum) and in the financial independence of forest management and development. women (1,699 women's thrift groups were formed). ANNEXES Project Project description Impact on rural poverty Turkey The project sought to restore sustainable land- The project has reached about 400,000 people use management to degraded watersheds in living in over 50 watersheds (and will now be Eastern Anatolia three provinces of the Upper Euphrates River adopted in up to 20 more provinces in a follow- Watershed Basin, and increase the incomes of the local up operation). Integrated management plans Rehabilitation population living in these areas, which are were prepared including improved management among the poorest in Turkey.To do this it had and cultivation of fodder, reforestation, soil con- 1993 ­ 1994 to help restore sustainable range, forest and servation, improved arable farming and fruit farming activities, reduce soil degradation, ero- farming, construction of ponds for supplementary sion and sedimentation in reservoirs. irrigation, bee-keeping, and gully protection. It improved opportunity and access to resources through targeted interventions, was cost-effective and could be maintained despite a difficult macro-economic environment. China Erosion causes 1.6 billion tons of sediment to Farmers not only provided knowledge and plan- flow every year from the Loess Plateau of ning, but also manual labor on their own lands. Loess Plateau northwest China into the Yellow River, creating Today, the project has completed over 80,000 ha Watershed tremendous downstream flood risk The objec- of terracing. Farmers have replanted 150,000 ha Rehabilitation Project tives of the project were to increase agricul- with forest trees and income-generating shrubs tural production and incomes through a more and trees. Crop yields have doubled and even 1994 ­ present efficient and sustainable use of land and water tripled in some micro-catchments due to the ter- resources in tributaries of the Yellow Plateau. racing and conservation techniques. Half a million farmers have improved their standards of living as a result of this project. 174 REACHING THE RURAL POOR A RENEWED STRATEGY FOR RURAL DEVELOPMENT Rural Development Strategy Background Papers prepared in conjunction with Reaching the Rural Poor (these documents can be viewed at http://www.worldbank.org/rural): 1 LongTerm Prospects for Agriculture and the Resource Base 2 The Role of Agriculture in Economic Development and Poverty Reduction: An Empirical and Conceptual Foundation 3 Rural Poverty:Trends and Measurements 4 Rural Non-Farm Activities and Rural Development: From ExperienceTowards Strategy 5 What Has Changed Regarding Rural Poverty Since Vision to Action? 6 Community Based Rural Development: Reducing Rural Poverty from the Ground Up 7 Risk Management in Rural Development:A Review 8 The Role of Rural Producer Organizations in the World Bank Rural Development Strategy 9 Agricultural Extension Investments: Future Options for Rural Development 10 Rural Infrastructure, Development, and Poverty Reduction ­ Challenges, Linkages, and Actions 11 Land Degradation for Selected Regions and Some Consequences for Rural Development 12 Promoting Agro-Enterprise and Agro-Food Systems Development in Developing and Transition Countries 13 Scaling-Up Issues and Options: Supporting Good Practices and Innovation 14 Farming Systems and Poverty: Improving Farmer's Livelihoods in a Changing World (FAO and The World Bank) Absolute poverty is a condition of life so degraded by disease, illiteracy, malnutrition, and squalor as to deny its victims basic human necessities . . . a condition of life so limited as to prevent realization of the potential of the genes with which one is born. . . . the problem is most severe in the countryside . . . ROBERT S. McNAMARA President,The World Bank Group Joint Annual Meetings, Nairobi, September 4, 1973 Eighty percent of our global population have 20 percent of the world's income . . . . Some 800 million people . . . go to bed hungry every night, the majority of them in rural areas. Indeed, 70 percent of the poor of our globe are in rural areas . . . why is it that this year in the demand for World Bank loans, we're almost at an all-time low in terms of the proportion of our lending for rural and agricultural purposes . . . ? JAMES D.WOLFENSOHN President,The World Bank Group Rural Development Strategy Regional Consultations, 2001 inks y-based so with per pa ecycledr on Printed ISBN 0-8213-5459-0