~~~21267 OCIAL DEVELOPMENT NOTES ENVIRONMENTALLY AND SOCIALLY SUSTAINABLE DEVELOPMENT NETWORK Note No. 43 December 1998 Social Assessment Helps Ensure Benefits of Agricultural Privatization for Kazakh Farmers The Government of the Republic of Kazakhstan Privatization Assistance Project designed to (GOK) attaches high priority to agricultural support the development and reform, since the agricultural sector accounts commercialization of privatized farms and for 25 percent of the labor force, 12 percent of agroenterprises in two areas of the country and GDP, and significant export revenues. Despite thus improve rural productivity and incomes. substantial progress with reform, several The project will assist farms and associated factors continue to undermine performance in enterprises to restructure and improve the sector. These factors include: productivity by: * Potential reduction in farm employment * Supporting the establishment of rural and increased rural income inequality, as advisory and information services newly privatized farms shed labor in an effort to improve productivity * Furthering the development of a sound legal and institutional framework for * Impact of divestiture of social services by secured lending and protection of creditor farm enterprises rights * Inadequate input supply and output * Facilitating commercial bank lending for marketing channels working capital and medium-term financing for restructured farms and other * Unclear role of government in agriculture rural enterprises. * Weak institutional and legal framework Social Assessment * Lack of information to farmers about their The principle objective of the social assessment options and rights as shareholders. (SA) was to understand the roles and status of different stakeholders in the privatization and The GOK has requested support from the restructuring process, and to identify ways to World Bank for an Agricultural Post- maximize benefits and mitigate possible This note was prepared by Stan Peabody and Deborah Youssef of the World Bank. For more information on the social assessment, contact Stan Peabody, The World Bank, 1818 H Street, NW, Washington, DC 20433, USA, Fax: 202-522-2510, E-mail: speabody@worldbank.org. To view other Social Development Notes on social assessment, please visit the World Bank's website at: http://www.worldbank.org, and click on the "Social Assessment" section in "Development Topics." Thje views expressed in this note are fhose of the author(s) and do not necessarily reflect the official policies of the World Bank. negative impacts of the project. To carry out The SA also revealed that extremely low the SA, several social research methods were provisions of public utilities (such as electricity, used. First, previous SAs of the agricultural gas, water supply, and telephone services) to sector (undertaken for the Irrigation and the rural population further aggravate the Drainage Improvement Project - IDIP), difficulties faced by rural people in meeting economic and sector work (ESW), and an SA their basic needs. Lack of electricity, in for the Water and Sanitation Project were particular, restricts access to information, reviewed; lessons learned were incorporated in thereby intensifying the growing information the present SA. gap between farm workers and those who were close to the leaders of state farms and Second, a socioeconomic survey of 600 districts, including heads of former state farms households (farm workers and independent and specialists of state/collective farms. The farmers) was carried out, and 100 in-depth SA found that lack of information, whether interviews were held with managers of base legislative, financial, or technical, is one of the farms (the large remnants of former collective major factors making farm workers vulnerable and state farms); managers of procurement, to exploitation by farm managers and local marketing, and consulting organizations; officials, and thus undermining public trust in managers of agricultural processing and the privatization process (see box 1). storage enterprises; and officials of local-level agricultural departments. In addition 14 focus Another important concern identified by the group discussions were held with farm work- SA is that lack of funds and credit constitutes ers, heads of base farms, and independent a major obstacle preventing farm workers farmers. from leaving base farms and establishing their own farms. Farmers have virtually no access to The SA was carried out by members of the commercial credit, and when it is available, Kazakhstan Social Science Network under the interest rates are very high. The SA also noted leadership of Bilesim International that both the quality of and access to social Kazakhstan, a marketing research firm, with infrastructure in the countryside had also been the support of the Academy of Sciences and greatly reduced during the transition. Most Academic Institutions in Almaty, Akmola, and hospitals and kindergartens on the farms have Taldy-Korgan. A World Bank social scientist been closed, some schools have been closed, designed the SA and provided guidance to the and practically everywhere cultural SA team. This report captures the findings of institutions have ceased to function. Lack of the SA process at the project appraisal stage, social infrastructure has intensified the impact and raises a number of issues that need to be of the transition on the rural population, addressed through the SA process during the particularly those most vulnerable - young implementation and monitoring stages. people, the elderly, and the disabled. Key Social Development Concerns Institutional and Organizational Issues A number of key social development A number of institutional and organizational concerns, resulting from the impacts of issues emerged from the SA. First, the SA privatization and restructuring, were pointed out that bureaucratic obstacles are a identified by the SA. First, the SA found a high major factor preventing farm workers from level of dissatisfaction with the outcome of becoming