Technology, Finance,
and Development



Technology, Finance,
and Development
An Analysis of the World Bank
as a Technological Institution
Edited by
Charles Weiss
World Bank
Nicolas Jequier
Institute of Advanced Studies
in Public Administration
Lexington Books
D.C. Heath and Company
Lexington, Massachusetts
Toronto



The views and interpretations in this book are the authors' and should not
be attributed to the World Bank, to its affiliated organizati-cns, or to any in-
dividuals acting in their behalf.
Library of Congress Cataloging in Publication Data
Main entry under title:
Technology, finance, and development.
Includes index.
1. World Bank. 2. Technical assistance. 3. Technology transfer-
Developing countries. I. Weiss, Charles.
II. Jequier, Nicolas, 1941-
HG3891.5.W57T42      1984     338.91    83-49213
ISBN 0-669-07762-3
Copyright © 1984 by D. C. Heath and Company
All rights reserved. No part of this publication may be reproduced or trans-
mitted in any form or by any means, electronic or mechanical, including
photocopy, recording, or any information storage or retrieval system, without
permnission in writing from the publisher.
Published simultaneously in Canada
Printed in the United States of America
International Standard Book Number: 0-669-07762-3
Library of Congress Catalog Card Number: 83-49213



Contents
Chapter 1      Introduction: The World Bank as a
Technological Institution Nicolas Jequier and
Charles Weiss                                      1
Part I         The Sectoral Approach                            15
Chapter 2      Technology in Agricultural Development
Graham Donaldson                                  19
Chapter 3      Government Promotion of Industrial Innovation
K. Nagaraja Rao and Charles Weiss                 35
Chapter 4      Civil Works Construction
Basil P. Coukis and Nicolas Jequier               55
Chapter 5      Urban Traffic Management Herbert H. Werlin       69
Chapter 6      The Uses of Satellite Remote Sensing
Wolfram U. Drewes and Abraham M. Sirkin          85
Part HI        Appropriate Technology and Basic Needs          103
Chapter 7      Water Supply and Waste Disposal
Julian Bharier                                  107
Chapter 8      Sanitation Systems for Developing Countries
Charles G. Gunnerson                            125
Chapter 9      Urban Shelter and Community Development
Herbert H. Werlin                               141
Chapter 10     Basic Education  Francis J. Lethem              157
Part III       Technology Transfer                             175
Chapter 11     Water Resources Development
Phillip Z. Kirpich                               179
Chapter 12     Power Generation and Distribution
Richard H. Sheehan and S. Ramachandran           197
v



vi                  Technology, Finance, and Development
Chapter 13    Fertilizer Production  Christopher J. Pratt     209
Chapter 14    The International Finance Corporation
H. Geoffrey Hilton                             227
Chapter 15    The Engineering Industries Frederick T. Moore   247
Part IV        Global International Research Systems          261
Chapter 16    The Consultative Group on International
Agricultural Research  John K. Coulter         265
Chapter 17    The Tropical Diseases Research Program
Adetokunbo 0. Lucas                            283
Chapter 18    Cotton Development International
Charles Weiss and Wil Lepkowski                295
Chapter 19    General Conclusions
Nicolas Jequier and Charles Weiss              313
Index                                          329
About the Contributors                         339
About the Editors                              343



Introduction: The
World Bank as a
Institution
Nicolas Jequier and
Charles Weiss
This book is about the union of money and technology. Its central message
is that one of the world's leading financial institutions-the International
Bank for Reconstruction and Development (IBRD), more generally known
as the World Bank-has had a substantial impact on the development and
diffusion of technology in the Third World. In fact, the World Bank has
become one of the main technological institutions catering to the needs of
the developing world, although it did not plan to assume such a role. This
status may come as a surprise to those who view it exclusively as a financing
institution, as well as to those for whom technological activities are associ-
ated essentially with industrial corporations, research institutions, or gov-
ernment ministries for science and technology.
The central mission of the World Bank, as well as its raison d'etre in the
international system, is to act as a development agency. But in fulfilling this
mission, the Bank has also become a technological institution. This book
examines the many facets of this function. By technological institution, we
mean an organization that, directly or indirectly, finances or carries out re-
search, transfers technology, promotes better choices and uses of technology,
encourages innovation, anld contributes to the building up of technological
capabilities.
The process whereby the Bank has become such an institution is fairly
simple. All of the projects the Bank finances involve technology in some
way or another; machinery, for instance, has to be purchased from indus-
trial suppliers, people have to be trained in new skills to operate productive
units efficiently, and new crops and new ways of operating have to be dif-
fused to farmers. Some of the technologies necessary to the success of a
project must be transferred from abroad, while others can be found lo-
cally, and the execution of the project generally contributes to the building
up of a local technological capability in the country conicerned. The range
of technologies thus transferred or developed is extremely wide; it includes
both hardware-machinery, equipment, tools-and software, or organiza-
tional tools, managerial methods, training programs, and institutional
schemes.



2                  Technology, Finance, and Development
What has contributed perhaps most directly to making the World Bank
a technological institution is not only this essential linkage between tech-
nology and projects; after all, hundreds of other large banks throughout the
world finance projects without playing a significant technological role.
Their primary concern, however, is to provide money for investment pur-
poses, and not to determine whether the technology chosen for the invest-
ment makes the most efficiernt use of resources, whether local people have
been trained to master the technology, or whether there has been a thorough
assessment of the impact of the project on the environment or on the society.
What makes the Bank a technological institution is its active role in the
choice of technologies appropriate to each particular situation and in the
mobilization of local technological capacity for the accomplishment of
socioeconomic objectives and human development.
When the World Bank helps one of its member countries to plan the
development of national power supplies or the modernization of the ag-
ricultural sector, it not only sets the stage for specific projects but helps the
country to examine the various ways in which the development objectives
for that sector can be achieved. This sector work brings into play a wide
range of factors, which include finance, economics, sociology, politics, in-
stitution building, and technology taken in the broadest sense.
The Bank's advice carries weight not only because it is linked with large
sums of money but also because of the Bank's experience as a development
agency. Ultimately, however, it is the government that selects a particular
project from its portfolio for Bank assistance, and it is the government that
organizes and manages the design and implementation of the project.
Hence the successes and failures of the projects that the Bank finances are
shared with the governments to which it lends. The Bank is one of the few
sources of disinterested advice on development policies and projects. Fur-
thermore, because of the Bank's worldwide experience and the fact that its
staff is drawn from all over the world, the formal and informal advice of
the Bank is a means of sharing the experience of developing and developed
countries. The Bank's staff no doubt may be biased by their training and ex-
perience, but they are held to strict neutrality with regard to sources of
equipment and technology. Some government officials often welcome a
close involvement of the Bank in the management of a project in order to
protect themselves against political and other pressures that could endanger
the success of the project.
The Bank's attitudes toward the choice of technology, the development
and diffusion of technological innovation, and the building of technological
capacity in developing countries have evolved in a pragmatic and unplanned
way. One of the strengths and originalities of the Bank's technological ac-
tivities is that they are intimately linked with, and indeed an integral part
of, the development projects financed by the Bank. Another is the Bank's



World Bank as a Technological Institution               3
access to the economic and financial decision makers in each country, These
two factors, combined with the Bank's long and diverse experience as a
development agency, can ensure a better fit between technological planning
and development priorities and help to overcome one of the major problems
facing the developing countries in their attempts to mobilize technology for
development: the poor linkage between indigenous research activities on the
one hand and the whole gamut of activities aimed at promoting economic
and social development on the other. For this reason alone, the Bank's ex-
perience as a technological institution deserves to be closely studied by the
development community and by experts in science and technology. Indeed,
we may well be witnessing the beginnings of a new type of technology policy
based on financial institutions, unlike our current technology policies,
which are based for the most part on research institutions.
The analysis presented in the chapters that follow of the World Bank's
technological activities appears particularly timely at a time when tech-
nology policy matters. once confined to the field of academic research and
internal politics, have reached the public domain and become a central con-
cern to diplomats and policymakers and a major subject of negotiation be-
tween industrialized and developing countries.
Themes and Outline of the Book
The chapters in this book illustrate the ways in which the World Bank has
come to play the part of a technological institution. They do not cover all of
the Bank's activities but only those-and they are numerous-where this
technological role is most conspicuous. The book suggests a number of rele-
vant conclusions for policymakers and for all others interested in the role of
financial institutions in the process of technological development. Most of
the chapters have been written by World Bank staff members and consul-
tants who were directly involved in the conception and execution of the
development projects presented here. They do not present an official view
of the World Bank, and the authors bear full responsibility for their facts,
interpretations, and conclusions.
This book is divided into four parts, each illustrating a general theme or
central aspect of the World Bank's activities as a technological institution.
Part I examines the ways in which technology is mobilized at the sector level
and shows how in this process the Bank has come to develop a vast store of
knowledge and experience, as well as a set of coherent sectoral technology
policies, which may be considered an important innovation in their own
right. This is perhaps most conspicuous in the case of agriculture and rural
development but is also evident in the promotion of industrial innovation,



4                   Technology, Finance, and Development
civil works construction, urban traffic management, and the uses of satellite
remote sensing.
The four chapters in part II extend this sectoral approach and focus in
the applications of appropriate technology to meet the basic needs of the
poor. The sectors examined are water supply and waste disposal, sanitation,
urban development, and education. These chapters show, among other
things, that the World Bank has become one of the leading innovators in the
field of appropriate technology for the poor.
The authors of part III focus on the problems of technology transfer in
sectors where the Bank traditionally has been heavily involved-the de-
velopment of water resources, power generation and distribution, fertilizer
production, and investments in private industrial corporations-as well as
in a newer but nevertheless rather similar sector, the engineering industries.
These five chapters show the ways in which modern technology is trans-
ferred in the course of projects and how such transfers contribute to the
building up of local technological capabilities in the borrowing countries.
The authors show that complex operating technologies can be success-
fully transferred to developing nations, even though the process may not
always be easy, no doubt a reassuring conclusion for those who question the
ability of the international technological system to contribute to the devel-
opment of the world's poorer nations. One of the most significant conclu-
sions emerging from this presentation is that, contrary to what often hap-
pens in the private sector, restrictions on the use of imported technology are
generally unimportant, the costs of imported technology appear to be rea-
sonable, and multinational corporations tend to play a subordinate rather
than dominant role.
The last part of the book focusL, ;n efforts to develop global interna-
tional research networks. The World Bank has been involved in three such
networks described here: the Consultative Group on International Agricul-
tural Research (CGIAR), the Tropical Diseases Research Program (TDR),
and the proposed (and now defunct) Cotton Development International
(CDI). In these chapters, the authors describe the ways in which the Bank
has contributed, financially and organizationally, to the building up of
these networks and also look into the complex issues of institutional en-
trepreneurship, research priorities and opportu.nities, political support, and
social relevance. Their presentations amount to a state-of-the-art method
for managing international research networks.
The concluding chapter attempts to draw all the threads together and to
present a general reflection on the role of the Bank as a technological in-
stitution and on the emergence of financial institutions as major actors in
the mobilization of science and technology for development. The central
conclusion is that financial institutions such as the World Bank have become
important partners in the technological system and that this role probably



World Bank as a Technological Institution                  5
could be made yet more effective if it were more generally acknowledged
and used by all those who have a stake in the economic and social develop-
ment of the world's poorest countries.
The Missing Elements
Any book, particularly a collective work such as this one, gives rise to a
number of questions as to what it does not contain. The omissions in this
book are of three distinct types: omissions due to errors of the editors or to
the unavailability of prospective authors, omissions due to the fact that a
particular subject was too new to warrant a full chapter or detailed presen-
tation, and omissions due to the fact that certain issues, however important
in general, do not greatly affect the work of the Bank.
Among the last type of ornissions, the most important lies in an area of
central concern to policymakers involved in international negotiations
about technology: the role played by multinational corporalio- in the pro-
cess of technology transfer. But in the day-to-day operations of an interna-
tional development agency such as the World Bank, as well as in the formu-
lation of its long term development strategies, this issue is largely peripheral.
The chapters of this book show, convincingly we believe, that when the bor-
rowing government has a firm political commitment to build local tech-
nological capacity and to meet the needs of its population, development
projects financed by the Bank do not in general raise any major difficulties
as to the cost or availability of technology; multinational corporations,
when they do intervene, generally play a rather minor part and are usually
pitted against one another in the process of competitive bidding for the sup-
ply of equipment. Perhaps codes of conduct may be useful, but even in the
absence of such a code, substantial amounts of technology are transferred
effectively from industrialized to developing countries.
In general, technological problems in the sectors in which the Bank
lends tend to result from inappropriate choices (which in turn often stem
from inappropriate policies) and from inadequate local capacity to import
and absorb technology rather than from external obstacles to the transfer of
the required knowledge. Water development projects, slum upgrading pro-
grams, or rural development schemes financied by the Bank, for instance,
do not involve proprietary technology, and what technology is needed is
* :<aerally well known to all of the specialists involved. As for projects that
do fall within the purview of multinational firms or need proprietary tech-
nology-as in the case of fertilizer plants or steel mils--the way in which
they are prepared and the role of the Bank as a disinterested technical adviser



6                   Technology, Finance, and Development
can be used by the member countries to reduce the difficulties that often oc-
cur in bilateral relatiorns between unequal partners.
This book does not explicitly discuss the concepts of technological self-
reliance and technological dependence-not because we believe them to be
irrelevant or unirnportant but because they have come to acquire political
and rhetorical overtones and would therefore call for long qualifications
and complex definitions. Nevertheless, much of the material presented in
this book describes efforts aimed precisely at solving the problems of cen-
tral concern to writers on technological dependence and proponents of
greater technological self-reliance on the part of the developing nations: the
development of a capacity to choose, adapt, and create technology suited to
local needs and conditions.
Another concept that does not appear explicitly within this book is that of
technological cooperation between developing countries (TCDC). Tech-
nological cooperation is indeed taking place among developing nations
through the World Bank's developmental activities and notably its projects,
although in a somewhat different way than the term generally suggests. The
main agents of transfer, or technical cooperation, are the Bank staff members
(many of whom are nationals of developing countries and some of whom
eventually return home to assume important responsibilities) who have par-
ticipated in the preparation of projects. In the same we", the Bank finances
(and sometimes directly assigns) experts and consulting firms from develop-
ing countries to work in other developing countries on specific projects, and
this is also an important channel of technology transfer between such coun-
tries. Cooperation does indeed take place, but it is primarily a side effect of
projects and development strategies rather than a goal in its own right.
The second group of omissions from this book relates to issues and sec-
tors that were too new to the Bank at the time this book was conceived to
warrant a full chapter. The most obvious of these is that of energy, today cer-
tainly one of the world's most pressing problems. Although the Bank tradi-
tionally has been heavily involved in the financing of power generation and
distribution projects, only in 1978 did it begin to support the development
of petroleum resources in non-oil-producing developing countries. The
Bank now devotes some 20 to 25 percent of its lending to energy projects.
The role of women in technology and development is another deliberate
omission. Here again the reason is the relative novelty of this concern to the
Bank, or for thzit matter to the development community as a whole. Most of
the Bank's current projects attempt to evaluate their likely impact on the
social position of women, on their earnings, on their role as producers, and
on their function as innovators. They also look at women's contribution to
the attainment of their objectives. This is most evident in the case of proj-
ects dealing with rural development, education, nutrition, and population.



World Bank as a Technological Institution               7
The World Bank as a Financing Institution and
Development Agency
The main business of the World Bank, which was established in 1945 as part
of the United Nations system, is to provide loans for development projects.
The sums involved are considerable; in fiscal year 1983 (the year ending
June 30, 1983), for instance, lending commitments reached $14.6 billion, of
which $11.3 billion were committed by the World Bank itself, $3.3 billion
by the International Development Association (IDA), its affiliate special-
izing in concessional loans to the poorest of the developing countries, and
$845 million by the International Finance Corporation (IFC), its affiliate
devoted to investment in the private sector. (Equity investments by the Cor-
poration amounted to $55.3 million.)
A commitment is an engagement to lend a specified sum of money for a
specific project, but the disbursement of the sums thus promised generally
extends over many years as the project progresses. Since the Bank's opera-
tions have expanded rapidly in the last decade and since the Bank generally
reimburses its borrowers for sums of money actually spent, its disburse-
ments in a year on past loan commitments are lower than its commitments
during the year; in fiscal 1983, they were $6.8 billion for the Bank and $2.6
billion for IDA. These disbursement figures will increase in the coming
years as borrowers spend the money committed in recent loans.
The World Bank is by far the largest of the international development
banks. In 1982, loans approved by the European Investment Bank, for in-
stance, amounted to some $4.1 billion, and those of the Inter-American
Development Bank and the Asian Development Bank totaled $2.7 billion
and $1.7 billion, respectively. The commitments of the African Develop-
ment Bank, the newest of the big international regional development banks,
amounted to $766 million.
The World Bank lends at somewhat below commercial rates. During
fiscal year 1983, its variable lending rate ranged from 11.43 percent (begin-
ning of the fiscal year) to 10.97 percent (end of the year). The terms of Bank
lending are more favorable than those typically available from sources of
commercial credit. The grace and maturity periods of World Bank loans de-
pend on the financial needs of the borrower and on the construction and
payback periods of the project. They are typically on the order of three to
five years and fifteen to twenty years, respectively.
The average size of the 143 loans made by the World Bank proper in
fiscal year 1983 was just below $79 million; that of the 120 IDA credits
was just under $28 million. The average investment of the IFC during that
same year was $14.6 million.
The overall size of projects is considerably larger than these figures sug-
gest because the Bank rarely finances the full cost of a project. The govern-



8                  Technology, Finance, and Development
ment of the country in which the project is carried out shares in the financ-
ing, and both the Bank and the government are frequently joined by
bilateral agencies, commercial banks, or other independent funds. The
Bank's contribution to a project varies considerably from project to project
and from country to country (it tends to be higher in the poorest of the de-
veloping countries) but on average amounts to around 35 percent of the
project's costs.
The World Bank generates the major portion of its gross revenues from
interest on loans and by investing its liquid assets. Outstanding loans totaled
$34 billion at the end of fiscal 1983. The average interest rate on outstand-
ing loans during the year was 7.9 percent, producing income of $2.5 billion.
In addition, commitment charges on undisbursed loan balances produced
$213 million, and front-end fees earned on new loans, $97 million. Alto-
gether the income on loans was $2.8 billion. Liquid assets aggregated $13
billion, net of commitments for settlements and cash collateral received on
loaned securities. The Bank invests its liquid assets throughout the year.
These investments vielded an average realized rate of return of 12.15 per-
cent and generated $1.4 billion of investment income. An additional $18
million of revenue was derived from other income.
Expenditures of the World Bank, which include administrative expenses,
interest, contributions to special programs, and issuance costs on borrow-
ings, totaled $3.5 billion. Administrative costs were $322 million, after
deducting $214 million for the management fee charged to the IDA and $4
million for the service-and-support fee charged to the IFC.
The Bank's net income ranged from $183 million to $275 million, with
an average of $217 million, between 1970 and 1978. Tt rose sharply to $407
million in 1979, ranged between $585 million and $610 million between.1980
and 1982, and reached $752 million, the highest figure to date, in 1983.
The major source of funds of the IDA, the Bank's soft-loan affiliate, is
the contributions from the Bank's wealthier member countries. In addition,
each year the Bank has transferred some of its net income to IDA; in fiscal
year (FY) 1983 the amount was $125 million. IDA funds are lent on con-
cessional terms to the Bank's developing member countries with a per capita
income below $795 (1980 dollars). These credits carry a ten-year grace
period and are repaid over a period of forty additional years. There is no in-
terest and only a 3/4 percent service charge.
Traditionally the World Bank has financed capital infrastructure, no-
tably roads, railways, ports, power generation facilities, and basic industries.
In recent years, its development strategy has placed much greater emphasis
on projects aimed at increasing the well-being of the masses of poor people
in the developing countries by making them more productive and by inte-
grating them as active partners in the development process. Lending in tra-



World Bank as a Technological Institution                     9
ditional types of projects has continued and expanded, but a more system-
atic effort is being made to make these projects more responsive to the
needs of the poorest segments of the population.
A senior Bank official has characterized the difference between a typical
loan of the 1950s and one of the 1970s as follows:
The 1950 loan would be for power generation in a middle-income devel-
oping country. In a sense it would be an "enclave" project, designed and
supervised by foreign consultants, executed by foreign contractors and sup-
plied and managed with the help of expatriates. The technical and financial
viability of the project would be analyzed, as would be its organization and
management, but little attention would be paid to its setting within the
energy sector, to how the electricity would be distributed, and to the impact
of the level and structure of tariffs on power consumption.
The loan of the 1970s would be for rural development in a low-income
developing country. It would provide an integrated package of goods and
services (extension, credit, marketing, storage, infrastructure, research) to
raise the productivity and living standards of the farmers. Existing local in-
stitutions would be strengthened or new ones established; local staff would
be used as much as possible, with the help of extensive training programs;
low-cost design and appropriate technology would be emphasized, giving
greater opportunities for local contractors and sources of supply; a built-in
system of monitoring and evaluation would help to adjust the project as it
went forward and to draw lessons for future projects; and attention would
be paid to cost recovery from the beneficiaries so that the project would be
replicable. I
Both in its traditional projects and in its new-style projects, the Bank
has deliberately sought to act as a development agency and not just as a fi-
nancial institution; the purpose of a project is to promote broader develop-
ment objectives, not merely to finance an investment opportunity. In order
to understand the relationship between projects and development strategies,
it is useful to take a closer look at how projects are identified, selected,
prepared, appraised, and carried out and at the relationship between projects
and development strategies.
Project Cycle
The project cycle, which can be defined as the set of procedures whereby
projects are conceived, planned, appraised, approved, implemented, and
evaluated, generally begins in informal discussions between governiment
officials and Bank staff members that lead to an agreement that Bank fi-
nancing is needed for a particular development project. There are many op-
portunities for such discussions. Bank missions consisting of staff members
and consultants visit each member country at regular intervals, and govern-



10                  Technology, Finance, and Development
ment officials are frequent visitors to Washington, where the Bank's head-
quarters and 90 percent of its permanent staff are located. (At present there
are permanent local offices of the Bank in thirty-two developing countries.)
These Bank missions to member countries range from short visits by one or
two experts to update economic data, to four- to six-week missions of teams
of eight to ten staff and consultants whose role might be to make an overall
economic survey of the country or appraise a complex large-scale project.
Occasionally Bank staff members are seconded or posted overseas for
months, and even years, to deal with particularly difficult operational prob-
lems.
Bank economic missions review the overall economic situation of a
country (annually in the case of major borrowers), discuss development
priorities, and assess its need for foreign credit as well as its ability to absorb
it, and later to repay it. In addition to their work on the general state of the
economy and its financial stability, these missions also analyze the major
sectors of the economy-agriculture, industry, and energy, to take but a
few examples. These missions are complemented at various times by sector
missions whose role is to analyze in greater depth a specific area of the
economy-perhaps transportation, the promotion of small industries,
forestry, or dry-land agriculture-in which Bank lending is likely to focus in
the future. One of the main functions of such missions is to provide a
general background on the sector, identify its major problems, and outline
possible strategies for its long-term development as a framework for lending
operations. This is one of the stages in which broad technological choices
and priorities are identified and analyzed. These sector missions are gener-
ally undertaken by staff members and outside consultants, but in certain
areas they are frequently joined by experts from other UN agencies.
When the country and the Bank have agreed that financing is likely to
be needed in a particular area, a project identification mission of Bank staff
and consultants visits the country to confer with government officials and
other people knowledgeable about the problems at hand. The main object
of such missions is to achieve a general agreement as to the size and scope of
the project to be financed. It then becomes the responsibility of the country
to prepare the project-that is, describe it in sufficient detail so that it can
be appraised by the Bank and a recommendation made to the Bank's man-
agement and the executive directors representing the member countries that
it be financed. In certain sectors, such as agriculture, education, water sup-
ply, and indust-;y, this task may be undertaken by staff of a UN specialized
agency, with which the Bank maintains a cooperative agreement. These are
the Food and Agricultural Organization (FAO), the UN Educational Sci-
entific and Cultural Organization (UNESCO), the World Health Organiza-
tion (WHO), and the UN Industrial Development Organization (UNIDO),
respectively.
The appraisal procedure is the most important phase in the project as far
as the Bank is concerned. Its purpose is to provide a careful and considered



World Bank as a Technological Institution                 11
judgment of the overall soundness of the project and not merely to evaluate
its financial viability or the likelihood that its revenues will be sufficient to
repay the investment. Appraisal procedures focus on six aspects of the proj-
ect. Its technical dimension is evaluated to ensure that alternatives have been
adequately considered and that the solution finally retained is the optimum
from the point of view of technical soundness, efficiency in the allocation of
resources, and efficiency in the operation of the undertaking. In the economic
part of the appraisal, an effort is made to estimate the true value of the proj-
ect's inputs and outputs to the nation's economy. This is done with all the
tools of modern economics, and the conclusion of this work is summarized as
an economic rate of return. Shadow pricing techniques are used to eliminate
the distortions caused by unrealistic exchange rates, tariffs, regulated prices,
and other such factors and to eliminate biases with relation to the cost of us-
ing labor and capital. The financial part of the appraisal focuses on cash-flow
analysis to estimate profitability and is particularly important in the case of
projects dealing with revenue-earning enterprises. This financial analysis is
complemented by commercial analysis of the market demand for the prod-
ucts or services to be produced by the project. The appraisal also checks that
adequate managerial talent and operational skills are available, or will be
developed, to run the project and that its organizational aspects have been
taken into consideration.
In addition to these six elements, the appraisal procedure takes into ac-
count a number of nonquantifiable and more qualitative elements, such as
the project's likely environmental and social impact and its effects on the
role and status of women. The Bank's standards of project appraisal are
probably as rigorous as those of any other project lending institution in the
world, and its attention to socioeconomic, technical, and environmental
issues certainly far exceeds that of a typical commercial bank.
A Bank-financed project is ultimately embodied in a legal document
known as a loan agreement, which commits the Bank and the borrower to a
specific set of actions. This loan agreement normally incorporates a de-
scription of the physical works and equipment to be financed by the Bank
and also specifies the policy changes agreed on by the borrowing govern-
ment and recognized as necessary to the success of the project.
Once a project has been appraised by the Bank staff and approved by
the board of executive directors, it is the responsibility of the borrowing
country to implement it. The Bank's role, however, does not end here; staff
members monitor the project at regular intervals and provide technical sup-
port if and when difficulties arise. In the course of this monitoring work,
discussions with government officials and the experience gained in the field
lead to the formulation of general ideas for other projects and for new
issues to be addressed in future economic missions or sector missions.
In practice, the design and implementation of a project do not proceed
step by step down a clear, smooth, straightforward path. There are numerous
overlappings and interactions between the different stages. For each specific



12                   Technology, Finance, and Development
project, there is also a terminal point as far as direct Bank involvement is con-
cerned. Once a project is completed-and this may be ten or more years after
a first identification mission took place-it is subject to an independent audit
whose purpose is to measure its overall results, including its economic and
financial return, as compared to the projections made in the appraisal. The
last annual review of these evaluations, which covered projects evaluated in
fiscal 1982, reported that only 8 percent of the total investments evaluated
had yielded results that appeared uncertain or unsatisfactory at the time of
the audit. In addition to this post-audit, one fifth of the projects financed by
the World Bank are subject to a so-called second look five years after their
completion; the purpose of this examination-carried out by social scientists,
economists, and other specialists-is to make a careful assessment of the
projects' actual economic and social impact.
The Role of Technology in World Bank Operations
In the course of its activities as a financing institution and development
agency and largely as a result of the ways in which projects are prepared, ap-
praised, and carried out, the Bank has come to acquire a large amount of
technical expertise, both in very specific areas (rural development or power
generation, to cite but two examples) and in the more general field of mo-
bilizing technology for the purposes of development. This expertise is em-
bodied at the individual level in the people who help countries to prepare
projects and design development strategies and at the collective level in the
Bank's institutional memory, its networks of consultants and experts, and its
relationships with decision makers in both industrialized and developing
countries. The Bank differs from most other development assistance agencies
in the importance of the role played by its technical staff. Of 3,100 profes-
sionals, 600 are experienced technical specialists, such as engineers,
agronomists and educators. While it is impossible to measure the importance
of this expertise in quantitative terms, it is central to the Bank's operations
and constitutes one of its major assets.
Perhaps the main difference between the Bank and the more traditional
types of technological institutions, such as government agencies for science
and technology, research organizations, or technological institutes, is that
technology is essentially a tool among many others rather than the central
concern. Technology transfer, the promotion of innovation, and the diffu-
sion of technology are not goals in themselves but simply some of the in-
struments, along with many others, that contribute to the success of a project
and thereby to the economic and social development of the borrowing coun-
try. This project orientation forces the Bank's staff to focus clearly on the



World Bank as a Technological Institution              13
ultimate value of a technology in solving a practical problem, even when
that technology is in a relatively early stage of development.
The chapters in this book show how technology comes into play in the
design of projects and the formulation of development strategies. We hope
they lead to a better understanding of the ways in which the Bank operates
as a technological institution. The lessons of this analysis suggest that other
development-oriented financial institutions may also be playing a similar
role and that banks are becoming or could become more active partners in
the process of technological development. This may be particularly impor-
tant at a time when the developing world is desperately looking for more ef-
fective ways of mobilizing technology for development.
Note
1. Warren C. Baum, "The Project Cycle," Finance and Development
(December 1978).



Paet I
The Sectoral Approach
The five chapters in this part explore some of the ways in which technology
is used as one of the instruments of development strategies in specific sec-
tors. Two general themes underlie the analysis. The first is that in the
sectoral development strategies put into effect by the World Bank and its
partners in the borrowing countries, we are beginning to see the first signs
of what might be called sectoral technology policies; these are in many
respects rather different from the conventional types of national technology
policies. The second therne is that, unlike national technology policies,
which are defined and im.plemented by national governments, these sectoral
technology policies are being developed by an international agency, the
World Bank, in cooperation with a number of local partners, which are
generally not involved in a direct way in the formulation of a national tech-
nology policy.
Sectors, in World Bank terminology, are not quite the same as the sec-
tors defined by economists or by national accounts statistics. They are
either broad fields of activity, such as agriculture and rural development,
more narrowly defined problems areas such as population, or issues that do
not fall into conventional economic categories but nevertheless have many
elements in common, such as urban traffic. This definition of what con-
stitutes a sector may not be entirely satisfactory from a conceptual point of
view but is useful for delineating administrative responsibilities in a
development agency such as the World Bank and as a unifying theme for
projects in related problem areas.
Conventional technology policies carried out by national governments
have tended to focus on the supply of technology through such means as the
building up of basic infrastructures (such as research laboratories and tech-
nological institutes), the support of technological research activities in
industrial firms, and controls on the import of foreign technology. The
assumption was that if the supply of technology could be increased, the
resulting innovations would gradually feed into the productive system and
thereby contribute to economic growth and social development. The
experiences of the last twenty years in both industrialized and developing
countries have shown that this approach alone was not always very
effective. In fact, it is becoming increasingly obvious that although the
supply of technology, and of the people to develop and use it, is very
important and will continue to remain a major focus of national technology
policies, the more critical element is the demand for technology. Sector
strategies play a key role in promoting this demand.
15



16                  Technology, Finance, and Development
It is only in a large, industrialized country that does not have a clearly
defined national technology policy, the United States, that governmient in-
tervention in the technological system has tended most clearly to focus on
manipulating and creating a demand for new technologies. This has been
done through a wide variety of means, ranging from the somewhat artificial
creation of new markets (often in the military field) for high-technology
products such as computers and microelectronic devices, to regulatory
measures such as new emission controls and fuel efficiency standards im-
posed on the automobile industry. This wide range of measures enacted by
the U.S. government was not intended to promote technological innova-
tion, but this, in effect, is what often happened as a result.
The five chapters in this part address, explicitly or implicitly, the issue
of whether it might be possible to promote technological innovation, and
hence development, in specific sectors by acting not so much on the supply of
technology as on the demand for technology. The authors suggest that several
of the major elements for sectoral technology policies are already in place and
that policies of this type can be a major instrument of development.
This is perhaps more conspicuous in the case of agriculture and rural
development, discussed in chapter 2 by G. Donaldson. The author suggests
that one of the central functions of an agricultural project is to serve as a
vehicle for technological change. He recognizes three main variables in a
technology development strategy for agriculture. The first is the technology
package of on-farm inputs (machinery, improved seeds, fertilizers, irrigation
equipment); the second is the physical infrastructure (roads, dams, irrigation
systems, storage facilities); and the third is the institutional infrastructure
(credit institutions, extension services, distribution services) and the overall
policy measures taken by the government to promote agricultural develop-
ment. He shows how the Bank's technology strategy in this sector has evolved
over the years and examines its role as a direct sponsor of particular kinds
of technology, as the indirect instigator of further investment in new
technology, and, more recently, as the direct originator of new technology.
In chapter 3, K.N. Rao and C. Weiss describe the World Bank's efforts
to develop a set of approaches, consistent with its lending practices and its
financial objectives, to encourage innovation at the industrial enterprise
level. On the basis of case studies of technologically innovative industrial
projects supported by the Bank in Spain, Israel, and Korea, the authors sug-
gest that some of the most effective means of fostering development and
change are generalized financial incentives for technological improvements,
active government intervention to catalyze innovations across a broad
front, and programs to develop new technology and to strengthen local
technological capabilities in specific areas through the concerted action of
government research centers, financial institutions, and private industrial
firms.



The Sectoral Approach                                     17
In chapter 4, B. Coukis and N. Jequier examine the research sponsored
by the World Bank and other organizations on the applications of labor-
intensive technologies for road construction, as well as specific projects in
which such technologies have been used. This research shows clearly that
labor-intensive methods can be economically efficient but that considerable
attention has to be given to the supervision of the labor force, the design of
better hand tools and animal-drawn equipment, and the timing of the works
in relation to agricultural priorities if such projects are to be viable. What
emerges from this chapter is the need for a well-defined sectoral technology
policy that helps to build rural roads efficiently and to meet broad social ob-
jectives in the field of income and employment.
Chapter 5 by H. Werlin describes a variety of innovative solutions to the
problems of urban traffic management. All of these solutions involve a
blend of hardware and software, but in most cases the most important ele-
ment by far is the software. Werlin shows that in major urban areas, seem-
ingly intractable traffic problems, with all their ensuing drawbacks for the
community, can be solved or dramatically alleviated at reasonable cost. His
demonstration is also particularly instructive because it shows that, in this
sector at least, the developing nations have something to teach the indus-
trialized countries, rather than the other way around.
In chapter 6, W. Drewes and A. Sirkin examine the impact of a revolu-
tionary new technology-remote sensing from outer space-on agriculture,
water management, and the development of natural resources. This highly
sophisticated technology is opening up new possibilities for developing na-
tions that lack personnel trained in resource evaluation and have inadequate
mapping capabilities. Effective application of such new techniques requires a
minimum of reorganization of existing resource-oriented agencies such as
geological surveys, forest services, and water planning authorities, yet offers
much new information useful to resource planners and decision makers in-
volved in development activities.



Technology in
Agricultural
Development
Graham Donaldson
Food production is the first systematic activity undertaken by any society,
and all countries, regardless of their level of economic development, have
an established agricultural sector. In developing countries, farming
traditionally provides the main source of employment, and the rural areas
generally contain the majority of the population. All models of economic
development attribute a particular role to agriculture in the development
process. As agriculture increases both its aggregate output and the produc-
tivity of its prime resources (particularly land and labor), it diversifies its
range of products for domestic consumption and export and generates a sur-
plus for further investment, growth, and development. In the face of high
population growth and renewed concerns about the long-run availability of
food supplies, the importance of agriculture has received further emphasis.
The World Bank has been responsive to these concerns and increasingly
has directed its attention to the agricultural sector of developing countries.
Its lending program provides substantial support for innovations designed to
improve established farming technology and raise the productive capacity
of agriculture. In many instances, a World Bank-financed project may be
the only means by which a small farmer can gain access to new methods and
resources. The technical package is recognized as the kernel of every proj-
ect. However, initiating acceptable technological change in agriculture is a
complex process, which requires far more than just efficient production
methods. Although the provision of capital remains a key component, the
Bank approach to agricultural development has changed markedly over the
years in line with the emerging awareness of rural problems and the
changing needs of developing societies. The approach has been broadened
to include support for forestry and fisheries and deepened to provide many
of the concomitants of farm production.
The Special Characteristics of the
Agricultural Sector
Even within a particular country or region, agriculture is generally very
diverse, and this diversity is magnified by differences in climate and geog-
This chapter draws extensively from John P. McInerney, The Technology of Rural Develop-
ment, Staff Working Paper 295 (Washington, D.C.: World Bank, 1978).
19



20                  Technology, Finance, and Development
raphy. Therefore care must be exercised not to refer to the agricultural sec-
tor as though it were a uniform entity. The location-specific characteristics
of farm production are such that one cannot usefully refer to change in
agricultural technology with the same generality as one might refer to
changes in the technology of steel production or transportation, for instance.
Agriculture around the world is practiced under a whole set of technologies.
Attempts to change this set, whether initiated by a national government or an
individual farmer, must choose among individual components or a subset of
components that are to be a focus for change. The problems of inducing
and supporting the adoption of new technology in agriculture are conse-
quently diffuse, determined as they are by an array of different technical,
organizational, and socioeconomic features.
From a technical standpoint, plant and animal production are essentially
natural biological processes upon which humans have progressively im-
printed their influence. Humans first injected their own labor to control and
direct the biological growth sequences and subsequently added an increas-
ing array of man-made and artificially applied inputs. As a result, change in
farm technology can be brought about in a number of ways: through alter-
ing the basic biological processes (for example, through the use of improved
seed varieties and livestock breeds); by new or modified labor operations
(for example, weeding, pruning, or row planting); by the appiication of
novel chemical inputs to the production process, most notably fertilizers,
disease and pest-control chemicals, and veterinary products; and through
the use of tools and mechanical aids supplying either additional power
(cultivators, pumps) or the facility to carry out particular operations (mold-
board plows, threshers). Despite these expanding possibilities for bringing
the biological processes of food production more directly under control,
there still remains an inescapable natural pace and sequence of events in
farming that govern the production possibilities. Variations in climatic con-
ditions and other uncontrollable biological phenomena leave food output
and quality ultimately unpredictable, even under the most advanced pro-
duction technology.
The organizational structure of activity is more diverse than in other
sectors. New production technology may need to be directed toward
nomadic pastoralists or to producers with highly intensive cattle feed lots;
new methods may be required either for plantation production or for tiny
village plots; innovation may be in the hands of highly commercialized,
market-oriented farmers or self-sufficient subsistence family units; produc-
tion may be oriented toward world export markets or to local domestic con-
sumption; farmers may be secure owner-occupiers or insecure share-tenants
effectively ruled by a landlord; decision making and its attendant success or
failure may rest with staunchly independent farm operators or may be
governed by a tradition of shared responsibility within the community; farm-



Technology in Agricultural Development                     21
ing may be a full-time and exclusive commitment or a part-time source of
accessory income. Compared with many other industries, a typical produc-
tion situation cannot be defined, especially in developing countries, and any
single agricultural commodity may be produced under an immense variety
of social and organizational systems. This characteristic in itself weakens
the meaning of general statements about changes in farm technology and re-
quires a particular understanding of specific local conditions.
Agricultural production has strong links with the sociocultural pattern
of life in rural areas. There are numerous interrelations between farming ac-
tivity and the life-style of the people. This arises partly from the historical
place of agriculture as one of the earliest human ac'ivities, so that many
customs, traditions, and living patterns stem from agricultural practices and
the cycle of the farming year. In addition, the countryside is at the same
time the place of work and the place of living for rural people, and both
farming fortunes and general welfare are entwined. Changes in agricultural
technology, which inevitably modify the characteristics and modes of farm-
ing activity, therefore also cause changes in life-styles and impinge far more
on the overall fabric of society than do innovations in sectors where work
and home, employment and leisure, are separate. As a consequence, suc-
cessful agricultural innovation is influenced and constrained by much more
than the technical and economic characteristics of the productive environ-
ment. Its effects go beyond the quantitative impact on food output and em-
brace a host of qualitative adjustments in the patterns of rural life, as
reflected in the structure of institutions, dependencies, values, and expecta-
tions within society.
Together these distinctive features of the rural scene exert a major in-
fluence on the nature and process of technological change in agriculture and
created special conditions for the design and implementation of projects
aimed at improving farm technology.
The Agricultural Project as a Vehicle for
Technological Change
Development is characterized by a cumulative series of changes in the
technology employed by society. Projects have been referred to as the cut-
ting edge of development because they serve as a key instrument for intro-
ducing and delivering new elements into the established pattern of activity.
In1 countries whtxe agriculture is characterized by low productivity and the
predominance of small-scale, subsistence systems that have evolved over a
long period, there usually is little experience of internally generated innova-
tion, and change is unlikely to occur unless it is deliberately introduced
from outside. Since an agricultural project is essentially "an investment



22                   Technology, Finance, and Development
activity where we expend capital resources to create a producing asset from
which we can expect to realize benefits over an extended period of time," it
is in the physical components (the hardware) financed by the project that
new technology is usually to be found.' Farm technology also has a so-
called software aspect that embraces the supporting systems, institutions,
and organizational structures associated with agricultural production.
These, too, are provided in development projects and have received an in-
creasing emphasis in World Bank financing for agriculture.
If one conceives the general structure of agricultural production to be
one in which numerous individual farmers make resource-use decisions
within a framework of shared physical and institutional facilities (the infra-
structure), it becomes possible to identify the major points in this structure
where development projects might exert their impact. It is thus useful to
distinguish three broad classes of projects according to the type of technol-
ogy they make available to the agricultural sector. (Any particular project
may, of course, contain elements of all three types.) Each has its own par-
ticular characteristics and practical problems, and each has an identifiable
place in World Bank lending for agriculture.
On-Farm Inputs
These projects provide technology in the form of totally new, locally novel
or improved traditional inputs and processes, as directly selected and
employed by the individual farmer. Typical examples include seeds, fer-
tilizers, tractors, machinery, tubewells, and livestock. The actual mech-
anism of the project may be to provide credit facilities to enable farmers to
finance their own purchases or investment decisions, but the focus of the
project can nonetheless be identified as specified hardware components.
Special considerations in such projects include the need to identify the par-
ticular group of farmers (in terms of size, type, location, and so on) to
whom the new technology is to be directed; ensuring that the inputs and
processes are appropriate to their situation; making available a suitably
complete package of project elements for successful implementation by the
farmer; providing the required information, guidance, and support to over-
come the barriers created by unfamiliarity; and achieving adequate reliabil-
ity and predictability in use so that the new technology is both acceptable to
farmers and successfully applied. This type of project is appropriate where
the micro-objectives for technological change, outputs, and resource use
have been clearly identified.



Technology in Agricultural Development                     23
Physical Infrastructure
One of the constraints facing the developing countries is that their basic
rural infrastructure is insufficient to allow the successful absorption and ex-
ploitation of new technology by individual farmers. The prime role of proj-
ect lending in such a case is to provide for investment in such facilities as
dams and irrigation canals, roads, electricity networks, and product storage
and processing facilities. The provision of such facilities is dependent on
public investment rather than individual farmer decisions, and in many in-
stances rural infrastructure has the classic characteristics of a public good.
The technology embodied in such investments is supportive rather thart
directly productive, and its value depends on the extent of chariges in on-
farm activities that it permits or induces. Because it is part of the general
fabric of farming, it is often not possible to tailor its availability or direct its
benefits to a particular group in the rural population, such as small farmers,
landless laborers, or maize producers. Indeed, by the very nature of the in-
frastructure, the exclusion of certain interest groups may be unavoidable.
Furthermore, in many cases, the success of the project in changing the tech-
nology of farming depends as much on the particular arrangements made
for the use of the facility as on the inherent technical quality or efficiency of
its physical structures.
Institutional Infrastructure
Recognition of farm technology as an interconnected system of resources,
activities, facilities, and processes highlights the importance of the software
elements that must be included in agricultural projects if they are to be fully
effective in sponsoring technological change. In many instances, this im-
plies the establishment of part^iular institutional structures necessary to
support the newly adopted physical farm inputs and interfarm infrastruc-
ture. These might include farmer cooperatives to supply inputs and handle
output; product collection, grading, and distribution agencies; credit in-
stitutions to serve the specific needs of innovating farmers; and farm ad-
visory and veterinary services. All of these project components require the
use of scarce and perhaps novel resources, though their totality is not just
the physical capital structures that are erected. Furthermore, they are just as
much an integral part of the production technology as are the hardware
items, which would not be viable or self-sustaining without the support of
these institutional arrangements.
One crucial type of institutional infrastructure that is gaining increasing
emphasis in the World Bank's agricultural projects is the establishment of
local research and extension agencies. These seek to sustain a continuing



24                 Technology, Finance, and Development
momentum of technology development, adaptation, adoption, and diffu-
sion. The technology of institution building-the establishment of ap-
propriate and effective institutional arrangements, responsive to the needs
of target groups, suited to the conditions surroundirng the use of new
technological hardware, and adaptable in the face of changing circum-
stances-is one of the most difficult and least charted aspects of contempo-
rary agricultural project work, yet is is crucial for successful development
through technological change.
One particular feature of an agricultural project (as compared with
many large-scale industrial projects for example) is that its implementation
rests in the hands of many individuals; no single entrepreneur, commercial
concern, or elite cadre of businessmen makes the decisions about invest-
ment and exploitation. Rather, the project's success is the result of the col-
lective action (or inaction) of countless individual farmers, many of whom
ofLen have little experience with innovation or with commercial production.
In these circumstances, changing established farming practice requires more
than the provision of new facilities. Whether it is making fertilizers avail-
able for sale or placing irrigation canals in situ, the innovation has to be ac-
cepted, taken up, and used by the target farmers. In addition, the new tech-
nology can often be applied in a number of different ways. Mechanization,
for instance, can be used to increase the intensity of land use, to expand the
area farmed, or just to replace labor. There is often a need to reconcile the
needs and motivations of the individual with sectoral objectives and the
wider social good. To achieve this, the agricultural project must be carefully
prepared and must fit into the context of a balanced policy toward
agriculture and a structured program of change. Without such an approach,
the project might otherwise serve merely as a temporary, and perhaps largely
unbeneficial, disturbance to the system.
Agricultural Lending in World Bank Projects
In the thirty-six years since it funded its first agricultural project-a $2.5
million loan to Chile in 1948 for the purchase of agricultural machinery for
land clearance-the World Bank has made available almost $30.2 billion in
loans for agriculture. The Bank on average provides about 39 percent of the
total funds for the agricultural projects it supports, so that Bank-financed
projects have in total directly initiated perhaps $77 billion worth of
agricultural investment. Since this sum constitutes more than 20 percent of
net public investment in developing-country agriculture over the period, it
represents a substantial amount of technological change initiated from one
institutional source. The importance of agriculture in the Bank's activities is
indicated by the fact that a quarter of its total lending to date has been
directed to this one sector. During much of the 1970s, the proportion of



Technology in Agricultural Development                  25
agricultural lending reached 30 percent. This emphasis has leveled off in re-
cent years, and today about one-quarter of the Bank's project funds are still
directed to agriculture and rural development.
The World Bank performs three main roles in relation to technological
change in agriculture. It serves, first, as a direct sponsor of particular types
of technology through the various project components (on-farm inputs,
physical infrastructure, institutional infrastructure), and the specific mix of
elements within these categories that it finances. Second, it serves as an in-
direct instigator of further investment in new technology-most obviously
because traditionally it has not financed total project costs but only foreign
exchange costs and approved local costs, thereby drawing in domestic funds
to support the project. In addition, because technological change is not a
discrete event but a continuing process, a diverse array of associated
secondary adjustments, investments, and expenditures by farmers are in-
evitably induced as they respond to the new production possibilities made
available by the project. Third, the Bank serves as an originator of new
technology. This has been a relatively recent but growing facet of the
Bank's influence through its funding of international and national agricul-
tural research systems that are expanding, developing, and adapting existing
knowledge and practices for different situations around the world.
The Bank has made important policy changes in its agricultural lending
programs in developing countries since the early 1970s. These recognize
three important steps in achieving the policy goals implied by the "Nairobi
Address": allocating a larger proportion of its lending to agriculture, in-
creasing the share of lending to the poorest countries, and introducing proj-
ects to benefit larger numbers of people in the poorest countries.2
The growing involvement of the World Bank in developing-country
agriculture is reflected in table 2-1. During the first twenty years or so of its
operations, the ruling philosophy of economic development emphasized the
importance of industrialization in leading the growth of aggregate gross na-
tional product (GNP) and modernizing the economy, loosely taken as synon-
ymous with development. In consequence, agricultural projects formed a
relatively small proportion of Bank lending, accounting for roughly 10 per-
cent of the total lending over the entire period. Since then, the emphasis on
agriculture has increased dramatically, rising to 20 percent and then to 30
percent of total lending in successive five-year periods, although it has
recently declined as a proportion to 25 percent due to the expansion of
energy projects and structural adjustment lending. During this time, the
Bank's scale of operations in all sectors has increased fivefold, so that in ab-
solute terms, its involvement in new agricultural technology projects has
become significant. Some indication of this recent growth is given by the
fact that of the total amount of capital made available to agriculture since
1948, almost three-quarters was lent in the last seven years.



Table 2-1
World Bank Lending in Agriculture, 1948-1983
Proportion        Total Bank        Agricultural   (D
0
Total Cost       Amount Lent           of Cost         Lending to         Lending as    w
Number of         of Projects         by Bank           Funded by        All Sectors       Proportion of   O
Projects         ($ million)        ($ million)        Bank (%)          ($ million)        Total (%o)   0-
1948-1963             55             1,736.6              468.1             27.0             7,208.6              6.5
1964-1968             45              1,277.8             620.8             48.6             5,632.8             11.0       n
1969-1973             178            6,436.4            2,586.3             40.1             12,849.4            20.1       -
1974-1978            358            23,855.9           10,018.7             42.0             32,556.3            30.8
1979-1983            386            43,629.5           16,519.9             37.9            61,276.0             27.0
0
Total               1,022            76,936.2          30,213.8             39.3            119,523.1            25.3       P
Source: World Bank, Annual Reports.
0.
CD
-o
3
CD



Technology in Agricultural Development                        27
Among the regions of the world, Asia receives the largest share of the
projects; the other regions of the world take an equal share among them-
selves. This pattern is consistent with the distribution of rural populations
in the world and also in agreement with the primary objective of the Bank-
removing rural poverty. Table 2-2 gives the distribution of rural poverty
and the allocation of Bank funds in different geographical regions. Over 85
percent of the rural poor are living in the countries of Asia and Africa, and
they receive close to 60 percent of the Bank funds allocated for agriculture.
Starting from the mid-1970s, special projects were prepared to benefit
small farmers (defined here as those with landholdings under 5 hectares)
and landless laborers in the poorest countries. During 1978 alone, these
projects were aimed at nearly 21 million families (direct and indirect bene-
ficiaries) or 105 million people in the rural areas. About 90 percent of these
beneficiaries are located in the countries of Asia and Africa. In Asia the ma-
jor share of these benefits goes to the world's poorest population situated in
India, Pakistan, and Bangladesh.
The path of agricultural lending over time, and particularly this recent
phenomenal expansion in project activity, is explained partly by the overall
growth of the World Bank as an international development agency during
the development decade of the 1960s and the worldwide attention to the
plight of the poor countries. It can also be viewed from the standpoint of
particular developments in agricultural technology. In the 1950s and early
1960s, the identified needs of developing-country agriculture, as well as the
dominant transferable technology, were seen as rural infrastructure
facilities. Lending in this period therefore focused on dams, irrigation
canals, and product processing facilities. During the 1960s, there was a
Table 2-2
World Bank Lending in Agriculture by Region, and Distribution of Rural
Population in Poverty
Percentage of        Percentage of
Agricultural        Population in
Lending           Rural Poverty
(1974-1978)           (1974)
Africa                                      15.9                 18.9
Asia                                        44.1                 66.4
Europe, Middle East and North Africa        18.7                  6.0
Latin America                               20.3                  8.7
Total value of World Bank lending
to agriculture                       $10,018.7 million
Total number of people with income
below $50                                                   580 million
Source: World Bank, 1980.



28                 Technology, Finance, and Development
gradual recognition of the possibilities of applying modern types of farm in-
puts developed in the framework of Western science-based agriculture to
the problems of agricultural development and food output expansion in
developing countries. The emergence of the green revolution gave added im-
petus to this change, which provided many more opportunities for injecting
new technology into agriculture by the typical lending project. Consequently
the character as well as the extent of the World Bank's lending gradually
shifted, with an increasing number of projects to finance new seed varieties,
fertilizers and chemicals, mechanization, livestock development, and other
direct on-farm resource-use activities,
Some idea of these changes emerges from table 2-3, which shows the
breakdown of agricultural lending by conventionally defined subsectors.
This classification of subsectors were done for administrative convenience;
thus the content of the subsector is only an approximation implied by the
name. As time passes and the scope and size of projects change the original
classification may have little relevance. For example, irrigation projects of
the 1950s differ considerably from irrigation projects of the 1970s. Before
the early 1960s, such projects concentrated on the construction of dams and
canals with a power plant; an example is the Indus Basin in Pakistan in
1961. But now the irrigation project is a complete system that emphasizes
water management and includes both on-farm facilities for using water and
supporting facilities to make available such inputs as seeds, fertilizers, and ex-
tension services, as in the case of the 1970 Kadana irrigation project in India.
Even with this limitation, the tables indicate the changes that have taken
place over time in the allocation of Bank funds for agriculture. Between
1948 and 1963, nearly 87 percent of rural lending was for irrigation (77 per-
cent) and general agriculture (10 percent), but in the 1979-1983 period, only
34 percent was allocated to these subsectors. By contrast, agricultural
credit, agroindusuries, fisheries, livestock, agricultural research and exten-
sion, and area development were given more importance in the later time
periods. The best way to show the changes that have taken place in the Bank
lending program is to analyze it project by project in different time periods
since classifying any project in a single category is difficult. A typical
agricultural credit project, for instance, will provide funds to buy seeds, fer-
tilizers, pumps, tractors, power tillers, threshers, bullocks, and dairy
animals or will help the farmer to construct wells and drainage canals and
provide training in improved agricultural practices. This project can, in
fact, be classified under any or all of the subsectors listed in table 2-3. A
case-by-case analysis of the 954 agricultural projects financed by the Bank
would bring stronger evidence to the main hypothesis of this book-that the
World Bank is a technological institution and is performing as an agent of
transfer for new agricultural technologies from the North to the South
countries through its support of technologically innovative projects.