independent farmers. Second, the reforms and growing impoverishment and SA revealed the coercive manner by which hardship. Unemployment is likely to continue managers of some base farms convinced farm to rise as a consequence of restructuring workers to transfer land and property rights to efforts, and thus to further exacerbate the them, either temporarily or permanently. Lack situation. of information on farmers rights and options 2 Box 1. Farm Problems (Responses of Farm Workers) Non-Payment of Wages Shortage of Bectricity Low Wages Out-of-Date Machinery Poor Technical Assistance High Prices Unemployment No Credit Bad Farm Management Poor Education No Drinking Water No Specialists 0% 10% 20% 30% 40% 56% 60% 70% 80% undermines farm workers' ability to negotiate organizations. Farm managers and managers with managers. of supply organizations and processing facilities would like to use the services of such Third, the SA identified a growing potential organizations for financial and legal advice, role for private enterprises (many of which are technological support, marketing, and access former state organizations) in providing to information. services to independent farmers. Fourth, the SA found that privatization has not changed The SA recommends that the project adopt the process by which key decisions regarding an information/communications component economic activity are made. Farm workers are, as part of a participation framework that for the most part, removed from farm- includes an intense public information management decisions, except for occasional campaign covering the following topics: consultation regarding harvesting dates. The SA raises the question of how best to increase * Privatization and restructuring options the participation of farm workers in farm- management decisions and in establishing and * Righis and responsibilities of farm managing farms of their own. managers and members in corporate farms of different types Fifth, the SA noted farmers' interest in uniting with other farms to establish 0 Characteristics of profitable base farms associations of peasant farms. However, the SA reveals that cooperation or association of . Opportunities and constraints in farmers and workers of base farms is limited, independentfarming due to lack of resources and experience. Finally, the SA identified a potential role for * Farm management principles. the services of special consulting 3 A systematic information campaign would advisory and information services, but play an essential role by informing farmers of proposes that: (a) rural advisory centers place their rights and options, encouraging farm priority on financial and legal advice, and (b) workers to participate in the decisionmaking an intense public information campaign be process, and motivating them to manage farms carried out with a specific focus on farmers. of their own. The SA also recommends that the advisory centers monitor demand and utilization, and Monitoring and Evaluation respond to changing priorities and levels of sophistication over time. The SA recommends a framework for a systematic monitoring program to maximize Mitigation and Employment Opportunities. The learning and development effectiveness in the SA recommends that efforts be made to help pilot project. The framework calls for local administrations assume responsibility for identifying input, process, output, and impact social infrastructure and to provide start-up indicators to address: (a) changes in the capital for local commercial and service composition, magnitude, and content of enterprises, both to reduce unemployment and demand for advisory services and credit; (b) to serve local needs through the private sector. the adequacy, responsiveness, accessibility, and effectiveness of the advisory centers and Commercial Bank Lending. The SA confirmed participating financial institutions; (c) the need for capital to induce restructuring, economic and social impacts of public establish both large and small new farms, and information campaigns, advisory centers and increase production. For the sake of equitable networks, restructuring plans, investments, and broad-based development, however, the and the divestiture of social infrastructure at project should ensure that the credit demands the farm and community levels; and (d) the of large units do not overshadow the needs of impact of small-scale investments in local smaller units. Thus, a portion of the credit commercial and service enterprises and the should be reserved for small independent emergence of new opportunities for private farms. The SA also led to a process whereby entrepreneurship at the community level. applicants for credit are screened to prevent loans from going to farm enterprises that have SA Impact on Project Design irregular ownership until the farm structure has been revised and rights are returned to the While the SA will continue to guide the workers. implementation and monitoring stages of the project, some implications for project design - Next Steps with respect to such key issues as rural advisory and information services, an The SA process should be ongoing, since empirical base for formulating a program to conditions in the project areas are changing mitigate the impact of divestiture of social rapidly. Specifically, continuous assessment assets and reduction in the labor force, and should provide data to assist in developing commercial bank lending - are listed below., approaches to promote the private sector in farm communities, thereby providing Rural Advisory and Information Services. The employment to people displaced by the SA not only confirms the need for rural restructuring process. Social Developmenot Notes are published informally by the Social Development Family in the Environmentally and Socially Sustainable Development Network of the World Bank. For additional copies, contact Social Development Publications, The World Bank, 1818 H Street, NW, Washington, DC 20433, USA, Fax: 202-522-3247, E-mail: sdpublications@worldbank.org. ® Printed on Recycled Paper 4