-4i
CD
0
0
Table 2-3                                                                                                                                              >
World Bank Lending to Agriculture, by Subsector, 1948-1983
c
-Total                                             Percentage of Rural Lending Allocated to:
Rural      General   Agricultural   Area      Fisheries  Irrigation  Livestock  Agro-    Perennial   Forestry  Research     Other         C
Lending    Agriculture   Credit   Development                                  industries   Crops                  and
(S Million)                                                                                                      Extension
CD
1948-1963      468.1       10.3        4.3         5.4                  76.4        1.5        1.0                   1.1                               <D
1963-1968      620.8                  13.6         10.4       3.6       44.5       23.5        3.1        1.3                                          O
1969-1973    2,586.3       1.0        19.1         6.0        1.2       31.0       20.5        8.1       11.2        0.5        1.4                    "
1974-1978    10,018.7      0.6         15.2       23.7        1.0       31.6        8.6        5.8        7.0        4.7        1.8                    3
1979-1983    16,519.9      1.2         14.7       23.7        0.9       32.9        1.6        9.5        6.8        3.4        4.3        .9           =
Total        30,213.8       1.1        15.0        21.6       1.0       33.2        6.0        7.9        7.1        2.6        4.0        .5
Source: World Bank, 1984.
CD



30                 Technology, Finance, and Development
Technological Changes Induced by
Bank-Financed Projects
One of the important innovations in irrigation technology in the 1960s was
the widespread diffusion of the tubewell. The tubewell is basically a pump
mounted on a pipe that is sunk from 50 to 300 feet into the groundwater-
bearing layers. Potentially, tubewells can be constructed small enough to
meet the requirements of farm holdings of the order of 2 to 5 hectares. Ir-
rigation can thus be made more directly available to the individual farmer
since it is embodied in on-farm inputs rather than in physical infrastruc-
tures. Two irrigation projects using this technology were set up in Morocco
during 1976 and 1977; they are supported with Bank loans totaling $71
million and will ultimately benefit 7,000 families working on 30,000 hec-
tares of rain-fed land.
As an indirect instigator of further investment in technology, the Bank
has encouraged the use of underground plastic drainage tiles to rectify
salinity in Egypt and Pakistan and the use of glass-reinforced plastic and
timber flumes for tertiary canals in Malaysia. As an originator of new
technology, it has funded the experimental development of solar pumps for
irrigation in India.
Another developing strand in World Bank lending is the emergence of
projects that include a greater recognition of the essential software elements
of agricultural technology, particularly in the form of institutions and
organizational arrangements that cater to the farmer's needs for inputs and
to the problem of marketing his products. Institution building is not easily
identifiable as a capital project that can be directly funded by the Bank. but
it inevitably receives attention as a component of carefully prepared
agricultural projects because it is often an essential determinant of their suc-
cess. In some cases, new institutional arrangements emerge as a by-product
of investment in physical infrastructures, as water management schemes
often do in canal irrigation projects. In other cases, they are central to the
project and its implementation. Thus, for instance, the funds made avail-
able to the farmer for the purchase of machinery will be disbursed as a
credit project operated by rural financial institutions in the country. In such
cases, the capability of these institutions to serve the expanding needs of
farmers is expected to be increased through their association with the project.
Typical projects that emphasize the software elements of agricultural
technology include the Lilongwe Land Development Program in Malawi,
the Pider Project in Mexico, and the Agricultural Refinance and Develop-
ment Corporation (ARDC) Credit Projects and Drought Prone Areas Pro-
gram (DPAP) in India. The ARDC projects have supported the training of
large numbers of participating State Land Development Bank staff and in-
creased the involvement of commercial banks in agricultural lending. The



Technology in Agricultural Development                  31
DPAP provides for strengthening the central government agencies in charge
of this program unit, creating an interdepartmental coordinating committee
at the state level, and establishing district-level development authorities to
coordinate and supervise the development of minor irrigation and water-
shed management, the adoption of dry farming technology, and the im-
provement of sheep and wool production.
Livestock projects in recent periods have focused increasingly on the live-
stock needs of small farmers, and particularly on dairying. A series of proj-
ects in Turkey have sought to reach small dairy farmers and promoted village
livestock development on a group basis. Projects in Honduras and Panama
have supported the development of dual-purpose dairy-beef production on
farms. In India, the National Dairy Project as well as dairy development
projects in the states of Karnataka, Madhya Pradesh, and Rajasthan are sup-
porting the widespread adoption of an Indian model of cooperative dairy
production and marketing that involves dairy cooperatives, unions of village
cooperatives, and federations of milk unions. The technology package in-
cludes the upgrading of native cows through cross-breeding with high-
producing exotic breeds, the development of milk transport systems, and
the establishment of large, sophisticated milk-processing plants. Farmers
are using their incomc from the sale of milk to purchase more fertilizers and
better seeds, as well as irrigation water for their crops.
Before 1971 the Bank initiated six fishery projects that provided mainly
for the purchase of commercial fishing vessels and the improvement of port
facilities. After 1971, twelve projects were specifically implemented to benefit
small fishermen. The Bank has provided improved equipment such as fiber-
glass canoes, synthetic nets, and outboard motors and has developed a tech-
nical package for aquaculture that includes the fertilization of selected ponds,
the introduction of new species of fish (notably the tilapia), and supplemental
feeding with bran.
Bank-financed projects in forestry have shifted away from industrial for-
estry-generally large-scale plantations supplying logs and pulpwood for the
domestic market-to rural forestry.3 The latter includes attempts to deal with
the environmental consequences of deforestation (as may occur in agricultural
settlement projects) and to provide the rural poor with adequate supplies of
wood for heating, cooking, and shelter through such means as village woodlots.
Projects on agricultural crops, which tended to focus on export crops
like rubber, oil palm, cocoa, coffee, and tea, now emphasize fruit trees such
as mangos, avocados, and apples, and there has been a similar shift away
from perennial crops to annual crops. These changes have benefited small
holders rather than private and government-owned estates. Technological
innovations introduced as a result of Bank-financed projects include dwarf
varieties of coconut trees, a low-volume herbicide sprayer, and puncture
tools for the easy tapping of rubber trees.



32                  Technology, Finance, and Development
The Bank's involvement in physical infrastructure frequently consists of
advising on post-harvest treatment, crop storage, and the marketing of
farm products. Grain storage, which forms a growing part of such loans,
used to be done mainly in large steel or cement silos located in urban areas;
several new projects in rural areas now concentrate on small steel storage
bins located on the farm or, alternatively, on plastered rattan containers
and on controlled open storage. Such projects encompass far more than the
mere creation of physical structures; they touch on the building of rural in-
stitutions. The Indonesian Nutrition Development Project, for example, is
supporting the establishment of a Food Technology Development Center,
which is assessing traditional processing and storage technology, erecting
prototype storage units varying in size from 1 to 10 tons that are managed
by the local village cooperative, and monitoring and evaluating their use as
a basis for developing a national storage program. This project includes
training extension workers, producing storage units, and developing a
storage credit system. A project in the state of Himachal Pradesh in India
that centers on the apple processing and marketing industry is introducing
technological innovations in the processing, packing, and grading of fruit;
it has also established a commercially oriented marketing organization and
made further infrastructural improvements to handle 25 percent of the
region's output.
The Role of Research
If an agricultural project is a vehicle for technological change, research is
the fuel for project innovation. The Bank has recognized the importance of
research, and a majority of projects include a research component when
feasible. Over half of the Bank-financed agricultural projects now have
agricultural research components, which amount to over 5 percent of total
lending in the sector. Important research components in recent projects in-
clude adaptability trials, fertilizer trials, variety trials, the testing cf alter-
native crops, quality improvement, the improvement of local research
capabilities through technical assistance, and the development of new
knowledge and techniques in specific areas. The fourth Philippines
Agricultural Credit Project, for instance, includes provisions for research on
appropriate farm mechanization technology for different agroclimatic and
socioeconomic conditions. The results of this study will benefit farmers,
policymakers, rural banks, and equipment dealers in the Philippines and
may be applicable to other countries in Southeast Asia.
Along with this support of research as a component of agricultural proj-
ects, the Bank also directly funds agricultural research and extension proj-
ects.4 This is the case, for instance, in Spain, Indonesia, Malaysia, Brazil,



Technology in Agricultural Development                    33
and India. Four such projects in India (West Bengal, Madhya Pradesh,
Rajasthan, and Bihar) are aimed specifically at strengthening agricultural
re-earch and extension services for the benefit of millions of farm families.
Some projects in the field of education also contain an agricultural
research component. The first large-scale education loan was provided to
help construct and equip buildings at the College of Agriculture of the
University of Philippines and was part of a comprehensive program to in-
crease agricultural production. Through 1983, 105 of the Bank's 264 educa-
tion projects have had an agricultural research component aimed at providing
training in agricultural techniques to rural populations.
The Bank is also a major sponsor of international research in
agriculture through its participation in the Consultative Group on Interna-
tional Agricultural Research (CGIAR) which supports major research in-
stitutions in twelve countries working on the major food crops and
ecological zones of the developing world.
Agricultural Components in Other
Bank-Financed Projects
Technological change can be characterized by the wider use of such modern
inputs as fertilizers, pesticides, tractors, pumps, threshers, harvest com-
bines, high-yielding varieties of seeds, and improved agricultural practices.5
One necessary condition for the full realization of the fruits of modern
technology is an uninterrupted supply of supporting inputs. In developed
countries, industrialization acted as a complement to technological changes
in agriculture by supplying such factors as fertilizers, pesticides, tractors,
pumps, threshers, harvest combines, and other industrial products. The in-
dustrialized nations have a great ability to deal with disequilibria6 and have
achieved a balanced growth in both agriculture and industry.7 In the tradi-
tional societies of developing nations, where this ability to deal with dis-
equilibria is much weaker, the software component of a new technology is
critically important to the successful adoption of innovation-hence the im-
portance of infrastructural facilities and the need to remove the constraints
to the adoption process. Through its lending programs in developing coun-
tries, the World Bank has played a significant role in inducing technological
changes in all sectors of the economy.
Bank projects in the industrial sector often contain an agricultural com-
ponent in the same way that projects in the agricultural sector often contain
industrial components (for example, food processing or sawmilling). The
size of the agricultural component may vary from nearly 100 percent in the
case af a fertilizer plant to a negligible share, as in a project to finance a
steel., lustry. Power projects financed with Bank funds have been critically



34                  Technology, Finance, and Development
important in providing the energy to power the pumpsets for irrigation.
Projects in health, population, nutrition, and transportation also often
have agricultural components, and as a technological institution the Bank
has organized projects in such a way that technological changes in different
sectors are complementary to each other.
From this short account, it is evident that the agricultural projects sup-
ported by the World Bank in the last 35 years have evolved through all the
types of technology identified previously: on-farm inputs, physical infra-
structure, and institutional infrastructure. The Bank's original emphasis on
technology embodied in physical infrastructure became progressively more
balanced through its support to the science-based technology embodied in
new inputs for direct purchase and use by farmers. More recently, this em-
phasis has been overlaid by the emergence of institutional infrastructure as
a frequent and important component of agricultural projects. Among other
things, this is a reflection of current concerns about the needs of the masses
of rural people in poor countries and about the appropriateness of the tech-
nological innovations that can be made available to them through agricul-
tural projects.
Notes
1. J. Price Gittinger, EconomicAnalysis ofAgricultural Projects (Bal-
timore: Johns Hopkins University Press, 1972), pp. 1-2. Investment is often
interpreted to include items of production expense as well.
2. Robert S. McNamara, address to the Board of Governors of the
World Bank, Nairobi, September 24, 1973.
3. See Forestry-Sector Policy Paper (Washington, D.C.: World
Bank, 1978).
4. See Agricultural Research-Sector Policy Paper (Washington, D.C.:
World Bank, 1980).
5. T.W. Schultz is in favor of defining technological change as identi-
fiable new factors of production accounting for an increase in output. See
his Transformation of Traditional Agriculture (New Haven: Yale University
Press, 1964).
6. Exogenous technological changes are shocks to the equilibrium pro-
ducing dynamic endogenous changes to move toward a new equilibrium.
7. Agricultural modernization displaced labor in the rural areas, but
industrialization was able to absorb the migrated labor.



Government Promotion
of Industrial Innovation
IL             K. Nagaraja Rao and
Charles Weiss
The art and science of industrial innovation, a process by which technical
ideas are implemented and new products and processes are successfully in-
troduced into the market, is attracting much attention in both developed
and developing countries. The developing countries, whose industrial de-
velopment is based primarily on imported technology, are showing a height-
ened interest in how their own technological development strategies could
be redirected to stimulate the innovative activities of their public and private
enterprises. This chapter describes the World Bank's efforts in assisting
several developing countries in promoting both technological innovation in
domestic industry and concomitant changes in public policies and institu-
tions.
The Bank's approach to industrial innovation in the developing coun-
tries is in essence an experimental attempt to apply what has been learned
over the past decade about the processes of technological development and
innovation in developed and developing countries. It recognizes the variety
of capabilities and experiences of the different developing countries. In
some countries, technological development is well advanced. In others, even
the basic industrial and technological infrastructure has yet to be laid.
The Bank's Approach to Industrial Innovation
Industrial innovation does not occur in a vacuum. It feeds on, and con-
tributes to, an existing base of industries and a supportive infrastructure of
institutions. It cannot flourish where such a base does not exist. Present
understanding of the innovation process has led to the recognition that
several elements must be available at the right time in the right proportions:
a potential demand (that is, a market or social need), a base of scientific and
technical knowledge, a source of creative effort, an attractive investment
The ideas developed in this chapter are derived from many sources. The general country
descriptions were drawn from World Bank reports. Descriptions of individual projects are
drawn from World Bank reports and from materials by George Wayne (Israel), Magdi
Iskander (Korea) and Wolfgang Wipplinger (Spain). We also acknowledge the contributions of
Yitzhak Yaakov, Jose Maria Castanie, J. Herbert Hollomon, Jack Baranson, Enrique Bia,
Jose Veiga Simao, Mario Kamenetzky, Augustin Que, K. Challa, Larry Westphal, and
Frederick Moore.
35



36                  Technology, Finance, and Development
opportunity, the ability to assemble capital and the resources necessary for
development, and, above all, the availability of entrepreneurial and pro-
fessional personnel who are able to mobilize the resources to satisfy these
needs.
Research and development may be necessary, but they are not a suffi-
cient condition for innovation. Frequently an advanced engineering capa-
bility may be all that is required to bring technical ideas to the marketplace.
There are many situations, however, in which hardware developments
focused purely on technology-indigenous or foreign, new, adapted, or
transferred-are unlikely to succeed if they are not accompanied by, and in-
tegrated with, a package of policy and institutional changes on the part of
government and a concern on the part of the innovating enterprise for the
whole sequence of idea generation, its technical implementation, and
marketing of the resulting product or process.
In general, technology policymakers in developing countries have
sought to increase both the supply and demand for technology-the former
through government assistance to research and development and, to a lesser
extent, to engineering, and the latter through innovative activities in public
or private enterprises. Until now, however, the supply side of technology has
received much greater attention and resources than the demand side. De-
mand for technology may be stimulated by a willingness to allocate public
resources to local enterprises for improving product design to meet market
needs, for carrying out preinvestment studies for shopping, selecting, and
negotiating for technology, for quality control and cost-cutting innovations
in processes, and for launching original products based on local research
and development.
The paucity of entrepreneurs and managers who combine skills in en-
gineering, production, and marketing and the lack of start-up and venture
capital to underwrite risky ventures of indigenous firms are, however, a
serious impediment to innovation in the developing countries.
The technical capacity of a nation-its ability to use and master tech-
nology-is an elusive concept. It includes the analytical capability of gov-
ernment decision makers, the technical capabilities of research scientists,
engineers, managers, technicians, skilled workers, shop floor innovators,
and consultants, and the all-around capability of the entrepreneur to make
technical choices and implement them. It also includes the capability to deal
with agents of technology transfer-chiefly the salesmen of equipment and
technical services and the licensors of technology and know-how. It means
the mastery of technology to the point of being able to design the next in-
stallation locally, to act as one's own prime contractor and to carry out
adaptations, and eventually to develop new products and processes based
on original research and development.'



Government Promotion of Industrial Innovation           37
Many developing-country governments, acting on the assumption that
such capacity is best developed through institutions, have established na-
tional science and technology councils for publicly supported multidisci-
plinary institutes of industrial technology patterned on those of advanced
industrial countries. Unfortunately, publicly supported technological insti-
tutions tend to achieve only very weak collaborative links with their clients
in the productive sector.
The revitalization of existing institutions by removing the bureaucratic
constraints under which they operate, or the creation of new ones with vital
connections to the sector to be served and more direct participation by rep-
resentatives from industry, is a question of renewed concern to developing-
country policymakers and international development agencies. Still, it is the
quality and capacity of the technical manpower available in the countries
concerned, not the variety of institutions that house them, that is critical to
an indigenous capacity for innovation.
World Bank Lending for Industry
In order to provide a background for the World Bank's current interest in
industrial innovation in the developing countries, it is useful to sketch the
role that the Bank and its affiliates have played in the industrialization of
the developing countries for more than two decades. The Bank directly
finances lrrge industrial projects in member countries through loans and
credits guaranteed by the government of the country in which the project is
located. Such assistance to developing countries totaled $6.7 billion for the
1970-1982 period and financed 130 projects in 46 member countries. Be-
tween 1957 and 1982, the Bank's affiliate, the IFC, has made a cumulative
investment of $4.8 billion in 653 projects with a total cost of $21.5 billion.
In fiscal year 1982, IFC investments totaled $612 million and expanded
greatly to $845 million in fiscal year 1983. Unlike the Bank, the IFC oper-
ates without a government guarantee of repayment. In addition to investing
its own funds, it serves as a catalyst to mobilize dorriestic and foreign pri-
vate capital, management, and technology to expand existing enterprises and
to promote the formation of new ones.
Indirect assistance to medium-sized and some relatively large enterprises
is provided by the Bank and the IFC through lines of credit extended to
public and private development finance companies (DFCs) in the develop-
ing countries. Through fiscal year 1982, the Bank Group (the IBRD, IDA
and IFC) has lent more than $7.9 billion to over one hundred DFCs. In
fiscal year 1982, the Bank lent $1.3 billion through DFCs. In addition, fi-
nancial assistance to small industrial enterprises in member countries is pro-
vided through DFCs or other financial intermediaries such as commercial



38                  Technology, Finance, and Development
banks. Frequently small enterprises are also assisted through loan com-
ponents built into urban and rural development projects. The concern with
the subsequent phase, in which a developing country's institutions could
themselves move into the practice of industrial innovation, is recent, Since
1974, the Bank has made investments in ten countries aimed directly at tech-
nological improvement and the stimulation of innovation by domestic
enterprises. Assessment of their effectiveness must await the time when the
products and processes developed by the assisted enterprises achieve tech-
nical and commercial viability. The countries themselves do not form a
homogeneous sample and vary greatly in their scientific and technological
capabilities.
The Spanish Experience
Farsighted, econonmic liberalization and growth-oriented policies imple-
mented in the early 1960s have propelled Spain into the league of industrial-
ized countries in the short span of some fifteen years. Its per capita GNP of
some $2,700 in 1975 entitled it to be classified in the lower stratum of the
high-income countries. Between 1961 and 1973, GNP expanded in real
terms by an average of 7.5 percent per year, and industry, the leading sec-
tor, grew at an annual rate of 9.6 percent. These rates are among the highest
achieved by developing and industrialized countries.
WATith import substitution gradually losing its stimulating power, indus-
trial growth was sustained by exports of manufactures, which in 1970 sur-
passed Spain's traditional exports of agricultural and mining products. In
1974, industry accounted for about 42 percent of Spain's GNP, while ag-
riculture's share dropped to 10 percent, a ratio characteristic of many de-
veloped countries. Growing external demand for industrial goods and
Spain's comparative advantage in lower labor costs and supply flexibility
contributed to this impressive record. The preferential Trade Agreement
concluded in 1970 with the European Economic Community (EEC) opened
up a market of vast proportions in the EEC countries for Spain's increas-
ingly sophisticated industrial goods.
Although, in common with many other countries at similar stages of
development, worldwide recession and high energy costs have caused a
downturn in the exuberant growth of the 1960s and early 1970s, Spain now
has a sufficiently large and diversified industrial structure on which to base
further development. This structure, consisting of capital-intensive enter-
prises in the basic metals industry, in transportation equipment, chemicals,
and the metal-forming and engineering goods sectors, has been laid, for the
most part, with large infusions of foreign capital, technology, and know-
how but with all the constraints such a process implies.



Government Promotion of Industrial Innovation            39
The process of industrialization, which has significantly raised the stan-
dards of living for Spain's rapidly urbanizing population, has brought sev-
eral problems in its wake. Labor costs have increased substantially in recent
years and have seriously eroded the competitiveness of Spanish industry's
products and processes in foreign markets. The flexibility of small-scale
firms, which have traditionally produced small o-r.ers with varying specifi-
cations, is seriously compromised, the investment climate for the start-up of
new technology-based firms is less favorable, and it has become clear that
Spanish industry must seek new directions to remain competitive.
As an outgrowth of discussion with the Spanish government dating
back to 1972, the Bank entered in 1975 into negotiations on a five-year $18
million loan for the support of research, development, and engineering in
industry. It was a path-breaking loan, the first Bank project intended to
assist the improvement of industrial technology through indigenous efforts
in product and process development. It was viewed as a demonstration of
new approaches to the technological improvement of Spanish industry.
The economic rationale for the project loan was clear; unless domestic
capabilities in industrial innovation were substantially improved, industrial
growth fueled until now by large importations of foreign capital, tech-
nology, and expert assistance would falter and seriously impair Spain's
ability to compete in world markets.2
Redressing current deficiencies in domestic technological capabilities is
a large and complex task. Dependence over extended periods on foreign
technology, lack of tax incentives and other inducements to promote indus-
trial research, low rates of national investment in research, development,
and engineering spread over too many institutions and programs, lack of
venture capital firms, and the conservatism of the banking system were (and
to a large extent still are) characteristic of the Spanish industrial scene as it
entered world markets in technology-intensive goods. In 1974, Spain in-
vested only 0.3 percent of its GNP (or $280 million) on R&D compared to
between 0.9 and 2.3 percent in the EEC countries and 2.6 percent in the
United States. Its deficit in technological balance of payments ($280 million)
was the highest among Western industrialized countries.
Qualitatively, Spain's investment in research and development has been
traditionally concentrated at the basic research end of the innovation spec-
trum. Rough estimates of the R&D gap and judgments on the absorptive
capacity of industry were used to determine the size of the initial total in-
vestment by the Bank and the government required to develop a program of
support to industrial R&D.
It quickly became clear that for the program to achieve its intended im-
pact on Spanish industry, new organizational devices with sufficient freedom
of action had to be created. A Center for the Development of Industrial
Technology (CDTI) within the Ministry of Industry and Energy was estab-



40                 Technology, Finance, and Development
lished to receive and administer the Bank's loan and government grants, a
total of $40 million that constitutes the five-year budget of the program.
CDTI is more insulated from bureaucratic pressures and constraints than
are other parts of the Spanish government, but its management could not
pay salaries to its personnel beyond those accepted for government agencies
nor freely dispose of the income CDTI receives for services it provides.
Steps were taken in December 1983 by the Spanish government to change
CDTI's status to that of a public law entity and thus to provide CDTI's
management the full autonomy of a corporate body.
In January, 1983, CDTI had a total staff of thirty-seven persons, of
which twenty were professionals. The evaluation of research projects
presented by industrialists and inventors and the follow-up of the approved
projects were proceeding at an increased pace. From its beginning up to
1983, 211 projects have been presented to CDTI, of which 123 have been
approved and 33 are already marketing the products resulting from the de-
velopment work supported by CDTI.
Contrary to the image of government organizations as passive responders
to proposals from researchers and enterprises, CDTI actively seeks out op-
portunities to encourage the development of indigenous technology to meet
local needs. For example, CDTI found that Spanish tile manufacturers were
dependent on foreign suppliers of kilns. The kilns available to them were a
generation or two behind those available to tile manufacturers in the sup-
plying country, which in many cases were linked to the kiln manufacturers.
CDTI promoted the formation of a consortium of Spanish tile manufac-
turers to develop a kiln with up-to-date technology suited to Spanish condi-
tions.
In another case, CDTI organized a consortium of Spanish suppliers to
design and produce a prototype locomotive to specifications set by the
Spanish railways, which will use the prototype as the basis for future tenders.
The participants hope that an exportable locomotive of Spanish design and
manufacture will result. CDTI is systematically reviewing goods procure-
ment by the Spanish government in order to uncover more opportunities for
this kind of entrepreneurial intervention.
CDTI's loans to enterprises for research and development work are
forgiven if the work is not successful. If the work does lead to marketing of
a new product or service, the principal is repaid at the rate of 5 percent of
net sales. The profits to CDTI come from a charge of 2.5 percent of net
sales for a period equal to the time elapsed from the closing of the project to
the end of the repayment of the principal. The closing of the project is taken
as the date on which the enterprise has successfully tested a product model
and is ready to enter full-scale production and marketing. Any delay in
marketing the product is in this way penalized, since it increases the time



Government Promotion of Industrial Innovation            41
during which CDTI receives profits. In other words, the enterprise reduces
its investment in the research if it achieves early commercialization of the
developed product.
In a new promotion program begun in 1981 for the small entrepreneur,
CDTI helps support "regional technological advisors," local professionals
(mainly engineers) working under contract with local chambers of com-
merce, who visit local industries trying to develop new projects that could
be supported by CDTI. Twenty-nine such regional advisors are now in place,
and a strengthening of the program is planned. CDTI also organizes work-
shops for entrepreneurs and seminars for graduate students in Spanish uni-
versities, on the financing of research, invention and imiovation, and the
organization of new enterprises.
In 1982, CDTI added three new programs: the promotion of better in-
dustrial design, the promotion of companies for technological innovation,
and the provision of services and facilities for inventors. The companies for
technological innovation are cooperative efforts among small enterprises,
which set up a special enterprise to develop and market a new idea with the
technical assistance of CDTI. The capital is financed one-third each by the
enterprises, the Institute for the Small and Medium Industries, and finan-
cial institutions mobilized by CDTI.
"Arpegio," the service provided to individual inventors in order to help
them to develop an idea, provides facilities and common services that can be
used by potential inventors under conditions previously agreed with CDTI.
Facilities in the Arpegio building are modular and can easily be rearranged
to suit individual requirements.
An interesting new development in the financial scene in Spain is the
emergence of SEFINNOVA (Sociedad Espafiola de Financiacion de la In-
novacion), a new privately owned venture capital company, one of only two
in the country. This company assists smaller enterprises in pursuing growth
opportunities, either in existing lines of business or through new product
and process development. This assistance takes the form of equity or con-
vertible debentures, with investment timed to coincide with the commercial
launching of a new product, process, or service.
The IFC, the World Bank's affiliate, has subscribed to equity shares
amounting to approximately $0.9 million, representing some 20 percent of
the paid-in capital of SEFINNOVA. This was the first investment by the
IFC in a technologically oriented venture capital company. (A similar in-
vestment has since been made in Singapore.)
To complement the work of SEFINNOVA, the government has or-
ganized within the National Institute of Industries, the holding company of
Spanish public enterprises, a public venture capital company called Na-
tional Enterprise for Innovation (ENISA) with an initial capital of 1 billion



42                  Technology, Finance, and Development
pesetas (or 10 million dollars). CDTI works closely with both SEFINNOVA
and ENISA to support the commercialization of new ideas, by helping to
organize the new enterprise or the new activities within an old enterprise and
by helping to launch the product or service into the market. Two members of
CDTI's staff are on the Board of ENISA and the president of SEFINNOVA
is on the Board of CDTI.
The Israeli Experience
Industrial research and development have been key elements in Israel's
strategy for the development of research-intensive industries and the pro-
motion of exports of technology-intensive products and processes. For a
small country of 3.6 million people, located far from the markets of indus-
trial countries and poor in natural resources, Israel has demonstrated un-
usual vigor in promoting exports of high-technology products. Israel's ma-
jor asset and its comparative advantage is its large pool of highly trained
scientists and engineers. Its ratio of 275 scientists and engineers per 10,000
population is one of the highest in the world, and its universities and re-
search institutions have achieved world renown in many areas of science
and technology.
With much of its research effort traditionally concentrated in universi-
ties and research laboratories, Israel launched a major effort in 1966 to re-
orient research toward commercial application. The function of promoting
research in private industry was entrusted to the Office of the Chief Scien-
tist (OCS) of the Ministry of Industry, Commerce and Tourism, and a well-
conceived program of matching grants to private industry, differentiated
according to the level of risk and the expected returns of the supported proj-
ects, now operates in Israel. The most widely used fifty-fifty matching
grants are made from the Research Fund for projects proposed by industry
and evaluated by the technical committees of the OCS for their technical
and market feasibility. National Projects, funded more generously at 80
percent of their costs, are those with higher risk and long-term payoff; they
are beyond the ability of firms to finance on their own, especially when
private risk capital is in very short supply.
Less frequently, the OCS also provides 100 percent financing to the so-
called infrastructure projects for the exploitation of natural resources, or to
nurseries of technologies for future entry into advanced technology fields,
or to provide technical support services to industry. In this class of projects,
joint industry-university research teams are encouraged to work together on
problems common to an industrial sector as a whole. Cooperation of Israeli
firms with foreign enterprises and investors is encouraged through the OCS
program. More recently, another window for financial assistance to enable



Government Promotion of Industrial Innovation          43
U.S. and Israeli firms to collaborate in the development of export products
has been opened by the U.S.-Israel Binational Research and Development
Foundation (BIRDF), to which the governments of Israel and the United
States have each contributed $30 million.
The Israeli scheme for the promotion of industrial innovation has other
interesting features. A program of the OCS that reimbursed firms up to 80
percent of the costs of subcontracts with universities was recently followed
by grants to universities to commercialize technologies developed by them
through local firms. These mechanisms have encouraged many universities
to undertake industrially oriented research and development projects. Plant
modernization and expansion are facilitated by a variety of other grants and
loans at concessional rates provided by the ministry and by commercial
banks. The OCS is also considering the initiation of loans to assist firms in
carrying forward their innovative activities beyond formal research and
development to pilot plant, prototype construction, and product testing and
marketing in order to hasten the introduction of new products into the
marketplace.
The competence of the members of the Israeli academic and industrial
communities and the existence of an organization with a history of ad-
ministration of grants for R&D augured well for the World Bank to con-
sider a loan of $5.0 million for industrial R&D, a component of an in-
dustrial development project that included a fourth loan of $25 million to
the Industrial Development Bank of Israel and a vocational-technical train-
ing component of another $5.0 million. A principal goal of the loan was to
improve the recipient organization's institutional capacity in project eval-
uation and selection and in subsequent monitoring. The choice of the proj-
ect, jointly made by the Bank and the OCS, emphasized the technologies
that might be useful to other developing countries. The latter criterion of
selection among subprojects was used in addition to other criteria, such as
benefits to the Israeli economy, nondefense orientation, and possibilities of
technical and commercial success.
Initially six subprojects were selected for Bank support. All were
designated by the OCS as projects of national importance and given grants
covering 80 percent of costs. Of these, three were classified as commercial
subprojects aimed at the development of preproduction prototypes; two
were classified as precommercial subprojects because they were in a much
earlier stage of development; and one was classified as an infrastructure sub-
project with the purpose of providing R&D and testing services for industry.
The R&D component of the Bank loan has financed the foreign ex-
change components of three subprojects aimed at developing commercial
prototypes: a computerized axial tomograph (CAT) scanner (an X-ray de-
vice that can scan the whole body rapidly with low exposure and is particu-
larly useful in locating tumors); a Rankine cycle turbine, for electric power



44                  Technology, Finance, and Development
generation from a variety of energy sources, including fossil, solar, wood,
waste products, and geothermal, for application primarily to rural areas
with limited accessibility; and a rural telephone system to serve small com-
munities of 100 to 400 subscribers through a telephone exchange with radio
links to a parent exchange, designed and packaged to minimize the need for
skilled maintenance personnel. The first two of these projects have resulted
in marketable products, which are being sold internationally. The tomo-
graph manufacturer is the second largest producer in a very competitive and
sophisticated world market; the rural telephone will reach the commercial
stage soon, and a very large market is projected.
Two other projects supported by the Bank have a longer time horizon
because of their unusual character and the need for further applied research
and evaluation. One of these, the solar ponds project, is based on solar
energy research in which Israel is a world leader. This subproject is aimed at
developing commercial prototypes of a nonconvecting solar pond collector,
an inniovative approach to the problem of collecLing and storing solar en-
ergy. A layered, shallow, black-bottomed pool of saltwater is set up so that
the salt solution remains denser at the bottom than at the top. The absence
of convection allows solar heat, absorbed by the more concentrated solu-
tion at the bottom, to be trapped there. The heat can be extracted by heat
exchangers for direct use or for conversion to electricity.
The second project with a long time horizon is aimed at the commercial
cultivation and industrial exploration of the jojoba, a wild desert plant
native to the Southwest of the United States and Mexico. Its beans contain a
thermally stable, odorless, and colorless oil, resembling that from sperm
whales, which has potential applications in high-temperature lubricants,
cutting oils, cosmetics, and medicinals. The adaptation and cultivation of a
plant species in different soil and climatic conditions is a long and expensive
process. The Research and Development Authority of the Ben-Gurion Uni-
versity of the Negev has already conducted extensive field tests of jojoba
and laboratory analyses of the oil and the wax resulting from hydrogenation
of the crude jojoba oil. Optimism concerning the commercial viability of jo-
joba products is sufficiently high to encourage project leaders to form a
company to complete development and to market the products, especially
for cosmetics and medicinals. As a byproduct of this project, plant propa-
gation techniques were developed which may be applicable to other plant
varieties.
The Bank loan also supports three infrastructure subprojects, two of
which were added after the beginning of the program. The original sub-
project was a multipurpose common services facility in the Negev desert for
the provision of material testing and pilot plant facilities to support local in-
dustry and to attract new industry to the area. The second subproject is a



Government Promotion of Industrial Innovation              45
Standards Institute to provide industry with information concerning non-
tariff requirements of other countries and to provide design, measurement,
and test facilities to aid manufacturers in meeting such requirements. The
third subproject is the provision of equipment to facilitate the consolidation
of several independent laboratories operated by the Ministry of Industry into
a single industrial development institute.
The Bank's loan has also provided funds for an analytical study of in-
dustrial innovation in Israel, including the impact of existing incentives on
exports, the availability of start-up and risk capital, and the formation of
new technology-based firms in Israel. The result of this study should be
useful to Israel policymakers and instructive to the Bank for investments in
similar projects elsewhere. Indeed, to learn such lessons was a major pur-
pose of the Bank in financing this project.
The Korean Experience
The remarkable economic performance of Korea since the early 1960s, sus-
tained principa.lly by the expansion of manufacturing activity and manu-
factured exports, is widely known and admired. The growth of aggregate
GNP at ani average annual rate of 10 percent between the early 1960s and
the late 1970s and projected growth rates of exports of 6 percent or more
through the mid-1980s, despite slow growth in the rest of the world, are in-
dexes of development that have sparked the interest of many in the dynamics
of the Korean model of export-led industrial development.
Within the manufacturing sector, the Korean electronics industry has
been the leading workhorse, contributing some 11 percent to the country's
merchandise exports between 1970 and 1978. Production and exports of
electronics goods have risen at a staggering average annual rate of 50 per-
cent from the low base of a decade ago.
The Bank's support of a comprehensive project proposed by Korea to
advance its electronics industry to state-of-the-art levels by the mid-1980s
was dictated by two important considerations: the rapid erosion of Korea's
comparative advantage of low labor costs and the far-reaching technological
changes taking place in the electronics industry worldwide.
Although the description of Korea's outstanding industrial perfor-
mance as one based on the export of labor-intensive, low-cost, technologi-
cally mature products is historically and technically correct, it does little
justice to the critical role played by the government's imaginative use of
economic policies to initiate and sustain a fairly efficient and equitable pro-
cess of industrialization. By careful management of the exchange rate close
to the free trade levl- L, by providing exporters with easy access to imported
inputs, and by protecting industrial sectors with unusual opportunities for



46                  Technology, Finance, and Development
import substitution, the government built an industrial production capa-
bility to serve domestic markets but strongly biased toward exports. Close
consultation between industry and government in the establishment of in-
dicative export targets discriminated by product, market, and exporting
enterprises has helped to focus export efforts of Korean enterprises to a
remarkable degree. It has also helped them take advantage of government-
supported export promotion activities and, especially, of market research.
The export-targeting system is refined to a point that the government
can act promptly and flexibly in changing the structure of incentives, and
entrepreneurs can alter their investment strategies and production pro-
cesses. The Ministry of Science and Technology and the infrastructure of
planning and information agencies play a critical supportive role in the dy-
namic interaction between the government and the entrepreneurial com-
munity.
An export strategy based until now on labor-intensive manufactures has
yielded important social dividends. The economy has performed well in
generating employment and distributing income equitably. Employment is
estimated to have increased at a rate of 3.7 percent per annum between 1965
and 1975, and 2 percent per annum between 1975 and 1983. Real wages in
manufacturing grew at an a:verage rate of 9 percent between 1965 and 1983.
Korea's population of 40 million had a per capita income of $1,800 in 1983.
Because of the high value Koreans place on education and the willing-
ness of parents to spend their own funds for the education of their children,
a significant private educational sector has developed. Korea's literacy rate
is among the highest in the world, and its universities have produced well-
qualified scientists and engineers. Stability and buoyant industrial develop-
ment have encouraged Korean scientists and engineers abroad to return
home in large numbers. Government incentives have contributed to the en-
largement of the high-level manpower pool available for development. Con-
trary to the experience of many other countries, public scientific and tech-
nological institutions such as the Korean Institute of Science and Technology
(KIST) have been unusually effective in contributing to industrial develop-
ment.
Korea has also made important strides in building up a technological
base to support the reorientation of its industry towards skill- and tech-
nology-intensive industries. As a percent of GNP, total spending for re-
search and development doubled in the last decade, from 0.3 percent in 1970
to 0.6 percent in 1979-among the highest rate in developing countries. Dur-
ing the same period, industrial spending for research and development in-
creased rapidly, at an annual rate of over 20 percent per year.
Despite this impressive growth, the research and development sector in
Korea still faces important weaknesses. First, research and development



Government Promotion of Industrial Innovation             47
spending by industry accounted for 34 percent of the country's total in
1979-a very creditable figure for a newly industrialized country but still
short of the 40-70 percent typical of highly industrialized countries. Second,
although some fifteen public research institutes have been established with a
view to meeting industry's growing technological needs, their links with in-
dustry need improvement and their manpower resources for research and
development remain inadequate and dispersed over too many institutes.
Third, industry's efforts to innovate are still considerably underfinanced,
particularly at the development and engineering phases, because of the lack
of suitable financing instruments in the capital market for such risky ven-
tures.
The World Bank's support of the development of the Korean electronics
industry demonstrates that when a country has carefully specified its ob-
jectives and policies in a particular industrial sector and has developed an
institutional capability for analysis and implementation, external resources
can be directed to specific activities and projects. These initial conditions
existed when the Bank started negotiations on the Electronics Technology
Project in Korea, to which it has now provided $29 million in foreign ex-
change toward the total project cost of $63 million.
The technological opportunity addressed by this project arises from the
dramatic changes that havre taken place in the field of electronics in the last
decade. The driving force bellind these changes has been the development of
integrated circuits, which combine thousands of individual components in
one small chip, and has led to the development of the microprocessor com-
puter on a chip. The phenomenal increases in the capabilities of integrated
circuits and their remarkable cost reduction-on the order of 15 percent per
year-are creating an important industry that is having a profound impact
on factories, offices, homes, cars, telecommunications, and virtually all
other facets of human life. The industrialized world is now entering the age
of electronics. Indeed, the world electronics industry should surpass the
steel industry in size in the late 1980s.
Increasingly governments in industrialized countries have recognized
the importance of this industry and have extended to it considerable finan-
cial support. Korea is well placed to benefit from opportunities emerging in
this field because rapid technological change is prompting companies in ad-
vanced countries to concentrate their scarce manpower and resources on the
latest technologies and products with the largest potential for profit and
growth (such as computers and telecommunications equipment). This trend
is creating opportunities in the intermediate technology areas, such as con-
sumer electronics and microprocessor applications, where the advanced
countries have already progressed down the learning curve, and further cost
reductions are possible only by transferring operations to countries like



48                   Technology, Finance, and Development
Korea, where wages for skilled labor and engineers are relatively low. It
is on this niche, between labor-intensive assembly operations on one hand
and the advanced technology products on the other, that Korea plans to
focus in order to sustain the impressive growth of its electronics industry.
To succeed in this field, Korea will have to concentrate initially on a few
technologies, which will allow it to upgrade the design and reliability of its
products and simultaneously provide the core around which to build
technological capabilities for the future. This effort will require substantial
design and manufacturing know-how, as well as expensive technological in-
frastructure, which is beyond the individual capabilities and resources of
Korean or joint-venture firms. As has been the case in industrialized coun-
tries, the government plans to stimulate, support, and complement industry
efforts.
The centerpiece of this project is the recently founded Korea Institute of
Electronics Technology (KIET), which has developed strong connections to
the industry it is expected to serve. It is designed as a service, research,
development, and engineering organization with strong industry and gov-
ernment representation on its board of directors and a president with wide
experience in research and development administration.
The structure of KIET reflects an engineering service rather than a re-
search orientation, and it is organized along three major functional lines:
semiconductor design, semiconductor processes, and systems. The three
divisions are headed by persons with significant industrial experience and
knowledge of technological developments abroad, a background especially
important in the fast-changing field of electronics technology. A U.S.
Liaison Office has been set up in the San Francisco Bay area, in the so-
called Silicon Valley, whose Korean counterpart, the Gumi Industrial Es-
tate, is planned to be the center of the Korean semiconductor and electronic
systems develpment. The U.S. Liaison Office is intended to provide a win-
dow on U.S. technology and a point of contact with U.S. corporations in-
terested in transferring mature semiconductor product and process tech-
nologies to overseas locations and in offering training to Korean engineers
and technicians in their application.
T'he role KIET is intended to play in advancing electronics technology in
Korea is a major departure from activities of similar government labora-
tories elsewhere. First, KIET will provide production services through its
specialized, relatively capital-intensive equipment and service divisions that
cannot be acquired economically by each individual firm but are essential
for the industry's development. Second, through the Research, Develop-
ment, and Engineering Program, a number of selected subprojects in semi-
conductors and digital systems technologies and product groups will be
undertaken. Costs, and therefore risks and benefits of research, develop-
ment, and engineering, will be shared with industry for these projects where



Government Promotion of Industrial Innovation          49
Korea can take advantage of its low-cost engineering and skilled labor re-
sources to compete effectively in the world market. The goal is to transfer
research results and to assist industry beyond the initial stages of design and
development through production and commercialization. The structure of
prices KIET charges for its services and products has been established in
such a way as to enable KIET to become financially self-sustained in about
four years.
In addition to its involvement in the development of Korea's electronics
industry, the World Bank made a $50 million loan in 1982 to support the
Korean Technology Development Corporation (KTDC), a financial institu-
tion that combines the patterns of action of Spain's CDTI with some of the
attributes of a venture capital company. KTDC finances research, develop-
ment, and engineering in private industry through loans, which are made
without collateral and which are partly forgiven if the project fails. KTDC
also provides equity funds to companies set up to exploit new research and
development results.
Support of Industrial Innovation in Other
Developing Countries
Capsule descriptions of a few other World Bank projects in support of in-
dustrial innovation illustrate the Bank's rapidly developing interest in this
subject. They also exemplify the use of local developmrent finance corpora-
tions anid other types of financial intermediaries in the disbursement of
project funds and their value in developing a capacity to appraise research,
development, and engineering projects. In some of these projects, World
Bank funds are clearly identified with the strengthening of local research
and development organizations and their ability to interact effectively with
small- and medium-sized firms. In such cases, institutional development
continues to remain a major thrust of the Bank's assistance program.
The Training, Technical Assistance and Technology Fund (TTTF) of
$3.3 million and a local training and consulting component of $1.2 million
are part of a project loan totaling $80 million to finance the modernization
and export capability of the Turkish textile industry. This loan is patterned
after a similar $5 million Industrial Technology Loan Fund to Colombia.
These funds are intended for textile firms for use in production improve-
ment, pollution control, export market analysis, and foreign training and
upgrading of R&D-oriented activities. Review procedures are kept simple in
order to encourage small- and medium-sized firms to obtain needed tech-
nical services expeditiously. One of the two private development finance
corporations that serve as intermediaries for on-lending the proceeds of this
project loan will administer the TTTF as well as the funds for local training
and consultancy extension services.



50                  Technology, Finance, and Development
A $2.5 million component of a $45 million loan to Portugal provides a
package of technological support and assistance activities designed to help
small- and medium-scale firms develop new products and improve the
quality of their export products. These activities will be undertaken by a
group of research and development institutions in the food, industrial
physics, and energy sectors operating under the National Laboratory of
Engineering and Industrial Technology (LNETI). The overall objective of
the project is to bring new small- and medium-scale industries to the less
developed regions of the interior, provide employment opportunities for
displaced persons from former colonies, and tap new sources of entrepre-
neurship by providing assistance to firms located in industrial estates.
In Uruguay, a World Bank loan of $9.7 million is financing a multi-
disciplinary industrial technology and research institute, vocational train-
ing, and technical assistance for studies of the technological aspects of
Uruguayan industrialization plans and for the achievement of increased
preinvestment analysis capability. The loan responds to the need for the
revitalization of an inefficient, protected industrial sector in a small coun-
try, where traditionally import substitution was extended even to activities
where foreign exchange savings were negligible. The Technological Labora-
tory of Uruguay, whose modernization would be financed in part by the
loan, is expected to develop its capabilities in industrial research, training,
dissemlination of information, and technical assistance to entrepreneurs.
In Mexico, where industry has reached a relatively high degree of so-
phistication and is supported by a substantial pool of scientific, engineering,
and technical skills, the World Bank's projects have proceeded along several
interesting lines. Mexico has introduced in recent years various policies and
has developed institutions with explicit concern for technological develop-
ment. The National Council of Science and Technology (CONACYT) and its
affiliate, the Technology Information Service (INFOTEC), the Mexican In-
stitute for Technological Research (IMIT), and the National Registry for
the Transfer of Technology (RNTT) represent a constellation of institutions
addressing issues of national technology policy, information, industrial re-
search and project appraisal, and review and control of foreign licensing of
industrial technology.
Anong the financial institutions providing loans for medium- and
larger-sized companies, the Fondo Equipamiento Industrial (FONEI), a
trust fund of the Bank of Mexico, has been in the forefront. Smaller en-
terprises are supported through trust funds administered by the National
Financiera, a large government-owned development bank. The World Bank
has been working with these financial entities since the early 1970s. A tech-
nology improvement component of a World Bank loan is being used by
FONEI for subloans, at interest rates below the required lending rates, to



Government Promotion of Industrial Innovation          51
such activities of firms as research, development, and engineering design of
new or improved products or production processes, technical information
searches, and overseas training and service of technical experts related to
new products and processes. Unlike other countries reviewed in this chapter,
Mexico does not currently have substantial government-operated incentive
schemes to promote research, development, and engineering in industry,
and the loan component for technology improvement would enable FONEI
to promote such activities in industry and to gain experience in their ap-
praisal and supervision. FONEI would also make a special effort to seek out
projects in enterprises located outside the principal metropolitan. centers.
The proposed loan would attempt to address the vexing problem of in-
dustrial pollution in Mexican cities by financing not only the purchase of
equipment required by law in Mexico but also the technical services for the
design and selection of such equipment. A financial incentive in the form of
a reduced interest rate several points below FONEI's standard lending rate
would be provided to encourage firms to use this component of the World
Bank's loan. The Bank's loan also provides funds for FONEI to organize
training courses for its own staff to undertake project appraisals and to
assess the recommendations of external project evaluation organizations
that are contracted for such services.
Some Lessons from the Bank's Involvement in
Industrial Innovation
Innovation is a process of creating change-in policies, in institutions, and
in people. In industry, the central agent of change is the entrepreneur. Ul-
timately entrepreneurs take the risks and enjoy the benefits. They are aided
by a supporting cast of research, development, and engineering personnel,
administrators, managers and marketing specialists who identify opportuni-
ties, and sales representatives who maintain contact with customers or
users. If the description of how the World Bank has supported industrial in-
novation has emphasized the role of institutions, it is not that the role of the
entrepreneur is not considered critical. On the contrary, the Bank sees its
role as catalyzing the activities of local institutions in such a way that they
stimulate innovation in local firms.
In spite of several studies of this problem in the developing countries,
the identification of entrepreneurs and methods for stimulating their crea-
tive endeavors remains elusive. While the model of the large corporation
has been transplanted to several developing countries and is thriving in
some, there is a great shortage of entrepreneurs for small technology-based
firms. While government agencies administering incentives and develop-
ment banks that provide capital are able to deal with the larger established



52                 Technology, Finance, and Development
enterprises, their capacity to identify and support riskier ideas of new en-
trepreneurs and smaller firms has yet to be developed. Experience suggests
the need for new types of organizations that provide a package of services to
small- and medium-sized firms, including start-up capital, assistance with
technology and product development, and, especially, with assistance in
marketing, both at home and abroad.
A frequent handicap of developing-country industries is their lack of
design and engineering capability, whose development has been thwarted by
reliance on imported technologies. The current interest of several develop-
ing countries in "unpackaging" imported technologies would also hinige on
the availability of local engineering capabilities. This has implications for
engineering education in the developing countries.
While the projects financed by the World Bank provide for local pro-
curement of preinvestment and engineering services, the small number of
engineering consulting companies and their limited capabilities frequently
force reliance on external sources of such expertise. Projects supported by
the Bank encourage the use of local consultants and consulting companies
whenever available. But new approaches to encourage private engineering
arid consulting companies in the developing countries are needed, for unlike
enterprises that possess physical assets against which loans could be made,
they deal in the intangible assets of knowledge and information. Perhaps
even more than research and development, what is urgently required is the
strengthening of the engineering function within domestic enterprises. Such
internal capability is not only important in itself; it is essential if the firm is
to be able to interact with outside engineering and consulting companies.
The quality and availability of technical and market information to
local firms is an intractable issue. Even if technical information is locally
available, information about local markets and especially about export
markets is usually in short supply. National documentation and informa-
tion centers frequently cater to the scientific research community and occa-
sionally to the needs of larger enterprises, but small and medium enterprises
frequently are unable to obtain technical information in a useful form. Pro-
ductivity centers and industrial research organizations on occasion provide
such assistance, but the need for very specific information on product or
process development has not been met.
In some of the projects financed by the World Bank, such as in Mexico,
provisions are made to enable firms to purchase the information they need,
but it remains to be seen how the facility is used. Clearly much of the infor-
mation is embodied in people, and the continual updating of their knowledge
and skills, as well as the creation of conditions favorable to their mobility, are
extremely important. While Bank-financed projects make provisions for
project-related training, the concern for qualitative improvement of profes-



Government Promotion of Industrial Innovation            53
sional and technical manpower is clearly a subject of importance to gov-
ernments and to local firms.
The case of Israel presents an imaginative approach to the institution-
alization of research and development in industry. Israel has been successful
in encouraging firms to make increasing investments in research and de-
velopment, leading to exports of technology-intensive products. The experi-
ence of Brazil also indicates that somewhat similar approaches may be ef-
fective in other countries.
It is natural for research within indu&stry in the developing countries to
take an evolutionary path, with the development of capabilities in testing
and engineering first. The rapidity with which firms might undertake re-
search and development activities frequently will depend on stimulative
government policies and even more on the recognition by the entrepreneur
of the risks and benefits of such activities.
In other countries, the almost complete absence of industrial research at
the enterprise level may force a government wishing to encourage innova-
tion to do so through government-supported research institutions. In such,
countries, a problem frequently encountered is to find ways to organize and
reorient the activities of such institutions to respond to the needs of in-
dustry. The Uruguay project is a case in point. There, the close contact be-
tween laboratory and industry makes the project institution a good bet even
in the absence of experience with research management. KIET of Korea
may represent a more far-reaching approach to institutional orientation.
Here, government, industry, banks, and KIET cooperate in an ambitious,
integrated, sectoral development plan.
Several countries, such as Brazil and Korea, have taken steps to convert
existing government research laboratories to autonomous corporations, to
be supported in the future through contracts with private industry. Such re-
structuring and reorientation of research institutes is a long and difficult
process, and the Bank's approaches to such institutional development, in
which it continues to be involved in several countries, can be described at
best as a learning experience for itself and its member nations.
In the triad of industry, government, and financial institutions neces-
sary to promote innovation, the Bank has naturally been drawn to the vehi-
cle provided by development finance corporations. While external
assistance may be initially helpful in directing their effort at technological
improvement in domestic enterprises, there is no substitute for a strong
cadre of local specialists in government agencies and development banks
who are capable of undertaking sector studies, identifying firms and en-
trepreneurs who can develop products and processes of commercial impor-
tance, and devising incentive loan and grant schemes to encourage their in-
terest in innovation.



54                 Technology, Finance, and Development
New technologies remain on the shelf if their entry into the marketplace
is not facilitated by a timely release of money at the appropriate stages of
the innovation process. The Spanish project seems to demonstrate that a
well-staffed semiautonomous institution may play a valuable entrepre-
neurial role in promoting innovation at the firm level, with minimal in-
volvement of government-supported research institutions. In many other
developing countries, however, entrepreneurs need to be educated in the
process of applying for government or bank assistance that would help
them traverse the learning curve of innovation. They might not even know
that government incentives are available and on what terms and conditions.
This chapter has provided a sketch of significant experiments on the
part of the bank and its members with alternative approaches to stimulating
innovation in the industrial environment of the less developed countries.
While a few guidelines for successful promotion of innovation in relatively
advanced developing countries have emerged, the strategies that need to be
followed in the less industrialized countries are far from clear. The adap-
tation of the experience gained thus far to conditions in these countries is
the next critical task.
Notes
1. See C. Weiss, M. Kamenetzky, and J. Ramesh: "Technological Ca-
pacity as an Element of Development Strategy," Interciencia 5, no. 2
(March 1980).
2. Information drawn from Bank appraisal reports.



Civil Works
A               Construction
Basil P. Coukis and
Nicolas Jequier
Basic infrastructure works such as roads, irrigation canals, flood control
systems, and crop storage facilities are important elements for economic
development and the improvement of living conditions in rural areas. Most
countries are aware of this importance and devote a large share of their
annual public investment to civil works. Aid agencies, both bilateral and
multilateral, devote substantial assistance to such projects. In the case of
the World Bank, over 40 percent of its annual lending goes to civil works. In
low-income, labor-abundant countries, civil works are also a source of
employment and often are used to provide jobs for the poor.
Although labor-intensive construction methods are still widely used in
many developing countries-notably in Bangladesh, China, India, Indo-
nesia, and Pakistan-for building rural roads, digging irrigation canals, or
erecting earth-filled dams, the trend during the last thirty years has been
toward equipment-intensive methods of construction. The use of thousands
of unskilled laborers instead of sophisticated machines came to be seen as a
relic of the past or a bowing to social necessity rather than as a viable
technological alternative. This view is not totally unjustified; large-scale
labor-intensive civil works aimed primarily at providing employment
usually register low productivity of labor and a high total cost of the end
product.
The preference for equipment-intensive methods is reinforced by a
number of social, cultural, and political factors. Developing-country
engineers and planners trained in the universities of the industrialized world
are much more familiar with, and attuned to, modern technologies than to
the traditional ways of doing things at home. Engineering and consulting
firms working on civil works projects tend to promote sophisticated tech-
nologies. When foreign aid is involved, procurement practices and financial
conditions generally favor the use of imported machinery.
In 1971, the World Bank, in cooperation with several bilateral aid
agencies, initiated a major study to investigate the prospects for labor-
intensive technologies in civil works construction, specifically rural roads
and irrigation works. The research was motivated by a number of factors.
First was the growing realization that rural civil works could be more
beneficial to the local populations if, in addition to their end product (a
rural road, an earth-filled dam, or an irrigation system), they were also to
55



56                  Technology, Finance, and Development
provide employment opportunities during construction and for mainte-
nance. Second was the Bank's strategy aimed at meeting the basic needs of
the poorest segments of the population in the developing countries, par-
ticularly in rural areas. Third was the fact that although labor-intensive con-
struction methods in civil works were known to be technically feasible, little
empirical evidence was available about their costs, their organizational
problems, their prospects for improvement, and their competitiveness
relative to equipment-intensive methods.
Technological and Economic Feasibility of
Labor-Intensive Construction Methods
Early phases of the World Bank study investigated the technical and
economic feasibility of using labor-intensive construction methods in civil
works.' This research, which started with a comprehensive literature survey
and then went on to field observation of some thirty road, irrigation, and
dam construction sites in India and Indonesia, confirmed the technical
feasibili'cy of substituting labor for equipment in a wide range of activities.
It also showed that most construction activities can be carried out with
methods ranging from the most labor intensive to the most equipment in-
tensive, and that apart from a few very specific tasks (such as the laying of
high-quality pavement), the quality standards of labor-intensive methods
can be as high as those achieved with equipment-intensive methods.
These conclusions may seem obvious today, when the promotion of
employment through the choice of more appropriate technologies is
recognized as a major objective by international development agencies and
most national governments. When the World Bank study started in 1971,
however, the use of labor rather than sophisticated machinery in civil works
projects was largely viewed as rather impractical, if not totally counterpro-
ductive. It also ran counter to the prevailing belief that the only possible
path of technological evolution was toward a greater use of better and more
expensive machinery.
The substitution of labor for equipment is but a reflection of the civil
works construction process. For example, for many road works, the work
consists basically of a small number of repetitive and fairly simple opera-
tions such as the excavation of earth and other materials, its loading and
transportation over fairly short distances, and finally its unloading and
spreading in the appropriate place. Earthworks may represent the most im-
portant task in the civil road construction and typically account for up to
half of the construction cost of a project. Other important activities include
the production of aggregates (crushed stones, for example) and the laying of
pavements.



Civil Works Construction                               57
Although the study confirmed that each of these tasks could be carried
out in a variety of ways (haulage, for instance, can be done with headbaskets,
wheelbarrows, oxcarts, tractor-trailer combinations, flatbed trucks, or
large bulldozers) and that it was theoretically possible to combine these
tasks in a great number of different configurations, it also showed that, in
practice, the choice of a particular technology for a specific task (such as
large-scale excavators for digging a canal) dictated the use of a similar type
of technology for most of the other tasks in the project. In other words, it is
difficult to combine equipment-intensive methods in one part of the project
with labor-intensive methods in another part. The main reason is the very
different rate of output of humans and machines, as well as the basic dif-
ferences in the organization of the work for each type of technology.
What is technically feasible is not necessarily economically justifiable.
One important conclusion emerging from the World Bank study was that
most traditional labor-intensive projects showed very low productivity
rates. Consequently, they were not economically competitive with equipment-
intensive methods, even when the prevailing wage rates were very low. The
study did suggest, however, that significant scope exists for improving the
efficiency of traditional labor-intensive operations, With better planning,
good supervision, improved tools, incentive payment systems, a proper
organization of work, and interventions to upgrade the health and nutrition
of the laborers, productivity can be increased several-fold. The research
showed that productivity improvements could be achieved without signifi-
cant increases in physical investment and that labor-intensive methods
could become much more competitive relative to equipment-intensive
methods for civil projects carried out in low-income countries.
Managerial and Organizational Factors
Showing the technical feasibility of labor-intensive projects and demon-
strating their potential economic efficiency is one thing. Designing viable
projects that employ thousands of workers and supervising such a complex
operation is quite another. A substantial part of the research carried out by
the World Bank was devoted to investigations of the organizational and
managerial factors that account for most of the differences between effi-
cient and inefficient labor-intensive projects.
Although each labor-intensive project is unique, even similar types of
projects carried out within the same country, the research revealed a
number of general principles about the organization and management of
such projects, and in the second half of the 1970s, a number of civil works
projects financed by the World Bank attempted to implement some of these
findings.



58                 Technology, Finance, and Development
The first requirement for a labor-intensive civil works project is that
there be an adequate supply of labor on the project site or close to it. Even
in countries with a large labor force and a high rate of unemployment, the
labor supply at specific sites may be inadequate, a situation that can cause
delays in the project work. One of the most frequent reasons for this ap-
parently paradoxical situation is that although there may be an annual
surplus of workers in the rural areas, the demand for labor in agriculture in-
creases very sharply at certain times of the year, notably during sowing and
harvesting. Workers can be diverted from peak-season agricultural work by
higher wages, but this solution may result in a noticeable decline in
agricultural output-a drawback that must be balanced with the economic
benefits of the project-and it can raise the overall cost of the project to
unacceptably high levels. What is more, workers who have been enticed
away by comparatively high wages from their seasonal agricultural job may
not be willing to accept lower wages for the same civil works job during the
slack season.
Furthermore, the availability of surplus labor at certain times of the
year does not necessarily mean that this labor will be available to work on a
civil construction project. The willingness to work on such projects depends
not only on the level of wages but on the worker's perception of long-term
and short-term earning differentials relative to other types of employment,
on his wealth (that is, the size of landholdings), on the disutility of work in
terms of forgone leisure, and on his perception of the additional costs, such
as transport, food, and lodging, of working on the project.
The research showed that one of the critical managerial tasks is schedul-
ing the civil works tasks in accordance with local agricultural practices,
which may differ from one region to another. It also showed that large proj-
ects are more difficult to organize than smaller projects. If thousands of
workers have to be assembled, transportation costs rise, and it becomes
necessary to spend large amounts of money on housing, food, and social
services. With smaller projects using workers from nearby villages or farms,
the overhead costs are much lower, and once the project is completed, some
of the same workers may be employed to perform regular maintenance.
A second major problem regarding management is the organization of
the work force. In traditional labor-intensive projects, the most usual form
of organization is force account, laborers employed more or less per-
manently by a public authority. This form has a number of advantages, the
main ones being the availability of workers throughout the year and the
flexibility to shift them from one site to the next. There are, however, many
drawbacks-low productivity, poor motivation, high overhead costs-that
make this form of organization much less efficient than the subcontracting
of various parts of the work to local entrepreneurs. But force account
organization may be the only feasible solution in countries where the con-



Civil Works Construction                                  59
struction industry is in the early stages of development and where technical
and managerial skills are scarce, and it has played an important part in
training personnel and in establishing standards of design and construction.
In countries that already have a developed construction industry and a
certain amount of experience with labor-intensive civil works projects,
however, research has shown that the contracting system is significantly
more efficient than the force account system. The work must be organized
in such a way that local contractors-most of them very small with limited
financial and organizational resources and therefore limited ability to carry
out a big project-are in a position to carry it out. A large project, for ex-
ample, must be divided into clearly identifiable small components that do
not exceed the technical and organizational capabilities of the likely con-
tractors.2 This principle, referred to as slice and package, has now been ac-
cepted as a means of fostering the participation of small local contractors in
civil works projects..
By their nature, labor-intensive construction projects require much
greater supervision than equipment-intensive projects. While a bulldozer
manned by one or two skilled workers can move up to 1,000 cubic meters of
earth per day, 200 to 300 unskilled laborers might be needed to do the same
amount of work. With labor gangs of 20 to 30 people, often dispersed over
a fairly wide area, a dozen or more competent supervisors capable of
motivating the labor force and controlling both the quality and organiza-
tion of its work are required. In many countries, the availability of a suffi-
cient number of skilled supervisors is a critical constraint on the feasibility
of labor-intensive projects. It is possible to train fairly large numbers of
people to assume such supervisory tasks, but this can add significantly to
the cost of the project and to the time needed for its execution. And train-
ing, however well done, is not a perfect substitute for the years of ex-
perience accumulated by seasoned supervisors.
If the availability of supervisory skills is one of the big bottlenecks in the
wider use of labor-intensive methods in civil works construction, another is
the availability of engineers and other high-level technical personnel with
the ability and inclination to organize and supervise projects of this type.
Traditional engineering schools familiarize students with modern
equipment-intensive methods but not with the less glamorous, but in many
ways equally complex, labor-intensive methods. Furthermore, labor-
intensive projects, which are often used primarily as a means of creating
employment opportunities, tend for this reason to have a rather un-
favorable image in the engineering community and are therefore unlikely to
attract the best technical people. This problem is not specific to labor-
intensive civil works projects alone. Until fairly recently, most attempts to
promote appropriate technologies (many of which are of the labor-intensive
type) were viewed with derision by policymakers and engineers and seemed



60                 Technology, Finance, and Development
unworthy of attention except by a small number of marginal groups with
relatively little engineering experience and almost no familiarity with the
management of large-scale projects. In recent years, things have changed.
The concept of appropriate technology has entered the mainstream of
development thinking and is being promoted by many development agencies.
The political and cultural legitimacy attached to appropriate technology has
encouraged the search for innovative labor-intensive technologies and is
gradually helping to bring some of the better engineers and managers into
the field. In this perspective, one may surmise that one of the most impor-
tant indirect benefits of the World Bank's study on labor-intensive con-
struction methods is to give these technologies respectability. This indirect
benefit is probably as important as the basic technical and organizational
aspects developed in the course of this action-oriented research.
The research carried out by the World Bank suggests that from an
organizational and managerial standpoint, labor-intensive civil works proj-
ects are rather complex, even if the basic technologies used are fairly simple.
In fact, the managerial and organizational elements are critical to the suc-
cess of a project, and one of the basic aims of the research was to develop
the know-how to make such projects economically efficient. As experience
was to show, some of the organizational means required to meet this
criterion of efficiency are fairly straightforward. This is the case, for in-
stance, with the whole program of wage structures and incentives. The
research showed that with adequate wage incentives, the productivity of
labor could be increased significantly. While this conclusion may seem
logical and obvious, the research did highlight two important points. The
first is that the productivity increases that can be fostered by an effective
system of wage incentives (piece-rate systems instead of daily wages) are ex-
ceptionally high. In the case of earthworks, for instance, it was observed
that the output per worker could be increased by a factor of two or even
three.3 The second is that the development and administration of an effec-
tive incentive system is a rather difficult and complex task. Detailed job
analyses have to be carried out, and a schedule of productivity norms must
be established. Furthermore, the payment basis must be fully understood by
the labor force, and it must be perceived as fair by the workers. It is also im-
portant that wages be paid regularly and promptly.
Wages and incentives are but a part of the much greater problem of
financing. The research showed that many such projects sponsored by
public authorities suffered from irregular supplies of funds to pay workers
and contractors and that this had a very negative effect on worker morale
and on productivity. The problem is particularly acute when the work is car-
ried out by small contractors who do not usually have the financial strength
to overcome the difficulties caused by delays in payments or have the
resources to make the initial investments for mobilizing the manpower



Civil Works Construction                                61
needed in the project (advances to prospective workers, transportation
costs, and so on).
Technical Factors
The World Bank study pointed to the paramount importance of managerial
and organizational factors in the planning and implementation of labor-
intensive civil works projects, but it would be a mistake to belittle the role of
technical factors. In fact, a significant part of the research was devoted to
detailed investigations of the wide range of technologies used in civil works
construction and to painstaking comparisons among alternative ways of
performing the same task. This research, summarized in a large number of
technical memoranda, represe. (s one of the most comprehensive bodies of
knowledge and experience about labor-intensive construction methods and
amounts in effect to the current state of the art in this field.
Wheelbarrows are one of the many factors studied. This is a well-known
technology that at first sight would appear particularly appropriate in
labor-intensive construction projects.4 In many countries, however, the
wheelbarrow is a totally unknown tool; workers are not familiar with it, and
no local manufacturers make them. The research carried out in India and
Indonesia showed that the traditional wheelbarrow with plain bearings has
little advantage for short haul distances over the seemingly inefficient head-
basket. The only competitive alternative is the more costly scooter wheel-
barrow, which has a pneumatic tire wheel mounted on ball bearings.
Haulage of earth with wheelbarrows of this type is economically and ergo-
nomically efficient but only within rather specific limits. If earth has to be
moved short distances, purely manual methods are preferable, and if the
haulage distance exceeds 100 meters, the modern wheelbarrow is no longer
the most efficient tool. Furthermore, much depends on the nature of the
terrain. With level ground, the wheelbarrow is easy to operate, but as soon
as the slope exceeds a certain gradient, it is more cumbersome than helpful.
Investigations were also carried out on other types of wheelbarrows,
notably the two-wheel Chinese type, which has the advantage that a larger
proportion of the load rests on the wheels but which is rather unstable, and
difficult to maneuver over rough ground.
Research was also carried out on the use of draught animals. It showed
that for short hauls with a large rise, as in the final portion of a high em-
bankment, panniers are a rather effective technology. With medium-length
haulage distances (between approximately 100 and 1,000 meters), the tradi-
tional animal-drawn cart is economically and technically efficient provided
the terrain is fairly flat. Using large numbers of draught animals in civil
works projects is far from simple, however. Provisions must be made for



62                 Technology, Finance, and Development
feeding the animals, keeping them in good health, and organizing the se-
quence of their work in such a way that idle time is not excessive.
Another area to which substantial research was devoted was that of
hand tools.5 In many developing countries, the only hand tools used in civil
works projects are either traditional agricultural implements or inferior
copies of Western-style tools. In most projects, the cost of hand tools ac-
counts for a very small proportion of total project costs. An ordinary shovel
may be worth four or five days of a laborer's wages, and total cost of all the
hand tools used in a project may not be more than 3 or 4 percent of the total
wage bill, even when one assumes that the hand tools' useful working life
does not exceed six months. Because tools are relatively inexpensive, their
importance tends to be overlooked. But the productivity of labor can be
markedly reduced if inadequate tools are used. Inferior tools are a bad in-
vestment because of their poorer productivity and because of the need for
much more frequent replacements, which rapidly offsets their lower pur-
chase price. The World Bank study showed that this tendency to overlook
the importance of providing the right tools for the right job was one of the
most cor-nmon problems in traditional labor-intensive civil works projects.
The productivity of workers is influenced not only by the quality and ef-
ficiency of their tools, by wage incentives, and by the level of organization
and supervision of the project but also by health and nutrition standards.
Many workers engaged in civil construction projects are undernourished
and in poor health, and one of the most productive investments is to pro-
vide workers with an adequate diet and good health supervision. Studies on
the relationship between nutrition and worker productivity are complex and
painstaking, and their results are not always very conclusive, but in some
cases, a direct linkage can be established between a specific nutrition defi-
ciency and worker productivity.6 It was observed in Indonesia, for instance,
that a simple iron supplementation program costing half a dollar per worker
resulted in productivity increases of up to 25 percent. A similar study car-
ried out in India indicated a close correlation between output and body
weight, which indirectly confirms that food supplementation programs aimed
at increasing caloric intake can be highly beneficial.7 Perhaps even more im-
portant than specific nutritional programs is the provision of clean drinking
water and sanitary waste disposal facilities on the work sites and within the
camps where the laborers are housed.
This rather brief review of some of the technical findings of the World
Bank's research on labor-intensive civil works construction would not be
complete without some reference to the possibilities of using intermediate
technologies in such projects. The term intermediate technology is gener-
ally understood to refer to technologies that in terms of complexity and cost
lie somewhere between the simple labor-intensive technologies, which are
still widely used in the rural areas of developing nations, and the complex



Civil Works Construction                                  63
equipment-based technologies of the modern sector. In this sense, a small
tractor with a trailer represents an intermediate technology, halfway be-
tween the traditional headbasket on the one hand and the bulldozer or the
motorized scraper on the other. In the civil works field, the term tends to be
used somewhat differently. By intermediate technology, one generally
means not a specific technology or piece of equipment but rather a com-
bination of labor-intensive and capital-intensive technologies. In other
words, intermediateness refers to the whole complex of technologies used in
a project rather than to specific pieces of hardware.
Experience seems to suggest that the possibilities of combining labor-
intensive technologies with equipment-intensive technologies are very
limited. Operationally it is feasible to bring a few sophisticated machines (a
bulldozer or an excavator, for instance) into an otherwise fully labor-
intensive civil works project. In practice, however, such combinations are
not appropriate. Part of the reason is the additional complexity this com-
bination introduces into the organization of work and the difficulty of coor-
dinating the fast pace of the machine with the much slower pace of the
laborers. In addition, the use of sophisticated machinery requires a fairly
complex support service (fuel supplies, spare parts stocks, maintenance
facilities) whose buildup is justifiable only if the number of machines is suf-
ficient. With only a few machines on site, setting up such support services is
not economical. Furthermore, when only a few machines are used, they
tend to lie idle for long periods of time since their rate of output is so much
faster than that of the laborers. As a result, the cost of using them tends to
become prohibitively high.8
One of the most significant lessons of this research from a technical
point of view is the need to maintain a certain degree of technological in-
tegrity in the whole project. If the project is to be labor intensive, it must be
consistently so; if it is to be based on equipment-intensive methods, then
there is but limited scope for introducing labor-intensive components. Ex-
perience also shows that this need for technological integrity also applies to
the maintenance work. If a road has been built with labor-intensive
methods, then the maintenance work is best carried out with the same
methods.
Another important lesson of the World Bank's study concerns the size
of labor-intensive civil works projects. Although in principle it is possible to
carry out very large projects using such methods-as indicated by the ex-
periences of countries such as China or India-the evidence suggests that
smaller projects involving a few hundreds of workers are easier to design
and manage and fit much better into the local environment. The optimum
size depends on the nature of the task and local traditions. In countries such
as India, for instance, there is a long-standing tradition of labor-intensive
projects, and large gangs of workers can be assembled from hundreds of



64                 Technology, Finance, and Development
miles around. But in many other countries, very large projects raise major
social and organizational problems, and this makes them rather risky prop-
ositions.
Design and Implementation of Labor-Intensive Projects
The World Bank study was also designed to provide a workable meth-
odology for preparing and implementing well-defined and economically
viable infrastructural projects. Although in its early stages, the study focused
primarily on existing projects carried out by local agencies, it soon shifted
to experimentation and analysis of new projects, many financed in part by
the Bank. One of the most important outcomes of the study was the prep-
aration of a very detailed guide that outlines the technical and organiza-
tional problems of labor-intensive civil works projects and summarizes the
basic know-how in this area.9
This guide, which marks the culmination of ten years of research, pro-
vides planners, administrators, and engineers involved in the design, execu-
tion, and supervision of labor-based construction projects with practical
help on all of the important aspects of such projects-from the initial design
and preparation phase to full-scale implementation. Its purpose is not to
make a case for labor-intensive projects but to show how best they can be
executed in practice. For this reason, it does not address such issues as the
evaluation of projects from the viewpoint of the national economy or the
determination of the economic value of a labor-intensive project versus
competing demands for investment funds by other types of projects. It
takes for granted that a project has been found to be valuable for the
economy and seeks to provide planners and managers with the necessary in-
formation to make it successful.
The guide presents the basic steps in initiating and planning labor-
intensive civil works projects and examines such issues as the technical and
economic feasibility of labor-based technologies, the choice of technology,
the nature of the physical works, the need for institution-building and sup-
port activities, and the ways of ensuring support from the authority that is
to finance the project. It examines the critically important role of pilot proj-
ects and the transition from the pilot project to a full-scale program. Special
chapters focus on the detailed planning, management, and organization of
a full-scale project. Others examine the problems of site planning and
logistics. What construction resources are available? How should labor
camps be laid out? How can on-site transport best be organized? What is the
cost of bringing in labor from far away? One chapter examines the problem
of site engineering. How should roads and irrigation works be designed?
What is the most appropriate way for conducting topographical surveys and



Civil Works Construction                                65
soil surveys? How should the site be cleared in preparation for the construc-
tion work? What is the most efficient way for moving the earth? What types
of pavements and linings should be chosen? How should quantities be
measured? How is subsequent maintenance work to be organized? The final
chapter is devoted to site administration and management and focuses on
such issues as the recruitment of labor, the design of a wage system, the
training of workers and supervisory staff, the measurement of productivity,
production planning and control, and the evaluation of productivity data.
Each chapter contains an annotated bibliography, and the guide in-
cludes a number of technical appendixes dealing with such subjects as the
design of hand tools and light equipment, different methods for cost
calculations, and the implementation of a monitoring and reporting system.
This guide is important for a number of reasons. By bringing together
all of the research carried out by the World Bank on labor-intensive con-
struction methods as well as its practical experience in the design and execu-
tion of both pilot projects and full-scale projects, the book summarizes the
basic technical and organizational know-how for designing and implement-
ing projects of this type. It also epitomizes one of the major ways in which
the Bank operates as a technological institution: what has been developed is
not primarily new technology in the hardware sense of the word but a large
body of organizational and managerial knowledge based on economics,
management science, engineering, and technology, in an attempt to syn-
thesize theory with practice and research with current operations.
Another important aspect of this research on labor-intensive construc-
tion methods is its cooperative nature. It was prepared not only by World
Bank staff members but by independent consulting firms, public authorities
in developing countries, and individual researchers from a large number of
countries, and the project itself was financed from a wide variety of
sources, both national and international. CIev-rly the research allowed for
an active and vitally important contribution on the part of the developing
countries themselves in the process of research and experimentation, and
this may well point to the new forms of action-oriented research, which will
increasingly be needed in the years to come.
Policy Issues
Labor-intensive civil works projects are technically feasible, and the study
sponsored by the World Bank clearly demorstrated that they can also be
economically competitive, provided they are well designed and adequately
supervised. They can be of interest only to countries with a rather low level of
income and a relatively abundant supply of labor. What is technically and
economically feasible, however, is not necessarily politically and culturally



66                  Technology, Finance, and Development
acceptable. Furthermore, even when such basic conditions as low wage
levels, an abundant supply of labor, and the political willingness to experi-
ment with such methods are met, there are still a number of problems to
overcome.
One of these is the way in which projects are designed and prepared.
The study sought to investigate the feasibility of using labor-intensive
methods in civil works projects and was aimed at developing the necessary
know-how for designing and carrying out such projects. Comparatively less
attention was devoted to the influence of project identification on the
choice between labor-intensive and equipment-intensive technologies. What
generally happens is that this preliminary phase in which a potential project
is identified and its broad characteristics are determined, exerts a major, if
largely unrecognized, influence on the types of technology selected for carry-
ing out the project. A typical illustration of this is the overall scale of the
project. If a project is identified at the outset as a rather large undertaking,
it almost inevitably follows that equipment-intensive technologies will
emerge as the choice for works execution. If the basic design parameters are
set according to high technical standards, it becomes difficult to choose
labor-intensive methods for carrying out the construction work.
Techniques that will help overcome the inherent biases of current
project identification and preparation procedures against labor-intensive
technologies can be extremely helpful. In this connection, reference must be
made here to a major conceptual innovation developed by the World Bank,
that of neutralization.'0 This is a set of techniques in procurement pro-
cedures that are aimed at identifying and, removing the biases in favor of
equipment-intensive technologies so as to azllow the contractor a freer choice
in the selection of technologies that may be used for carrying out parts of
the project. The purpose is not to discriminate against equipment-intensive
technologies or to give particular preferences to labor-intensive technologies
but simply to ensure that the different technologies are put on the same
footing. This can be done through a wide variety of means, ranging from
technical specifications to the definition of the size of the tasks to be carried
out, and from bid evaluation rules to the choice of financing schedules.
This concept of neutralization, developed within the framework of a
guide to competitive bidding, is of much wider relevance than to the field of
procurement alone and is in fact applicable to all of the early phases of a
project as well as to the design of sectoral development policies. Its impor-
tance is twofold: as an instrument for reducing the inherent biases against
the use of labor-intensive or appropriate technologies and as a tool for
widening the range of technology choice and suggesting alternative options
that would not normally be taken into account. In a sense, it represents a
major effort for bringing the problem of technology choice into the policy-
making process.



Civil Works Construction                            67
In the same way, this research of the World Bank on labor-intensive
civil works construction might be viewed not only as an important contri-
bution to the organizational and managerial state of the art but also as a
major attempt to explore alternative development strategies and to present
policymakers with a number of options more appropriate to local condi-
tions.
Notes
1. This section draws heavily on The Study of Labor and Capital Sub-
stitution in Civil Engineering Construction: Report on the Bank-sponsored
Seminars in Washington, Cologne, Copenhagen, London and Tokyo
(Washington, D.C.: World Bank, 1978).
2. See Guide to Competitive Bidding on Construction Projects in
Labor-Abundant Economies (Washington, D.C.: World Bank, 1978).
3. On this point, see Technical Memorandum No. 12, Haulage by
HIeadbaskets, Shoulder Yokes and Other Manual Load-Carrying Methods
(Washington, D.C.: World Bank, October 1975) and Technical Memoran-
dum No. 19, Excavation (Washington, D.C.: World Bank, February 1976).
4. See Technical Memorandum No. 1, Comparison of Alternative De-
sign Wheelbarrows for Haulage in Civil Construction Tasks (Washington,
D.C.: World Bank, January 1975), and Techlnical Memorandum No. 13,
The Use of Wheelbarrows in Civil Construction (Washington, D.C.: World
Bank, October 1975).
5. See Labor-Based Construction Programs--A Practical Guide for
Planning and Management (Oxford: Oxford University Press, 1984), Ap-
pendix C.
6. See Technical Memorandum No. 4, Effect of Health and Nutrition
Status of Road Construction Workers in Northern India on Productivity
(Washington, D.C.: World Bank, January 1975).
7. See "Iron Deficiency Anaemia and the Productivity of Adult Male
Workers in Indonesia," World Bank Staff Working Paper No. 175 (Wash-
ington, D.C.: World Bank, April 1974).
8. On the scope for using intermediate technologies, see, for instance,
I.K. Sud, C.G. Harral, and B.P. Coukis, "Scope for the Substitution of
Labor and Equipment in Civil Construction-A Progress Report," a paper
presented at Indian Roads Congress, Thirty-Seventh Annual Session,
Bhopal, December 1976 (New Delhi, 1978).
9. Labor-Based Construction Programs-A Practical Guide for Plan-
ning and Management, op. cit.
10. See Guide to Competitive Bidding on Construction Projects in
Labor-Abundant Economies (Washington, D.C.: World Bank, 1978).



Urban Traffic
Management
Herbert H. Werlin
Inadequate transport undermines the capacity of cities to fulfill their func-
tions, and it negates the advantages that densely populated areas enjoy by
virtue of their concentration of skills and purchasing power. Poor transport
and poverty are interrelated. In many countries, roads often are badly lo-
cated, poorly built, and badly maintained. So dusty are they in some of the
pueblos jovenes (new settlements) in Peru that road traffic is considered
responsible for the high incidence of respiratory disease. In Recife, Brazil,
some urban arteries cannot be used at all by public transport for as long as
two months during the rainy season.
Poor roads, combined with poorly maintained vehicles and inadequate
traffic control, are also responsible for the high fatality rates from accidents
in many developing countries. A recent study of somrie of the cities of these
countries found these rates to be eight times greater than in Great Britain
and up to thirty times greater than in the United States. The highest figure
was in Bombay, with 53 fatalities per 10,000 vehicles. This compared with
4.2 fatalities per 10,000 vehicles in Great Britain and 1.6 in the United States.
Most urban poor are dependent on their own feet to get where they have
to go. In many cities, half of all work trips are made on foot, often for long
distances. For poor people, the cost of motorized transport can be a severe
impediment to finding employment. Of those able to afford motorized
transport, between two-thirds and three-quarters use the bus, but services
tend to be unreliable and inadequate.
What can be done to improve urban transport in the developing world?
Traditional transport planning methods, with their emphasis on deciding
when and where to build the next road, do not provide the answer. Even in
developed countries, the costs of urban road construction are becoming un-
acceptable, not only in monetary terms but also in terms of social disruption
and environmental destruction. Traditional approaches have also encouraged
private automobiles, leading to intense congestion of urban streets, air and
noise pollution, and the allocation of scarce foreign exchange on fuel,
gasoline stations, and repair facilities. In terms of costs per passenger mile,
buses are clearly much more economical than automobiles. A bus costing
$40,000 in 1975, or thirteen times more than a typical automobile, may
average forty times the automobile's annual passenger mileage.
Much of material included in this chapter was originally prepared for and presented in the Urban
Edge, a World Bank-sponsored newsletter published by the Council for International Urban
Liaison.
69



70                 Technology, Finance, and Development
Because of their concern to make maximum use of limited resources and
to avoid past mistakes of North America, where resources went to improv-
ing facilities for private transport at the expense of those needing public
transportation, leaders in developing countries are looking to innovative
solutions. These include such approaches as greater priority to projects aimed
at improving public transportation, the orientation of public transport to
the needs of residents in low-income areas, the development of traffic engi-
neering and management measures that make better use of the existing
street system, the application of new organizational and financial tech-
niques to improve the efficiency of bus fleet operations, the encouragement
of low-cost fuel-saving transportation systems, and the change in such
social habits as working hours. These approaches, used singly or in com-
bination, will be illustrated in this chapter with the help of a number of ex-
amples taken from large cities of the developing countries in which the
World Bank has been involved. They will show that a balanced approach to
urban transportation can help to reduce travel time, bring jobs closer to
home, and allow the poorest people access to transport, a vital necessity in
their search for jobs.
Making Better Use of Existing Roads
Making better use of existing roads and streets is one of the first and most
obvious approaches to improving urban transportation. The problem is
more one of traffic management than of physical improvement or enlarge-
ment. The building of new roads makes sense only if they are properly in-
tegrated with existing roads. One illustration of this approach is provided
by the city of Calcutta, which is attempting to reduce traffic tie-ups by
restricting certain streets to pedestrian use, improving traffic islands in the
center of wide roads (particularly at junctures), introducing new or im-
proved road markings and signals, enforcing more effective parking con-
trols, and creating exclusive bus lanes with indented bus stops and other
protective measures to facilitate passenger pickup.
Such an approach is being increasingly used in a number of other cities.
San Jose, the capital of Costa Rica, is avoiding an expensive road construc-
tion program. Only one section of a new road will be built to link up with a
new intercity highway. In four corridors, the streets will be widened, where
possible, within existing rights-of-way, to allow the introduction of exclu-
sive bus lanes during peak hours. A number of Brazilian cities are paying
particular attention to the development of bus lanes. In Recife, about 40
kilometers of exclusive rights-of-way for buses are being constructed in four
radial corridors leading into the central area. The work includes repaving or
constructing new sidewalks, curbs, bus stops, and shelters and signals.



Urban Traffic Management                                  71
In addition to over 20 kilometers of exclusive and priority lanes for
buses and taxis, Manila is planning to provide or improve over 20 kilometers
of footways, together with 200 crosswalks in mid-block positions. Madras is
another city that recognizes the importance of both foot and cycle paths. Its
project calls for the improvement of about 200 kilometers of footpaths and
about 50 kilometers of cycle tracks, together with the construction of nine
pedestrian underpasses and the lighting of twenty-four dangerous intersec-
tions.
The effect of unpaved roads on public transportation is long remembered
by passengers required to use such vehicles during a rainy season. But a
road-paving program need not be expensive. Where soil conditions are rea-
sonably stable, the paving can take the form of a simple macadam surface
dressing, which can cost as little as 20 percent of the cost of traditional road
construction.
In San Salvador, a new two-lane road is being planned to allow bus ser-
vices to penetrate for the first time into the heart of one of the poorest
neighborhoods with about 60,000 inhabitants. The project also includes
about 5 kilometers of two-lane access roads with very simple design stan-
dards for service vehicles, such as garbage and utility trucks. To improve ac-
cess from houses to the bus lines, about 18 kilometers of current tracks will
be paved on a width of 3 meters as pedestrian footpaths. Finally, a series of
concrete stairs will be provided to eliminate the need for bus passengers and
other pedestrians to scramble up and down muddy hillsides.
In Madras in 1976, it was estimated that 40 percent of all daily pas-
senger trips were made between 8 A.M. and 10 A.M. and between 4 P.M. and 6
P.M. This concentration resulted in severe congestion during these hours and
the overloading of buses by as much as 100 percent. To alleviate this situa-
tion, the state government in August of that year implemented a system of
staggered work hours for government offices, private business, factories,
and schools. The impact of this change is currently being evaluated. A
similar experiment is being carried out in Bombay by the state government
of Maharashtra.
In mid-1975, Singapore became the first country in the world to curtail
systematically the use of private automobiles in congested areas. The need
was clear; within a radius of 8 kilometers, over 1.5 million people were us-
ing over 250,000 registered motor vehicles, of which 150,000 were private
cars. A number of alternatives were considered, among them import duties,
gasoline taxes, city street tolls, and higher parking fees. The solution even-
tually adopted-area licensing-has proved more effective than any of
these alternatives could possibly have been, though it required significant
political courage and planning. Area licensing in Singapore initially com-
prised five steps: the designation of a restricted area, the requirement of a
dated windshield sticker for passengers to enter the restricted area between



72                    Technology, Finance, and Development
7:30 A.M. and 10:15 A.M., the opening of 10,000 spaces in car parks around
the periphery of the restricted zone, the operation of shuttle buses from the
fringe car parks to the central areas, and the doubling of parking charges at
public car parks within the restricted area, making them especially high for
all-day parking. Based on experience, minor modifications have been made,
including better bus services, restrictions on taxis, and upgrading of roads.
The following description provides some insight into the mechanisms of
Singapore's experiment:
The restricted zone covers the previously most congested part of the central
business district (CBD) about 500 ha, leaving diversion routes for motorists
who do not have destinations within the zone. During the time the system is
in operation (7:30-10:15 A.M. weekdays) the red overhead lights at 27 gan-
tries spanning all approach roads to the CBD are lit and roadside check-
points at the gantries are staffed by polite uniformed women, 55 in all, who
check as the traffic slows without stopping whether the prominent daily or
monthly sticker is displayed on the windshield. Booths that sell the stickers
operate daily at the approaches to the gantry points and monthly stickers
are also on sale at banks and post offices.
On the rare occasions that a stickerless windshield or invalid coupon
passes by the argus eyes of the gantry women, the culprit can look forward
to a summons and S$50 [1 U.S.$ = approximately S$2] fine in the next
day's mail-violations average about 70 a month out of more than 11,000
properly documented trips into the central area. There is a S$2,000 fine and
a jail sentence fc. .= =- "-Q.!egal tampering with the sticker, but no in-
stances of this kind have been reported to date. The system operates
without fear or LX'or and it certainly encourages car pooling as the gantry
attendant checks either for four heads or for the sticker on the windshield.
Promptly at 10:15 A.M. the "In Operation Restricted Zone" red neon sign
atop the gantry is turned off, the women go off duty, and normal traffic
resumes. Amazingly simple and inexpensive to operate, besides producing
revenues, area licensing has proved effective in reducing the use of private
cars, with resultant savings of imported fuel. The ridership and cost-ef-
fectiveness of public transport in the inner city has been increased. Besides,
pollution levels have dropped significantly, as determined by the regular
monitoring of air quality carried out at selected stations in the CBD. '
The success of the Singapore experiment soon became apparent. Since
its introduction, speed within the restricted zone during the restricted hours
has improved within two years by an estimated 22 percent and on inbound
radials by 10 percent. The number of cars entering this zone during the re-
stricted time dropped by 73 percent. Approximately 18 percent of the vehi-
cle owners chose new options. Of these, about equal numbers changed to
the bus, joined car pools, or made the trip at different times. The total
capital costs have already been recovered almost entirely from the sale of
stickers costing U.S.$26 a month or $3 a day. Above all, the public has been
pleased with the experiment. According to public opinion surveys, Singa-



Urban Traffic Management                                   73
poreans note less congestion, safer streets, and reduced pollution in the cen-
tral area. Even business leaders agree that the scheme has not had the ad-
verse impact on sales that was initially feared.
The success of an area license scheme depends on a number of factors:
competent management, comprehensive policymaking and planiling, atten-
tion to administrative details, preparation of the public, and flexibility.
While Singapore has a number of advantages in this regard, other cities
could, with suitable modifications, follow this example. What is essential is
the conviction that such a scheme would be worthwhile and the political will
to carry it through.
Paratransit Alternatives
Paratransit refers to a range of vehicles-from minibuses to carts, powered
by motors, animals, or humans. Paratransit services are privately owned.
Beyond that, generalizations are difficult. Often these vehicles have no fixed
hours of operations or destination, and their drivers charge whatever can be
negotiated or demanded. Their flexibility, accessibility, and relative
cheapness make them highly competitive. Because of their importance, a
number of countries are trying to regulate the various forms of paratransit
without discouraging them and to enhance their positive features while con-
trolling some of their less desirable characteristics.
In many countries, bus companies are in financial difficulties. Costs of
fuel, vehicles, spare parts, and labor have risen more rapidly than fares,
which need to be kept low for political reasons. There is also the require-
ment to operate buses at times or on routes where there are few passengers.
An alternate form of service is the minibus, often nothing more than a
pickup truck fitted with benches for ten to fourteen passengers and a rack
on the roof for goods. In case of rain, roll-down plastic sheets may be pro-
vided for protection. Minibuses can operate efficiently with fewer passen-
gers and typically need only 25 percent of the fuel required by a sixty-pas-
senger bus. They also make better use of road space in congested areas. Be-
cause minibuses are generally privately owned, they are not a drain on local
government resources, as are the public bus companies plagued by costly
overheads.
The efficiency of minibuses makes them an attractive business proposi-
tion in many developing countries. The rate of return on such vehicles sug-
gests that they can be financed at commercial rates of interest of about 18
percent per annum. Such a loan can be amortized without too much diffi-
culty, even when gasoline prices are high and occupation rates only 60 per-
cent; this still leaves enough for insurance and allows for a take-home in-
come equivalent to $1,200 per year. In addition to creating employment



74                  Technology, Finance, and Development
and income for owners and operators, minibuses stimulate the development
of small engine and repair shops and other businesses in poverty areas.
Other positive side effects include the spread of mechanical skills and
vocational-technical education.
The usefulness of minibuses often makes official opposition to them
counterproductive as well as futile. In Hong Kong, for example, during the
early 1960s over 2,000 illegal minibuses were estimated to carry 17 percent
of all bus passengers.2 During the political disturbances of 1967, these
minibuses were legalized. By 1976, the number of "public light buses" had
reached 4,350 and carried an estimated one-third of public transport
passengers. So profitable were these public light buses by 1980 that their
owners could recover two-thirds of a vehicle's purchase price in a single
year.
Kuala Lumpur, Malaysia, is another major city that recently has en-
couraged minibuses, licensing 400 of them between 1975 and 1977. Direct
observation, inquiries among residents, and published accounts indicate that
the minibuses are providing a valued service, particularly in reducing con-
gestion in central Kuala Lumpur. It is estimated that in 1980 they handled
about 8 percent of peak hour trips and 6 percent of all trips, with average
trip time reduced to about thirty-five minutes.
Contributing to the success of the Kuala Lumpur licensing project has
been the effectiveness of certain regulations such as the requirement of a
standard color for the minibuses, the display of route numbers recognizable
from a distance of 50 yards, the designation of twenty-eight routes averag-
ing 12.4 miles, each passing through the central area, the fixing of a maxi-
mum fare, double that of buses for a comparable distance, and the prohi-
bition of standing passengers. Fourteen terminals have been set up at which
passengers have a choice between at least two different routes through the
central area. Passengers also can hail a minibus anywhere along the route as
well.
The jitney, jeepney, or shared taxi did not originate in the developing
world. Jitney was early slang for a nickel said originally to have come from
the French jeton (token). Jitneys seem to have originated in San Francisco,
picking up passengers for a nickel along a more or less fixed route before
World War I, before becoming the victims of mass transit opposition.
Shared taxis are now starting to come back in a few U.S. cities.
The distinction between jitneys and minibuses is not always easy to
make because the larger jitneys carry as many passengers as the smaller
minibuses; however, they are usually passenger-carrying automobiles rather
than converted trucks or vans. They differ from conventional taxis by
operating on fixed routes, stopping to pick up and discharge passengers
along the way. Like minibuses, they are hailed from the street. In many
developing countries, jitneys are an effective response to the inadequacies of



Urban Traffic Management                               75
public transit. Indeed, they may be the only practical alternative for the ma-
jority, who cannot afford private cars. In Lagos, which suffers from serious
transportation inadequacies, the kia-kia service is crucial to the operations of
the city although frowned on by officials because of its freewheeling nature.
In Tehran, some 2,000 jitney-taxis running on fixed routes carry about
100 million passengers a year, compared with 700 million carried by buses.
In Manila, an estimated 18,000 jeepneys carry as many passengers as do
buses. Here buses and jeepneys charge the same fare and operate along the
same routes. The major distinction is that buses are perceived to be more
comfortable for longer journeys, while the jeepneys are faster.3
For countries anxious to discourage private automobiles, jitneys can
prove quite useful. In Mexico City, they carry more passengers than private
automobiles, though they are much fewer in numbers than private autos.
The popularity of jitneys seems to be extending to industrialized countries.
In Osaka, Japan, a taxicab company that started out with twelve jumbo
cars at the end of 1976 now has nearly three hundred in operation, using a
computer-assisted dispatching service. The nine-passenger cabs pick up and
discharge passengers along their route, charging each new user the equiva-
lent of $1.25 for the first kilometer and 25 cents for each additional third of
a kilometer. The cabs may also be hired by the hour for about $10, and they
are being used increasingly by companies to pick up employees and for com-
pany outings.
Many countries have had a problem regulating jitneys. In Manila,
public agencies, while controlling the entry of new operators, have been
relatively unsuccessful in introducing service criteria and follow-up enforce-
ment. As a result, the police department estimates that three-quarter, of
local accidents are caused by poorly maintained and badly driven jeepneys.
In Caracas, on the other hand, where jitneys serve about a half-million peo-
ple daily, effective controls are maintained on the number of vehicles allowed
on the streets and on the rates charged. Owners are required to obtain per-
mits and licenses from a ministry, must be approved by a city department,
and have to be accepted by an association (a form of transport union).
Specific routes are determined by the more than fifty existing associations,
each with 150 to 300 jitney owners.
Pedicabs, three-wheeled muscle-powered vehicles, have been going
strong since invented in 1847 by a U.S. Baptist missionary concerned with
public transportation difficulties in Japan. They now go under many dif-
ferent names: trishaw in Hong Kong and Malaysia, samlor in Thailand, and
becak or betjak in Indonesia. Until recently, pedicabs were very common in
most Indonesian cities; there were an estimated 300,000 in Jakarta alone.
Gradually, however, governments have discouraged them because they are
blamed for accidents and traffic congestion. Moreover, leaders such as the
late Ayub Khan of Pakistan viewed them as undignified and degrading, and



76                 Technology, Finance, and Development
he therefore banned them in his country in 1961. The Bangkok government
prohibited them from operating within the metropolitan area in 1961, and
in central Jakarta, they were banned in 1972.
The outlawed pedicabs increasingly have been replaced by motorized
rickshaws (three-wheeled motor taxis). Like pedicabs, the superstructures
are produced in local workshops, often with elaborate canopies, including
silver, gold, and mirrored surfaces. In Karachi, the auto rickshaws operate
in the taxi mode but are much less expensive. At the same time, they can go
much faster than buses. Their maneuverability allows them to penetrate
even the narrow back alleys of residential districts. Thus, short or long
hauls throughout the metropolitan area can be undertaken on demand.
Motorized rickshaws, however, create noise and air pollution, particu-
larly when they are not properly fueled and maintained. Drivers tend to be
reckless and unconcerned with traffic regulations and speed limits. The in-
stability and fragility of the vehicles causes accidents. There are also com-
plaints about rigged meters and refusals to make short trips. Nevertheless,
motorized rickshaws could become inlcreasingly important in many places.
Proposals for Nairobi's Transportation System
Like so many other cities in developing countries, Nairobi's roads can no
longer provide easy access for its rapidly growing population, which has
doubled in the last twenty years to almost 900,OO.4 Existing problems in-
clude the heavy financial burden of importing fuel, high accident rates, lack
of adequate pedestrian facilities, inadequate public transport, and conges-
tion at access points to the central business district and the industrial area.
To deal with these problems, various strategies are currently being analyzed
by representatives of government ministries, the municipality, the police,
and other interested parties, working within a Transport Advisory Group.
A number of measures are being considered for implementation with World
Bank assistance.
A bus and minibus priority route system. The central part of Nairobi
would be linked to low- and middle-class residential areas by a network of
bypass roads, crossing the city center from east to west and north to south,
thereby dividing the city center into four traffic cells. A fifth cell, to the
north of the main center, will be created by a proposed northern bypass.
Buses and minibuses would have exclusive rights-of-way on these roads.
Automobiles would be restrained within the cell boundaries formed by these
busways by using physical barriers or other traffic management measures.
Area traffic control (A TC). Vehicular flows would be more efficiently
regulated through a new ATC system comprising approximately sixty sets
of signals within the city center, the industrial area, and the immediate ap-



Urban Traffic Management                                 77
proaches. The proposed system would be capable of expansion up to ninety-
six signals, including pedestrian phases and special phasing for public trans-
port and emergency vehicles.
Pedestrian facilities. Some 90 kilometers of footpaths and walkways are
to be introduced or improved throughout the city serving low-income
families. When necessary, footbridges or signalized crossing places are to be
provided. Where pedestrian malls seem appropriate, motor vehicles would
be excluded.
Parking restrictions. Parking meters are to be installed throughout the
central area, with a progressive increase in fees and penalties to discourage
long-term use. A parking tax on all privately controlled parking spaces is
proposed, and the number of parking spaces available for private nonresi-
dential use will be limited. Off-street car parks maintained by the city coun-
cil are to be operated more effectively. Vehicles entering them during the
morning peak hours may be subject to parking surcharges.
Decongestion measures. One-way street systems and junction im-
provements are being planned. Another strategy is to stagger working hours
in the central and industrial areas. Shopkeepers would be encouraged to
open later and close later. A timing differential between school and work
starting times would be attempted, which would have the added advantage
of making regular buses available for school use.
Safety improvements. Driving tests are to be made more rigorous, and
vehicles will be periodically inspected. Traffic violations are to be enforced
more vigorously, with the police better trained for this purpose. A special
unit within the police department will be established to investigate accidents
and to devise improved accident prevention measures. This unit will also be
responsible for developing public education programs emphasizing lawful
and safe driving.
More and better matatus. The Nairobi form of paratransit (matatus)
consists largely of pickup trucks fitted with benches for twelve to eighteen
passengers and with a rack on the roof for goods. Their seats or benches are
sometimes folded away to allow more goods to be carried. According to a
1979 survey, there were about 3,600 urban and intercity matatus operating
in Nairobi carrying over 66,500 passengers daily. Despite their usefulness,
matatus have a bad reputation. They are often overloaded, which makes
them dangerous as well as uncomfortable. Only a minority are covered by
insurance, and those who have it are seldom properly insured. Hired
drivers, in contrast to vehicle owners, tend to be especially irresponsible, ig-
noring traffic regulations and safety requirements. In addition, matatus fre-
quently obstruct traffic, illegally parking to pick up and discharge passengers.
Can matatus be regulated without being discouraged? This is the ques-
tion currently being considered by Kenyan officials with World Bank assis-
tance. What has been proposed is an assistance program, making low-cost



78                  Technology, Finance, and Development
repair facilities, insurance, and credit available to small-scale matatus
driver-owners with the stipulation that the driver take courses in lawful and
safe driving, as well as in vehicle servicing, and pass a competence test in
these fields and that the vehicle be maintained in good condition and in-
spected annually, be adequately insured, provide adequate safety and com-
fort for the passengers and not be loaded beyond its specified capacity, and
be fuel efficient and, preferably, diesel engined.
Better Public Transit for Tunis
In 1972, 75 percent of all passenger trips in greater Tunis were made by
public bus or train and only 15 percent by private car. However, because of
the inability of the Societe Nationale des Transports (SNT) to maintain its
bus system and railway line (the TGM line), general public dissatisfaction
was high. In 1972, the SNT fleet comprised 355 buses. Almost one-third
were over twelve years old, and about 10 percent could no longer be used.
On an average weekday, only 58 percent of the fleet was available for ser-
vice. Forty percent of the buses departing from the depot were experiencing
breakdowns, half of which required towing back to the depot. Because of
this depot's inadequate space and facilities, it was difficult for proper
repairs and preventive maintenance to be carried out. SNT experienced
similar problems with its railway line. So old was its equipment, according
to officials, that operation could not be kept up for more than another five
or six years without a major modernization program; however, lack of
funds precluded such a program.5
In 1973, with World Bank assistance, the Greater Tunis District govern-
ment undertook a comprehensive approach to its transport problems, which
included the purchase of 210 new buses, the construction of a new bus
maintenance depot, the purchase of 13 new railroad cars and modernization
of the TGM track and signalization equipment; the raising or' fares and im-
provement of collection procedures; and the upgrading of all agencies
responsible for project implementation. Traffic management was also im-
proved with the upgrading of street intersections, the establishment of new
traffic regulations, the introduction of parking bans, the opening of
restricted bus lanes, and the closing of certain streets to traffic.
By 1977, many of the project's components were benefiting the public;
85 percent of the SNT bus fleet was in daily operation, and frequency of
breakdowns had declined to 20 percent of the previous figure. Bus ridership
was estimated to be about 15 percent higher than it would have been
without the project. Ridership on the TGM rail line was significantly higher
than it would have been without modernization.
Since 1980, there has been a marked improvement in bus services. With
the purchase of 600 new buses, the fleet size has been increased by 69 per-



Urban Traffic Management                                   79
cent relative to 1973. As the average age of the fleet has been reduced to
under five years, breakdowns have been reduced by one-third, enabling
buses to complete 85 percent of scheduled trips. This improved service has
generated a 77 percent increase in passengers over the past eight years, com-
pared to a predicted increase of only 44 percent.
Tunis' suburban light rail system has been completely reconstructed, in-
cluding tracks, signals, substations, and depot. With the introduction of
thirty-six cars, the new service is reliable and fast (about forty km/hr. travel
speed). The ride is comfortable, and vehicles and stations are well maii-
tained. Tunis is also redeveloping its streetcar system, which ceased opera-
tion in 1960. It is purchasing seventy-eight vehicles from Germany, each
with a capacity of about 300 passengers, at a total cost of $168 million.
Improving Road Use in Brazilian Cities
In Brazil's large cities, competition for the limited road space has intensified
in recent years. The increased number of cars, buses, trucks, and pedestrians
has resulted in greater delays, accidents, and pollution. The most serious
situation is in the residential areas where the poor live; there, most roads are
unpaved, making traffic movement almost impossible during periods of
heavy rain. Frequently after a period of rain, bus services to these areas are
suspended, causing residents to miss work or to lose job opportunities.6
To deal with these problems, the Brazilian government, with World
Bank assistance, is proposing to undertake projects in five of its metropoli-
tan regions, with populations ranging from 1.2 million to 3 million. The
components include road upgrading and widening, exclusive bus lanes, im-
proved traffic signal systems, and redesign of intersections. An important
element is the paving of bus routes to poor residential areas. Where possi-
ble, a simple macadam surface dressing costing as little as 20 percent of
traditional road surfaces will be used.
In addition to these general features, each of the cities concerned has
been implementing specific measures appropriate to local conditions. Since
1976, the city of Salvador has opened three fringe car parks with 2,500 spaces
that are linked with the central area by air-conditioned minibuses. As a result
of a low park-and-ride fee and an intensive publicity campaign, the service is
popular with motorists. To reduce traffic congestion further, authorities are
attempting to improve roads and bus terminals and increase the efficiency of
the existing bus fleet. The measures proposed include bus lanes, reorganizing
terminals to reduce the number of buses circulating at less than full capacity,
and linking the terminals by a new circular bus service. A special transfer
system would enable bus passengers to go long distances at little cost. In low-
income areas, tnere are to be sheltered waiting terminals.



80                   Technology, Finance, and Develc.Iment
Since 1974, the city of Curitiba, Brazil, has introduced the concept of
structural axes, each of which contains three parallel roads one to five
blocks apart. The central roadway consists of an exclusive busway and ad-
jacent service roads for local traffic and parking. The two outer roads are
one way in each direction and provide for through traffic and access to
commercial developmcnts. In the future, the busway could possibly be con-
verted for use by trams or light rail. The land fronting the central road is
zoned for high-density commercial aild residential development. The de-
velopment of a mass transport system on the central road is expected to
facilitate this commercial and residential concentration along these axes.
So far, the system has worked as planned. Whereas the population from
1970 to 1974 increased by 22 percent, the population along the structural
axes grew by 67 percent. Traffic congestion ha been substantially reduced
in the central area and virtually eliminated elsewkere. Most helpful has
been the public transportation developments. Currently two distinct bus
systems exist. Within the exclusive busways built into the structural axes,
express buses operate to and from the city center. The second system, using
local bus routes, connects the express bus system with adjacent residential
areas.
Although this bus system has been rapidly expanding the number of
passengers served, help has been requested from the World Bank to extend
the road system and to expand services on existing roads. Also traffic
management schemes in the city center are being developed, including the
coordination of 200 traffic signals, the implementation of a central area
parking policy, and the introduction of an extensive system of pedestrian
streets. About 30 percent of the streets in the central business areas are
already devoted to exclusive pedestrian use. In the other streets, parking is
either prohibited or severely restricted.
In the city of Recife, tra-ffic is burdened by inadequate bridges, an anti-
quated system of traffic lights, and naarrow streets within the congested cen-
tral core. To relieve these problems, the municipality has initiated a series of
measures and is planning others. Existing roads are being upgraded to pro-
vide an inner cross-town route, the first perimetral, that avoids the city
center. This is to be followed by a second perimetral, diverting traffic front
the center and, with it, significant, commercial and service activities. Roads
linking poor residential areas to these perir-etrals will be improved. The
perimetrals are to be linked by certain streets on the periphery of the central
nin us so as to form a city-center ring route. Other measures are also being
used to encourage private motorists to use other forms of transportation.
Parking charges increase with the number of hours parked, and cars will be
excluded from a number of streets. At the saine time, bus operations are to
be improved, By coping with the existing situation in these ways, officials
hope that futUr.: traffic problems will become manageable,



Urban Traffic Management                               81
Bangkok Traffic Project
Like so many other cities in developing countries, Bangkok, with a popula-
tion of 4.8 million, suffers from too much traffic on too little road space.
Only about 10 percent of the city's inner core is devoted to roadways, and
they consist of a discontinuous jumnbe of narrow, winding streets. Yet the
number of motor vehicles in the city continues to expand at an annual rate
of over 8 percent. Consequently travel costs have become so high as to
threaten the city's economic development. To improve this situation, the
Thai government's Office of the Committee for Management of Road Traf-
fic (OCMRT) undertook a $34 million project in 1979 with World Bank
assistance. The objective is to make Bangkok's existing transportation more
efficient with minimum additional investments.
A first element in this program is to increase road capacity. Road
flyovers are to be introduced at critical intersections. Certain roads are to be
widened, junctions will be improved, and missing road links, generally less
than half a kilometer in length, are to be provided. Sidewalks are to be in-
cluded or widened in certain places.
Another element is to set up bus lanes along roads with the highest
volumes of bus passengers. Some of these will contain physical barriers
preventing their use by automobiles. Bus bays are to be extended, allowing
dispersal of stops so that buses with different destinations will have separate
stops. This will avoid the current delays in bays now often used by over 100
buses per hour. Bus shelters will be provided at these bays and other heavily
used locations. In addition, regulations restricting minibuses are being
relaxed.
In addition to giving priority to buses, OCMRT has suggested a number
of parking policies designed to discourage long-term commute- parking, in-
crease parking spaces for short-term parking, and expand the traffic capac-
ity of arterial streets. On-street parking will not be allowed wherever it ap-
pears to reduce traffic capacity seriously. Parking regulations will be strictly
enforced by hiring an additional 1,000 parking attendants, providing stiff
p enalties for violations, and by a graduated increase in fines.
While these measures are expected to be useful, the government has also
studied the possibility of an area pricing scheme to discourage the use of
centrally located roads by cars during the working day. The project includes
measures to increase the government's capacity to improve traffic planning,
operations, public relations, and enforcement. Air and noise pollution as
well as traffic volume are to be carefully monitored so that abatement
measures can be successfully carried out. The Bangkok Mass Transit
Authority is also to be assisted with such operations as rationalization of
routes and schedules, finance and accounting, management of materials
and cquipment, and vehicle maintenance.



82                  Technology, Finance, and Development
Low Cost Parking Controls Bring
Tel Aviv Revenue
An ingeniously simple parking coupon system used in Tel Aviv for the past
six years has eliminated parking meters and their associated costs while rais-
ing money for the city. Anyone desiring a parking license for use in the in-
ner city may purchase a booklet containing ten detachable tabs. On finding
a vacant space, the driver parks, detaches a coupon, tears off a tab in-
dicating his arrival time, punches out the perforated date, and displays the
card against the inside panel of his side window by rolling up the window
against the folded upper edge. Each card can be used only once, being in-
validated by the perforations. Some drivers keep them to document parking
expenses.
After several years of operations the Tel Aviv system takes in more
than $80,000 annually, as against parking meter revenues of less than a
quarter of this total, at the time when the new system began operating in
October, 1971. The expenses of purchasing, maintaining and collecting
coins from the meters, which exceeded the revenues collected, was com-
pletely eliminated.
Tel Aviv Deputy Mayor Ramot told the city council after the system had
been in operation a few years "we got rid and relieved of the complaints
against broken meters, their bothersome supervision, criticism of inspec-
tors, vandalism and burglary. We introduced the parking card patiently . . .
and we are now completely relieved of the drivers' arguments.' '7
The system uses inexpensive cardboard and requires no special instru-
ment to mark the card; it eliminates the cost of parking meter purchase, in-
stallation, and maintenance and allows for parking fee increases without
meter changes; it saves the costs of parking restriction signs along streets as
entire sections of town may be designated as short-term zones. It also allows
for overnight parking according to local regulations (as cards may be pre-
printed to give free time from any late afternoon to the following morning)
and earns the local jurisdiction advance fees from the coupon distributors
who handle the business as concessionaires.
Art of Traffic Management
It may be appropriate to include the following section of a report prepared
for the Fourth African Highway Conference (Nairobi, Kenya, January
20-25, 1980) by Peter Midgley, a member of the World Bank's Urban Proj-
ects Department, which summarizes some of the ways in which the World
Bank can contribute to the exchange of knowledge and experience in an
economically important sector.



Urban Traffic Management                                      83
Traffic management is scorned in some circles as being a palliative inap-
propriate for "our problems." Why is this so? In most cases because traffic
management techniques are developed in situ in response to a problem in a
specific city, region, country or continent. They are hence regarded as be-
ing non-transferable. How many times have I heard the phrase "OK, that
may work in country X because they are disciplined but you know in our city
drivers would never respect the signs." In fact, as experience has shown,
traffic management concepts and techniques are often not directly
transferable.
They are adaptable. Often the adaptation of a concept developed in one city
will lead to the development of a totally new concept in another city. Un-
fortunately, no international mechanisms exist for the transfer of informa-
tion regarding traffic management in a systematic way. Organizations such
as the OECD, the Department of Transportation in the US and the Trans-
port and Road Research Laboratory in the United Kingdom have docu-
mented and compiled information on certain categories of traffic mange-
ment techniques in Europe and North America. In the Urban Projects
Department of the World Bank we have started to compile information on
traffic management experiences worldwide derived in part from European
and North American sources and from urban transport projects financed
by the Bank in Africa, Latin America and Asia. Many traffic management
measures are not documented even by the city using them. This is often due
to the municipal staff being unaware of the need to report what appears to
be an obvious or common sense technique. I would ]ike to give two ex-
amples of this. They illustrate the notions of simplicity, practicality and
adaptability I have described as well as revealing the problemn of documen-
tation.
Before joining the Bank, I was working in France on research into busway
systems. A colleague mentioned to me that when visiting friends in the city
of Liege in Belgium he had noted a busway was operating in the main shop-
ping street of the city. I had reviewed all available literature on busways
and Liege was never mentioned. I visited the city and to my astonishment
found not only a busway but a complete network which had been operating
for some five years! The city engineer had thought it would be a good idea
to use the right of way of a tram system which had been removed years
before to run buses on in order to avoid congestion in the city center. It
worked, and so the system was extended to other routes in the city. In Paris
we had been experimenting with different carriageway widths to try to
determine an optinmm width for bus operation. Our experiments had
determined 6.5 metels to be the optimum for two way bus flow at speeds of
50-60 km/hour. The Liege system had carriageway width of 6.5 meters and
buses were running at 50-60 km/hour!
The second example concerns the city of Grenoble in France. I had visited
Grenoble several times in connection with a tram feasibility study. On one
of these visits I decided to take a look at the new town being built on the
outskirts of the city. As I walked through one of the residential com-
munities I came upon a section of road with what at first appeared to be a
scaled down version of a tank-trap. As I was examining this rather peculiar
structure a bus appeared, approached the "trap" cautiously, passed over it
without any problem, and went on its way. I was mystified. On speaking



84                   Technology, Finance, and Development
with some residents I discovered that the trap was designed to stop cars
from using what was a bus-only route. The trap was designed to accept the
axle width of a bus and had iron posts set to a height to allowv a bus body to
pass. If a car attempted this it either smashed its axles or broke its
bodywork. Apparently, when the road was opened for buses three cars at-
tempted to use it. No one ever tried again! I never discovered who had
thought up this ingenious, albeit radical, method of bus priority enforce-
ment, but it revealed a great sense of practicality and simplicity which
worked most efficiently. Needless to say, I have never seen this technique
documented. The "inventor" probably thought it was so obvious that to
write it up was unnecessary! But this illustrates what traffic management is
all about: the art of making better use of existing facilities based on the
science of monitoring the use of such facilities.
Notes
1. George Wynne, Urban Transit Abroad 2, no. 2 (Fall 1979).
2. See Gabriel Roth and George Wynne, Free Enterprise Urban
Transportation, 1982, available for $4.95 from Council for International
Urban Liaison, 818 18th St., N.W., #840, Washington, D.C. 20006.
3. See Sigurol Grava, "The Jeepneys of Manila," Traffic Quarterly
(October 1972).
4. This section draws heavily on a paper by Paul Mbau, Nairobi's city
engineer, prepared for the 1980 Fourth African Highway Conference.
5. This section is based on an article prepared for The Urban Edge by
Noel Carrere of the World Bank's Urban Projects Department.
6. This section is based on an article prepared for Metropolis by Peter
Watson of the World Bank.
7. See George Wynne, Urban Transit Abroad, op. cit., p. 6.



The Uses of Satellite
Remote Sensing
Wolfram U. Drewes and
Abraham M. Sirkin
The connection between the high technology of the space sciences and the
problems of economic development may not be readily apparent. One link
is the urgent need of developing countries for accurate, up-to-date resource
information. Space technology is helping to fill this need. For all countries,
the need to acquire, analyze, and use valid information about the nature,
location, and state of their physical resources increases significantly as
economic development proceeds.
The obvious development projects-cultivation of arable land, cutting
of natural forests, grazing on lush grasslands, exploitation of surface or
near-surface mineral deposits-were recognized and carried out for genera-
tions with little recourse to formal surveys. Even the extension of arable
lands by irrigation facilities and the production of hydroelectric power in
obvious sites such as river gorges required little advanced scientific in-
vestigation. Further development, however, generally depends on less ap-
parent and less accessible resources. If development programs are to be ef-
fective and prudent and if they are not to squander a nation's limited
resources, they must be projected on a detailed and accurate information
base, and the pertinent information must be made readily retrievable.
The development gap between the industrialized a4 developing coun-
tries is accompanied by a resource information gap. Industrialized countries
are generally well mapped and continue to gather, analyze, store, and use a
wealth of resource information, but developing countries generally are in-
adequately mapped and at earlier stages of resource data accumulation. The
paucity of resource information is both a symptom and a contributing cause
of underdevelopment.
Developing countries need an information base about both their non-
renewable and renewable resources. They must know where nonrenewable
resources-fossil fuels and minerals-may be found within their borders,
and they must know the location, extent, and current condition of their
renewable resources-vegetation, soils, forest, and water. In order to iden-
tify, prepare, monitor, and evaluate specific dvelopment projects, planners
and resource managers need detailed information to determine the suitabil-
ity of the project site, to calculate its chances for success, and to estimate its
probable impact on the surrounding areas.
85



86                  Technology, Finance, and Development
Developing countries currently face the interrelated problems of the
time needed to acquire and analyze resource data, the open-ended costs of
data acquisition and processing, and the choices that have to be made
among the various options for study.
The numerous- technological means of data acquisition, processing, and
storage that have become available in recent decades have both facilitated
and complicated the task of gathering and using resource information.
Helicopters, airplanes, and satellites serve as the instrument platforms;
many camera and multispectral sensor systems, as well as h ohly specialized
instruments such as magnetometers and laser measuring devices, obtain
data to display on screens, to be stored in memory banks, or to be converted
to film or map form on automated cartographic tables.
The World Bank is continually assessing and using the latest techniques
to obtain the information needed to support its own operations. At the
same time, it has sought to strengthen the capabilities of developing coun-
tries themselves to acquire and use resource information. To this end, it has
financed a number of projects designed to enable developing countries to
take advantage of the new technologies and thereby speed up their access to,
and effective use of, information about their own resources.
New Technologies
Until the advent of the photographic camera and the airplane, resource in-
formation could be acquired only by direct observation on the ground. For
the past half-century, however, the primary means of gathering geographic
and resource information have been medium- and low-altitude aircraft,
various types of cameras and film, and numerous technical devices to
facilitate aerial photo interpretation and map production. All countries of
the world have been covered, some lightly and some intensively, by aerial
surveys, mainly by conventional black-and-white film, generally accom-
panied by the necessary ground observations and geodetic controls to
validate the accuracy of the photo interpretation. After World War II,
remote sensing from aircraft became the standard mode for acquiring
resource data, and many cieveloping countries have commissioned aerial
surveys to generate a national data base for some resources or to establish a
factual foundation for a particular development project.
In its own operations, the World Bank has incorporated aerial surveys
as integral elements of many of its development projects. Aerial photog-
raphy has been used to define drainage basins and determine watershed
characteristics relevant to irrigation proposals, to identify alternative
transportation corridors, and to ascertain the needs and opportunities for
reforestation, rangeland improvement, and population resettlement.



Satellite Remote Sensing                                  87
In the 1970s, two technological revolutions strcJ :g1y affected the remote
sensing field. One was the launching of the Landsat series of earth-
observing spacecraft by the U.S. National Aeronautics and Space Admin-
istration (NASA). The other was the refinement of computer technology to
permit measurement of homogeneous areas noted on the digital tapes carry-
ing satellite data and to store physical and other relevant factors in
automated geo-based data formats.
The multispectral scanner (MSS) aboard the Landsats senses and records
the reflectance of energy radiated from earth features in four different
wavelengths of the electromagnetic spectrum. Two of the wavelength bands
are in the visual region, and two are in the near infrared region. Since the dif-
ferent objects or phenomena on the earth's surface reflect different intensities
of energy in each wavelength, each surface feature has its own spectral
signature and thus may be distinguished on tape and films. Three Landsat
spacecraft, launched by the United States in the 1970s and no longer opera-
tional, carried multispectral scanners that provided resource data for virtually
all areas of the world. Landsat 4, launched in 1982, and Landsat 5, launched
in 1984 at an altitude of 705 kilometers, carry advanced sensors called
thematic mappers, as well as multispectral sensors to provide continuity of
data compatible with the data from the earlier Landsats.
Each Landsat satellite circles the earth on a near-polar orbit fourteen times
in every twenty-four hour period. Its sensor system records data of a swath of
earth 185 kilometers wide as it passes overhead. The orbit is timed to cover each
area at approximately 9:45 A.M. local time so that the shadows are the same
from day to day and the usual midday cloud build-up is avoided. On the next
day, the swaths covered are immediately adjacent to, and west of, the swaths
covered on the previous twenty-four hours. The radiation intensities sensed
and registered by the sensors are transmitted in digital form to ground receiving
stations. In 1984 three such stations were operating in the United States, two in
Canada, and one each in Argentina, Australia, Brazii, India, Italy, South
Africa, Sweden, Thailand and Japan. Additional stations were under con-
struction or planned in other countries in Asia, Africa, and Latin America.
For processing and filing purposes, the strips of data are divided inLo
segments or scenes, each also covering a lineal distance of approximately
185 kilometers, and the required corrections and annotations are made by
computers. The data products emerge in two modes: computer-compatible
tapes and reconstituted black-and-wlhite imagery, in film or print form. The
tapes contain a record of the energy intensities radiated by each 60 x 80
meter portion of the earth's surface on a scale of 0 to 64 intensities. On the
black-and-white print and film formats, this range of intensities, in any one
of the four spectral bands, is compressed to 16. Color composites of three
bands are also pro.84iced by passing light of different intensities through
color filters to facilitate identification of surface features.



88                   Technology, Finance, and Development
The Landsat data products cannot match aerial photographs in show-
ing, and generally permitting identification of, fairly small objects or
phenomena. But they have numerous advantages over aerial photography,
advantages of particular value to developing countries. They offer a synop-
tic view of a large area in one scene from the same angle of flight and from
the same sun angle, differing in this respect from the many aerial
photographs needed to cover the same area. Entire regions and countries
can be viewed and mapped on a uniform basis by assemnbling mosaics of
Landsat scenes taken at the same altitude, flight angle, and sun angle.
Coverage of the same area at different times and seasons can be provided by
later flights of the satellite, a capability useful for monitoring changes in
vegetation, water, or land use patterns. Acquisition of the data in the
original digital format permits rapid processing of large amounts of raw
data and production of usable information in a short time. Under current
financing arrangements, the use of Landsat data costs less than conven-
tional surveys. This is likely to be the case as long as governments capable of
operating equipm'nt in space, such as the United States, continue to under-
write the larger share of the capital and operating costs of satellite sensing.
After the launching of Landsat 1 in 1972, scientific investigations carried
out in different countries showed the capabilities and limitations of satellite
remote sensing, as well as its value as an analytical tool for resource managers
and planners. These early experiences of both investigators and users showed
that certain significant features or phenomena, such as sizable water bodies
or areas of clear cutting of forests, could be identified even in the simplest
Landsat data products-the black-and-white imagery. They also demon-
strated that it was possible to satisfy many other information needs of resource
managers, such as the identification of major land use associations, the
evaluation of crop conditions, the demarcation of recently flooded areas, and
to some extent the definition of saline soil areas. Satellite data were shown to
save time and money by eliminating areas not worth further examination and
by identifying areas that deserved closer study by means of aircraft or direct
ground observation. This is particularly important for the exploration of
fossil fuels, minerals, and groundwater resources. The synoptic character of
Landsat images furthermore offered an integrated view of a nation's resource
conserv-ation problems, its development potential or limitations, and the in-
terrelationships among various physical phenomena affecting development.
Other new technologies include platforms and sensors that provide ad-
ditional choices and advantages for special remote sensing tasks. High-alti-
tude aircraft (some flying twice as high as normal commercial aircraft) carry
high-resolution or multispectral sensors, which are used for broad-area
mapping or for highly specialized sensing chores such as damage assessment
following floods and earthquakes or demarcating crop diseases invisible on
normal films.



Satellite Remote Sensing                                89
Microwave sensors on aircraft are able to penetrate cloud cover or can
operate at night. Thermal infrared devices, which can detect radiation dif-
ferences on the earth's surface to a fraction of a degree, are useful in pollu-
tion control and hydrologic investigations. Airborne magnetometers, which
indicate changes in the earth's magnetic field, direct the attention of
geologists to areas deserving more detailed study in the search for minerals
and fossil fuels.
These developments in platforms and sensors have been accompanied
by a revolution in the processing and storage of remote sensing data. Nu-
merous sophisticated techniques are now applied to the data on Landsat
digital tapes to elicit from them much more resource information than can
be gleaned from the basic film imagery. When the digital material is recon-
stituted into imagery, arbitrary false colors can be assigned to the different
radiation intensities throughout an image. If sufficient ground truth is
available to confirm the identification of the resource elements represented
by the various intensities in the Landsat scene, the image can be categorized
and can offer much valuable information to resource managers. (See figure
6-2.) Different types of forests, cultivated land, or other types of ground
cover are clearly distinguishable in such imagery. The cost for sophisticated
"edge enhancement" or categorization of a single Landsat scene, covering
about 34,000 square kilometers (13,000 square miles), ranged from $900 to
$3,000 in 1984, depending on the type of processing desired.
Even more information may be obtained by emphasizing or "stretch-
ing" the digital data about a scene or part of a scene in one band of the elec-
tromagnetic spectrum in relation to the data from the other bands in the
same composite image of the scene. Merging data from two or more dif-
ferent data acquisition systems can also yield additional information. For
instance, the comparison of Landsat and meteorological data has proved in
worldwide tests to be successful for large area crop prediction.' Landsat
data have been combined with aerial side-looking radar data to emphasize
relief, and space imagery has been combined with aerial radar profiling or
with known spot elevations in experiments to obtain more useful imagery.
"Stereo combinations" of Landsat and aeromagnetic data have also been
produced by Australian and U.S. scientists to facilitate interpretation
of aeromagnetic surveys by exploration geologists. Digital data storage
analysis and display systems now can put together relevant social,
economic, and administrative facts with physical data from Landsat and
other sources to offer a comprehensive "geo-based" data service to
resource managers and development planners.
Despite their high-technology character, these space and digital systems
are highly appropriate to developing countries because they provide the in-
formation needed for sound economic development and also because they
do so at a substantial saving of time and in a manner that promotes an inte-



90                  Technology, Finance, and Development
grated approach to resource planning. Moreover, the transfer of the most
useful elements of these new technologies to developing countries can be ac-
complished with relative ease. Nations do not have to own reception sta-
tions or elaborate computer systems to acquire and analyze satellite data. In
early 1984, Landsat scenes could be bought in the United States for $20 to
$60 in standard image form. Tapes could be purchased for $400 to $650 and
be processed for $1100.2 Sophisticated processing and analytical services are
available from contractors in several countries. It takes only limited periods
of training for a small number of specialists to enable a country to use the
new data products effectively.
The World Bank's Use of Remote Sensing in
Agricultural Projects
Shortly after the launching of Landsat 1, the World Bank began to test and
use satellite data for project planning. Its use of such data has increased
steadily since, mainly in the identification and preparation phases of proj-
ects. By 1984, the Bank had obtained and used Landsat data in connection
with forty-one project loans in thirty-one countries.
Landsat data can be of value for agriculture in two distinct ways. One is
helping to make earlier and more accurate crop predictions, a capability
that is being tested on a global scale by the U.S. government. The other is by
contributing to the execution of soil surveys and land use studies for the
siting or expansion of agricultural development projects. Thus far, the
Bank's use of satellite imagery has been concentrated on the latter and can
be illustrated by two cases, one concerned with project identification and
preparation and the other with a comparative study of seasonal cropping
patterns.
In 1976, the government of Upper Volta requested the urgent help of
the IDA of the World Bank to identify areas in which to settle thousands of
nomadic families forced out of drought-stricken regions of the northern
part of the country. The sites selected needed to have good soil, adequate
rainfall, and a sparse population ethnically compatible with, and receptive
to, the incoming migrants. The general area selected was the southwestern
part of the country, which receives more rainfall than the northern regions
bordering the Sahel. Because of the severity of drought conditions in the
north, the government wanted potential resettlement areas designated
within six months. To meet the deadline, it was necessary to use existing
sources of information.
The French government's Office for Overseas Scientific and Technical
Research (ORSTOM) had produced a soils reconnaissance series of maps in
1969 and a potential land use map in 1976. The other main source of exist-



Figure 6.2
Orissa, India: Land Cover-Land Use Association
The upper picture is a portion of the
Orissa Land Cover Land-Use Associa-        r                                                                                  COLOR          COVER TYPE
tion Map, based on the categorization                               .WET                         SEASON      IMAGERY
of Landsat imagery taken during the                                                             NOV. 18-21        197
wet season in 1975. In the color-coding                                                                                                 Unclassified/Cloud Shadow
of the 23 categories of land cover                                                                                                      Ocean, Deep Lakes/Coastal Currents
elicited from the Landsat data by com-
puter processing, red represents forests,  -*                                                                  -                         Rivers/Lakes
the light beige areas are barren or                                                             -                                                      Water
Shallow/TurbidWae
fallow fields, the light, green indicates
some vegetation cover and the dark                                                 4111 1                                                Swamps/Ma'shland
green signifies vigorous plant growth,
predominately rea.-                                                                                                                     Wetlands/Flooded Rields
Pulses/Upland Rice/Dry Farming
Single Crop Rice
--        Double Crop Rice/Other Crops
--                                     J. -  1XDout;' Crop Rice
=         Barren Land/Scrub Vegetation
The lower picture of the same area is t  £                                                  = T '  . - -,zBr                                     an/r      Vegeatio
based on categorization of 1973 dry-       .-LI                                                                                          Fallow Land/Unknown Vegetation
season imagery. The dark green shows                                                     'DRY     SEASON      IMAGERY
rice and other crops covering most of     .                                                     JAN. 18, 19, 1973               0        Grassland
the non-forested areas. The obvious     I . -      .   -                          r
differences shown between the dry-        ,      ,                                                                             jJ        Rivrin ;hrubs/R eds/Sugarcane
season   and  wet-season   plantings        i                                            -     =i...                                     Palms/Horticulture/Mixed Farming
focuses the attention of agricultural
planners on the lands that could pro-                                                                                                    Highland Mixed Forest/Dipterocarps
duce a second crop if provided with                .
irrigation. The pie-shaped wedge be-                                                                                          -          Lowland Mixed Forest/Mangrove
tween the dark green areas of the lower                                                               -      ' S              -          Hill and Ridge Shadows
river's distributory system should have             - -      ,vtdA-fA
particular developmental potential since  -   --     in    f,                           ;                          .z-   c-             Conifer-Casurina Pine/Bushland
soils of most of the delta are similar.                                                                                                  Con ifea"surin PDnepusi
'1"                      -       Forest Anomaly/Rubber, Teak, etc.
-Zp ~                                                                     LI       Sand/Saitfiats
Mudilats/Silt Deposits
~'  ~   4is.      ~Urban/Industrial



Figure 6.1
Upper Volta: Selection of Land for Settlement
)-%                            /       /       a° - ~
77
tii raso senleIment selcte asf a. reutoF td o  ada mgr advrospyiclueorpind soieoo                         icf-
--2          ',--------
This portion of a map of southwestern Upper Volta, prepared by World Bank resource planning specialists, shows four of the 19 poten-
tial areas of settlement selected as a result of a study of Landsat imagery and various physical, demographic and socioeconomic fac-
tors. The red circles indicate villages, with the diameter size of each related to the number of inhabitants. The brown and yellow patches
cover areas recognized in Landsat imagery as rocky outcrops and shallow oxide soils, respectively. Both offer severe physical limits to
cultivation. The blue areas have been delineated as zones subject to river blindness and cannot be used for settlement. The polygons
marked 12, 13, 14, and 15a are areas of good soils. These are surrounded by or adjacent to, dotted patterns lof lesser quality soils) that
are bounded by actual physical features such as trails or streams. Villages for the new settlers would be more suitably located in the
dotted areas rather than on the better soils suited for cultivation, as indicated by the markings within them, area 14 is rated "high", area
12 "medium" and areas 13 and 15a "low", but all are adequate for developing agriculture.



Figure 6.3
Example of the Detail That Can Be Obtained from Landsat Imagery
This edge-enhanced false color image of a portion of a March 1979 Landsat scene illustrates the detail that is obtainable
by intensive computer processing. In this picture of the Meghna River (lower Gangesi in Bangladesh, forests and crops
appear in various shades of red, clear water is colored dark blue, and various degrees of sedimentation toward the mouth
of the river show up as various shades of lighter blue. This 1979 image, by comparison with Landsat imagery taken in 1973
and topographic maps published in 1960, indicates numerous areas where erosion of one side of the river and land accre-
tion on the other side have occurred. The extent of such changes is noted in the map shown as Figure 6.4.



Figure 6.4
2                            9100'
| | | The Meghna ILower Ganges) River
Course Changes c. 1960  71979
i     |  |       li          the Chandpur Project Area233
c01200                                       4oMlpi  a s 1
23130                 0                     Common wa ter courses in 1960 and 1979
B i -              11     ||||Common land in 1960 and 1979
Lan                 cre0o Scal  199t°0 co mparedto 1960
10  - - i  .,+  °   1|0 . . 20   3     40  lle
lo       o     Io  20        30      40M50Kiom ..r



Satellite Remote Sensing                                 91
ing information was Landsat imagery, on which areas with serious physical
limitations for agriculture were readily identifiable. Shallow soil hardpan,
rock outcrops, and swampy areas were clearly distinguished.
Of four Landsat scenes of the western third of the country taken in
November 1976, one full scene and a third of another, both in the extreme
southwest portion, seemed to offer the most promising physical terrain.
Digital processing of these scenes produced fifteen separate reflectance
categories. A different color was assigned to each reflectance category on a
reconstituted color print. In January 1977, a Bank field mission, including
specialists in soils science and remote sensing and accompanied by a bot-
anist-ecologist in Upper Volta, visited the region to gather the essential
ground truth in a limited number of sample areas. With the aid of heli-
copters, they sought to match specific colors on the Landsat print with the
actual land cover in the sample area. They found that three distinct reflec-
tance signatures corresponded with areas unsuited to agriculture. These
were areas of sandstone and granite rock outcrops or shallow soil areas con-
taining a high percentage of iron oxides. These areas were then plotted on
base maps prepared from a U.S. government map series at a scale of
1:250,000. The unsuitable areas detected by the Landsat sensors included
numerous sections of rock out-crops and poor soil that were too small to be
noted on the ORSTOM soils map.
As a result of this elimination process, areas of low population density
that had a presumed potential for cultivation were visited and field checked
on the ground, primarily to review the soils quality. Soil samples of each area
were analyzed in the laboratory, after which nineteen sites were selected for
potential settlement. Each area was rated high, medium, or low for agri-
cultural potential, based on soils quality rainfall and accessibility. A map of
the whole region was then produced by the Bank, with the nineteen areas,
totaling 58,000 hectares, clearly located and rated (see figure 6-1). Seven
areas were rated high, six medium, and six low. The Landsat data made a
significant contribution to the process of elimination and thus to the prepara-
tion phase of the resettlement project, which was jointly financed by the Bank
and the government of Upper Volta. The use of Landsat data resulted in
major savings of time and money for the project. An aerial photographic
survey of the same area would have taken about two years to complete.
The Landsat component of the project, including the printing of a
potential settlement area map at a scale of 1:250,000, cost $31,700, of which
$12,000 was paid for computer tape analysis and $10,100 was attributed to
fees for remote sensing and soil consultants. Cost estimates from a commer-
cial firm for an aerial photographic survey to accomplish the same objective
were $340,900, eleven times the cost of using satellite data.
The second example of the Bank's use of remote sensing in agriculture is
drawn from India. In 1975, the Bank responded to a request from that



92                 Technology, Finance, and Development
country's government, on behalf of the state of Orissa, for assistance in ob-
taining resource information needed by state planning authorities. The state
government wanted to test the ability of Landsat to identify various land
use categories and to quantify the acreage devoted to single-crop rice pro-
duction and to double-crop production. The information was needed for a
regional food grain production review and for agricultural planners who
wanted to move from single cropping to doublecropping. To provide the re-
quired answers, Landsat imagery for two different seasons was needed, one
set before the primary rice crop was harvested and another set showing a
maturing secondary crop. Accordingly eleven Landsat scenes for most of
Orissa, taken in the dry season of January to March 1973, were obtained to
disclose the secondary paddy crop.
A team of Indian scientists from the National Remote Sensing Agency of
India (NRSA) and the Orissa state government, including soil technicians and
foresters, was trained by a World Bank group to make the ground observa-
tions needed to identify and confirm the categories of land cover visible on
the satellite imagery. In November, 1975, right after the monsoon season and
before the primary crop was harvested, the ground truth team initiated field
operations in the area with the aid of a small plane, a ihelicopter, and four-
wheel drive vehicles. The team covered the area to provide ground truth for
new wet season Landsat imagery on the exact days that the sateilite, activated
by NASA, was passing overhead during four consecutive orbits.
Processing of the cloud-free Landsat scenes of Orissa was performed by
staff members of the Bank and NRSA using a commercial firm's interactive
computer system. On the basis of this digital and the matching ground truth
data, twenty-three different categories of land cover, including ten relating
to agriculture and five to forest types, could be distinguished and their areas
quantified. Comparisons of the land use on these scenes with those of the
dry season permitted ready identification of single- and double-cropping
areas and indicated clearly where a second crop of rice could be produced if
the needed irrigation and drainage canals were built (figure 6-2).
Multiple copies of the printed Orissa Land-Cover/Land-Use Associa-
tion Map, based on a mosaic of the categorized Landsat scenes, were pro-
duced by the Bank and widely distributed to state and central government
resource managers and planners. The map proved to be of value to scientists
beyond the agricultural sector. It showed foresters how much more wooded
land had been cleared than was previously realized, it drew attention of
hydrologists to areas suitable for dams and barrages, helped cartographers
correct their maps of a river that had changed course, and directed
geologists to areas of interest for mineral investigations. The Orissa map
thus exemplified the comprehensive approach made possible by the synoptic
view of resources offered by satellite sensing and illustrated also the value of
doing comparisons of multiseason imagery.



Satellite Remote Sensing                                93
Most of these results could have been achieved by aerial photography,
but the work would have taken longer and cost substantially more. The
Landsat survey of Orissa took nine months from the initial purchase of
Landsat imagery to the publication of the land use map. Mounting an aerial
photograph;c project with dual season coverage, completing the photo in-
terpretation. and producing a mosaic of the hundreds of photographs
would have cost at least $500,000. The total cost of the Landsat survey to
the bank and -he government of India, which shared the financing, was
$68,000, of which $31,800 was for computer iprocessing of the Landsat
tapes and $24,300 for remote sensing consultants engaged in ground truth
field surveys and cartographic activities.
Remote Sensing in Forestry and Range Management
Many developing countries have difficulty keeping track of the rate at
which their forests are being depleted. One problem is that in most countries
information on timber holdings is in the hands of private concessionaires
who do not share it with the government. Another is the cost of monitoring
large tracts of land either by road or from the air.
Since the development of aerial photography, remote sensing has been
the standard means of conducting forestry surveys in virtually all countries.
Aerial surveys are used not only to define areas of standing trees but also
for such purposes as assessing fire damage, demarcating areas affected by
insects or other diseases, and identifying tree types and crown sizes in order
to estimate timber volume.
Digital tapes of Landsat scenes that are intensively processed can pro-
vide most of the data essential for sound forest management. Even in its
simplest black-and-white film form, Landsat imagery has demonstrated its
unique capability to disclose the changes that have taken place in forest
cover in recent years, and it does so more cheaply and quickly than can air-
craft imagery. In several developing countries, including Brazil, Indonesia,
and Thailand, the governments are using Landsat imagery to determine
whether national regulations on forest cutting are being enforced. In several
instances, new logging roads in forested tracts could be identified since their
reflectance is in high contrast to the surrounding forest cover.
The World Bank has incorporated remote sensing elements in a number
of its forestry or forest-based settlement projects. In 1972, for instance, the
government of Nepal asked the UN Food and Agriculture Organization
(FAO) and the World Bank for assistance in establishing a settlement of
landless farm workers in the forests of the Terai plain. The forests were
being rapidly depleted as new settlers were moving in and clearing woods on
their own. For the Bank's appraisal of the settlement project, six Landsat



94                  Technology, Finance, and Development
scenes. taken in 1972, covering the Terai and nearby regions, were pro-
cessed in color composite form and enlarged to a scale of 1:25,000. The
scenes showed that forests covered only 27.4 percent of the Terai in 1972 as
compared to 52.6 percent indicated in aerial photos taken six years earlier.
Of special relevance to the project was the fact that one of the areas pro-
posed for settlement showed substantial cutting. When further investigation
confirmed that 40 percent of the proposed site was already occupied by il-
legal squatters, the settlement project was modified into a forest conserva-
tion project.
As part of a forest plantation project in Kenya, the Bank approved a
land use study of forest and water catchment areas. The purpose of the
study was to provide a basis for decision making on the future of the
nation's forests, vast tracts of which had been cleared of timber to make
way for agriculture. The budget for the project included $300,000 for the
acquisition and processing of Landsat tapes to cover the entire country. Ini-
tial work was done by the Kenya Rangeland Ecological Monitoring Unit
(KREMU), financed originally by the Canadian government's aid program
and after 1982 by the World Bank. A small-scale (1: 1,000,000) forestry map
for all of Kenya, based on the black-and-white film copies of thirty-three
scenes involved, was produced using existing and new aerial photography
for checking specific areas of deforestation. An inventory of forested areas
for Kenya was prepared for the Ministry of Environment and Natural
Resources and showed a serious reduction in forest lands from the areas
previously registered. In 1984 KREMU was continuing its work of process-
ing the satellite tapes and was producing large-scale edge-enhanced images
and maps of forest and rangeland areas to serve more specific forest
management and agricultural needs, as well as to identify rangelands and
areas subjected to overgrazing. The Ministry of Energy is also using the im-
agery in its search for minerals. In 1984, KREMU asked the Bank's help in
producing a new series of maps of Kenya.
Landsat imagery, if well processed, has proved capable of identifying
several forage types by measurement of the biomass. Evidence of plant
vigor in grazing lands is essential in any rangeland inventory or rangeland
improvement program. The Bank has used Landsat data in projects de-
signed to promote rangeland and livestock development.
In Somalia, for example, where two-thirds of the population are pasto-
ralists, a World Bank identification mission in 1976 proposed a rangeland de-
velopment project for the central region of the country. Its resource informa-
tion elements included a resource inventory and a range ground survey.
To provide a foundation for the ground survey, tapes of seventeen Landsat
scenes were acquired, processed, and analyzed. When the first five scenes
were processed and reconstituted into visual imagery, they provided the
field team working on the rangeland study more information on the vegeta-



Satellite Remote Sensing                                95
tion and soil moisture content of the area than had been available from
maps or other sources. Preliminary ground truth for the Landsat data was
obtained by field inspection from low-flying aircraft. An estimated count of
herds was also obtained by direct observation from the flights and from
enlargements of 35mm photographs. The Landsat portion of the inventory
was budgeted at $16,000, and the rest of the inventory, including the aerial
phase, was to cost about $200,000. The ground survey, designed to validate
the Landsat and aerial data, was being carried out by a joint team of
Somalian and foreign professionals.
Hydroiogy and Geology
Remote sensing from both planes and satellites is playing an increasingly
important role in the search for and development of water resources. Air-
craft have been -used for decades to measure surface water bodies, monitor
snow melt, help site dams, spot seepages in irrigation systems, and measure
sedimentation in reservoirs for river courses. All of these tasks relating to
surface water can now be accomplished, to some extent, by satellite sensing.
From Landsat data, it is also possible to note geological and vegetational
evidence pointing to the potential locations of groundwater. But it is in con-
nection with surface water data that Landsat has shown unique capabilities.
Even in the simplest black-and-white Landsat film, surface water is easily
-ecognized. Other hydrological factors are also observable, including the
outlines of drainage basins, extent of snow, various watershed charac-
teristics, broad irrigation channels, levels of water in reservoirs, and chang-
ing course of meandering rivers.
The World Bank has used Landsat imagery to obtain information for
some of these purposes in connection with its projects. In some cases, sat-
ellite sensing proved helpful in the monitoring of projects. In Thailand, for
instance, Landsat film of the area c )vered by the Northeast Thailand Irriga-
tion Improvement Project was oblained in 1974. Visible in the black-and-
white film was unexpectedly heavy sediment in one tributary from a recently
filled dam. This information led to the discovery that numerous farmers,
displaced from the flooded areas, had resettled in rich bottom lands along
the tributaries leading into the reservoir rather than in the less fertile upland
areas that had been assigned to them. Their tilling of land in the riparian
watershed area of the reservoir led to accelerated erosion and a shortening
of the expected life effectiveness of the reservoir, indicating the need for
closely integrating resettlement policies with infrastructure development.
The potential value of Landsat data for supervision of water projects was
further demonstrated when a holdup in construction was identified on the
Landsat scene by a gap that then still existed between the northern and
southern portions of the primary canal networks.



96                  Technology, Finance, and Development
Timely satellite imagery can show the extent of flood coverage. The
Bank successfully tested the value of Landsat data in two flood situa-
tions-in Pakistan in 1973 and in the Sudan in 1978. The sensitivity of the
Landsat MSS to clear and turbid water was proved useful to the Bank in
conne-ction with two coastal tourism projects. In Gambia in 1975, black-
and-white Landsat films showed a littoral ocean current passing an area
near the capital city, Banjul, where a hotel beach complex was to be built
with the help of a Bank loan. Investigation confirmed the existence of a cur-
rent carrying effluents from the city. An alternate site was then chosen for
the hotel project. In Turkey in 1976, Landsat imagery showed distinct
discoloration in offshore currents passing the area of a proposed tourism
complex on the Mediterranean coast. In this case, further checks found that
the discoloration was caused by chemicals from an urban complex that was
going to be displaced by the tourism project. In both cases, the costs of the
Landsat imagery and analysis were nominal.
Mineral Resources
Aerial photography has provided the primary data base for geologic map-
ping and for mineral and petroleum exploration for the past half-century.
Satellite sensing is now used to complement the aerial surveys. Large
geologic features, such as major lineaments, can be recognized more easily
in the synoptic view of large areas available from satellite-imagery than in
mosaics put together from many aerial photos. The broad Landsat view
also provides an excellent framework on which to present geologic data and
can direct the attention of exploration geologists to areas deserving closer
study by aerial photography, ground observations, and test drilling. Aerial
surveys, however, are still essential for doing detailed studies and to carry
specialized sensing equipment such as magnetometers, thermal infrared sen-
sors, and high resolution multispectral scanners.
In response to requests from the UN and other international bodies, the
World Bank in 1979 announced its Program to Accelerate Petroleum Pro-
duction in Developing Countries, including support for geological surveys.
Bank staff are helping countries to keep abreast of the latest technological
developments and to determine the most efficient and economical means of
evaluating their fossil fuel and mineral resource potential.
In 1979 the Bank responded to a request from the government of Nepal
for help in determining whether any reserves of petroleum or natural gas
could be located in the country. The request was prompted not only by
Nepal's urgent need to reduce the financial drain caused by petroleum im-
ports but also by encouraging indications of gas seepages reported in
various parts of the country. A loan was approved for an aeromagnetic



Satellite Remote Sensing                                97
survey to be carried out in the most likely area, the Terai foothills of the
Himalayas bordering the Gangetic plains of India. The survey was com-
pleted in 1980. Since 1980, Bank geologists have continued to examine
Landsat imagery in many countries as a first step in their fossil fuel resource
surveys.
Technology Transfer
In its use of remote sensing data for identifying, preparing, and monitoring
the development projects it supports, the World Bank has sought, whenever
possible, to secure the participation of professional and technical personnel
in the country concerned. The purpose is not only to obtain knowledgeable
assistance for particular studies but to familiarize local resource specialists
and survey technicians with new data-gathering and analytical systems. In
some instances, resource professionals or remote sensing specialists have
been brought to U.S. laboratories to work on the processing and categoriza-
tion of Landsat imagery. In addition, the Bank has given direct support to
projects aimed at transferring the newer resource information technologies
to developing nations.
In 1971, for example, the Bank produced six maps at a scale of 1:500,000
covering administrative subdivisions, population, transportation, hydrol-
ogy, land use, and land capability to assist in the analysis of feasibility
studies in Bangladesh. The maps were based on the best data available at the
time; however, after the first Landsat imagery of Bangladesh became avail-
able, it was evident that the maps, based on old topographical sheets, were
out of date. When the Bangladesh government asked in 1973 that the earlier
map series be republished, the value of using Landsat to update the maps
was recognized. An inexpensive color-composite mosaic of the whole coun-
try processed by the "dye transfer" method was produced by the Bank.
This mosaic was the first Landsat color image of a complete country ever
processed. It could readily be evaluated for cartographic fidelity and it
reconfirmed the extensive changes, sometimes up to 10 to 12 kilometers, of
river courses in the lower Ganges-Brahmaputra basin. Imagery taken in
later years and intensively processed by edge-enhancement or categorization
methods showed further changes. (See figures 6-3 and 6-4.)
A inapping program was worked out between the Bank and the Bangla-
desh government operating through its Space Research and Remote Sensing
Organization (SPARRSO). rhe first phase of the mapping effort was com-
pleted in 1980 with the production of a new mosaic based on edge-enhanced
images and on categorized Landsat imagery taken in 1976-1977 and incor-
porating land use information from the 1971 land use map. Staff members
of the Bank and SPARRSO worked together in the computer tape process-



98                 Technology, Finance, and Development
ing of the imagery. The cost of the new map, produced in 2,000 copies, was
$68,500. The updated map can now serve as a base for updating the other
thematic maps needed for development planning in various resource sectors.
A second example is taken from Indonesia. In 1974, the government,
aware that the country lacked an adequate resource information base, asked
the World Bank for assistance in developing a comprehensive mapping and
survey program as a foundation for national and regional planning. Informa-
tion was needed to assess deforestation, erosion, and other ecological
deterioration on the main, overcrowded islands of Java, Madura and Bali.
Especially wanted were resource surveys of the poorly mapped outer islands,
where resources remain largely untapped and where the government has been
trying, on a massive scale, to resettle families from the more densely
populated areas. The Bank approved a two-part National Resource Survey
and Mapping Project, estimated to cost $48 million. Part I, financed by the
Bank, was to cost $26 million, and part II, to be supported by the Canadian
International Development Agency, was estimated to cost $22 million. Both
parts of the project were designed to strengthen Indonesia's own capability to
gather, update, store, and use the resource information it needs for its
development.
By the time Bank financing ended in December 1983, two elements of part
I had already been completed: the construction of new, enlarged quarters for
BAKOSURTANAL, the National Coordinating Agency for Surveys and
Mapping, and the procurement of modern equipment needed for expanded
map production and for resource evaluation of a volume and quality to
match Indonesia's planning requirements. Still in progress were the coverage
of aerial photography, at 1:50,000 scale and larger, of about 300,000 square
kilometers to support current development projects funded by the Bank;
analysis of remote sensing imagery including Landsat scenes; technical ser-
vices of survey firms and consultants to provide assistance to geodetic con-
trol, cartography, map printing, and resource analysis; and training of
BAKOSURTANAL professional staff and technicians both in Indonesia and
abroad. By mid-1983, more than seventy-five Indonesian staff members of
BAKOSURTANAL had already completed such training programs.
Much of the project emphasis is on the resource data needed to find suitable
sites for resettlement on the outlying islands. The Landsat imagery and the
small-scale photography provide reconnaissance-level data to locate broad
areas for potential development. These in turn lay the groundwork for regional
surveys directed by the respective ministries. Surveys are carried out by teams
from various governrnent departments and the universities or by local and out-
side consultants. The work of the regional survey teams is supported by the
large-scale photography and intensively processed Landsat data.
To facilitate efficient retrieval, management, and use of the information
gathered on Indonesia's 3,000 islands, a highly responsive geo-based computer



Satellite Remote Sensing                                99
data system with an automated mapping component was installed as part of
the project, along with a satellite image processing system. These com-
puterized systems are able to analyze and integrate physical, socioeconomic,
and administrative data in digital form. By means of visual displays, quan-
titative tables, and map overlays, the system can respond quickly to ques-
tions from planners and resource managers about the physiographic,
socioeconomic, and administrative factors relevant to any particular spot
within the archipelago, provided the proper basic data is available and has
been digitized.
Several countries besides Indonesia have asked Bank assistance in ac-
quiring and introducing efficient systems to integrate resource data already
available and to incorporate data to be obtained by remote sensing. A.mong
countries requesting such help are some that have been meagerly studied in
the past but are now undergoing a multiplicity of resource surveys and
others that have a substantial volume of resource information already ac-
cumul.ated. Nepal is an example of the former and Malaysia of the latter.
Multilateral and bilateral aid organizations are administering develop-
ment projects separately in different regions of Nepal and have had to
gather original data on which to base project planning. West German teams
are gathering data in major drainage basins for hydrological projects in
eastern Nepal. The Canadian International Development Agency has been
collecting data on land use and soils in the whole of Nepal. Three multina-
tional agencies-the Asian Development Bank, the World Bank, and the In-
ternational Fund for Agricultural Development (IFAD), financed by Arab
nations-are supporting various development projects and associated
studies in central Nepal. Superimposed on these regional undertakings are
sectoral studies such as the World Bank's aeromagnetometer survey for
petroleum and gas exploration and two surveys financed by the U.S. Agency
for International Development. One of these is a survey of roads, trails, and
bridges in connection with transportation projects. The other focuses on
areas subject to erosion and landslides.
To integrate the data from these disparate studies, the World Bank is
working with Nepalese government agencies to establish the foundation for
a geo-based information system. With the assistance of the German
Development Agency, Landsat imagery of the whole of Nepal was com-
puter processed in 1979. Based on this imagery, a new map of Nepal was
produced on a Universal Transverse Mercator grid. This and new maps at
the 1:250,000 scale, scheduled for publication in 1984, will facilitate com-
puter analysis of the voluminous resource data now being collected in the
field by various national and international development agencies.
In the case of Malaysia, the government has conducted extensive surveys
of soils, land use, water, and forests in the past two decades and has pro-
duced highly detailed maps of the country's resource base. The Bank was



100                 Technology, Finance, and Development
asked to assist in modernizing the country's regional planning and informa-
tion svstem by helping to evaluate equipment and software for data analysis
and automated mapping. The Bank provided such assistance in connection
with a state and rural development project supported by the UN Develop-
ment Programme (UNDP).
For some time the Ministry of Agriculture has been doing automated
mapping in its flat-bed plotter for land tax purposes. The government's in-
terest in automated analysis and mapping, however, extended to the
broader land management field. Malaysia required a more efiicient way to
organize the regional resource information that had been accumulated and
to make it readily accessible to regional planners. The Bank examined a
number of sophisticated geo-based data systems to help the Malaysian
authorities decide which would meet the government's needs.
In a test of such a system by Bank staff, facts from the detailed 1976
map of one Malaysian state were programmed into the computer, and a
series of questions were asked. Was rubber being grown on lands of 8 per-
cent or steeper slopes, or was it occupying flat lands highly suitable for
agriculture? Was rubber growing on heavily acid soils or also on good-
quality soils optimal for other cultivations? How seriously do open pit min-
ing areas impinge on good agricultural soil? In each case, the geo-based
digital system responded, within fifteen to twenty-five minutes, with
displayed maps of the areas and tables of acreages printed alongside. The
test demonstrated the capability of such systems to extract quickly the type
of resource information that planners, resource managers, and economists
need for identification and preparation of development or conservation
projects.
In numerous other cases, Bank staff members have evaluated data ac-
quisition proposals, equipment, contracting firms, and software systems to
assist developing countries in deciding on the options most suitable to, and
cost-effective for, their resource information needs. The Bank's objective
has been to promote high standards of accuracy, efficiency, and appro-
priateness in evaluations of the new technologies and data products. Ex-
perience with new devices and systems in one developing country is made
known to other countries facing similar resource information problems.
In addition to these examples of technology transfer to specific coun-
tries, the World Bank has facilitated the independent utilization of the new
techniques and data produicts by developing countries. In 1976 the Bank
published Landsat IndexAtlas of the Developing Countries of the World to
help users in those countries locate usable Landsat imagery for areas of in-
terest. The atlas notes the Landsat scenes that were taken from 1972 to May
1975 and identifies each scene by its numbered north-south orbital path and
its number or row in each orbit. In addition, each area is keyed to tell
whether the scenes taken on particular dates have 0 to 10, 20 to 30, or 40 to



Satellite Remote Sensing                                 101
50 percent cloud cover. Scenes of more than 50 percent cloud cover are not in-
cluded. This atlas has complemented other resources indexes and has made it
easier to locate source materials and imagery needed to carry out resource
evaluation for the justification of development projects of the Bank.
Future Prospects
As technology advances and innovations multiply in the various phases of
resource data acquisition and analysis, the World Bank continues to
monitor those improvements that can bring immediate benefits to develop-
ing countries. The European Space Agency, France, India, Japan, and the
United States have alreadyn announced plans to launch remote sensing
satellites. These proposals, which are in different stages of planning or
development, variously involve higher spatial resolution, multiplatform
stereo capability, improved radar imagery to pierce cloud cover, and ther-
mal sensing that would provide more information on soil and water
resources. Additional reception stations will be available in the 1980s to
receive data directly from satellites for the part of the earth's surface not
previously served by direct reception. This should speed up the delivery of
the data and eliminate delays that thus far have hindered the use of Landsat
imsvgery for efficient monitoring of environmental change.
The higher spatial resolution expected from the next generation of
satellite sensors in the mid-1980s should provide more detail of the type
previously available only from aircraft: more precise crop prediction,
recognition of smaller geologic features and water bodies ?nd identifica-
tion of more types of trees, soils, and vegetation. Greater  of combina-
tions of satellites and aerial data can be expected, as can further refine-
ments in the services performed by the integrated geo-based information
systems.
The Bank is watching these innovations and improvements in order to
take advantage of the opportunities they may offer to save time and money.
The Bank is also keeping in touch with the discussions at the UN and in na-
tional legislative bodies regarding the institutional, political, and financial
future of the remote sensing enterprise.
The attractiveness of satellite sensing to developing countries has been
increased by two factors that may be affected by institutional changes. One
is the current policy of open distribution of Landsat data products to all
who wish to purchase them. Any restrictions placed on such distribution for
political or economic reasons would lessen the value of the technology for
developing nations. The new data acquired about the resources from outer
space should not be considered the exclusive property of any single satellite-
owning government or its private entrepreneurs but rather are for the use
and benefit of all the countries of the world.



102                 Technology, Finance, and Development
The other factor is the relative inexpensiveness of Landsat data for all
users, including developing countries. The reason for this low cost is that
the heavy investment in the spacecraft and sensing packages aboard them
has been borne by the U.S. L;overnment. Satellite operating costs have also
been paid by the United States. If users of satellite data products had to pay
their full economic price, to cover capital and operating costs, the price
would be prohibitive for most developing countries.
The industrialized nations-the United States, Canada, the Soviet
Union, Japan, and the member countries of the European Space Agency-
are planning expanded satellite sensing programs with at least two objec-
tives in view: they want better and more detailed information about their
own resources, and they also want a stronger grasp of both the renewable
and nonrenewable resources that may be available to them from elsewhere
on the planet. Satellite sensing represents an advanced technology that is
benign in its impact on developing countries and is highly appropriate for
meeting developmental requirements. Current knowledge of the state of the
world's resources-whether it be the health of crops or the availability of
fuel-is becoming increasingly important. The developed nations should be
able to offer the by-products of their own remote sensing programs to the
rest of the world, as they do with satellite meteorological and navigational
services, without seeking a full financial return on their investment.
From the point of view of the developing countries whose interests the
Bank seeks to serve, remote sensing of earth resources from space should be
viewed1 as a global service, similar to the World Weather Watch. It should
be made available to all at nominal cost by the nations that can afford it, in
their own interests and in the interest of the international community.
Notes
1. Executive Summary, Large Area Crop Inventory Survey (LACIE),
Houston, National Aeronautics and Space Administration, Lyndon B. John-
son Space Center (August 1978).
2. The prices differ for standard Landsat data products from reception
stations outside of the United States. In Italy, for example, standard images
could be purchased in 1984 for $50 (black and white) to about $200 (color
composite) and $450 for a computer-compatible tape.



Part 11
Appropriate Technology
and Basic Needs
There are few issues in the debate about the role of technology in the
development process that raise as much enthusiasm on the part of its pro-
ponents and as much derision on the part of its critics as the concept of ap-
propriate technology. The debate is not simply semantic or ideological; it
touches on one of the most fundamental problems in national development
strategies: how best to meet the basic needs of the poorest people for food,
health, shelter, and work.
The four chapters in this part describe the ways in which the World
Bank is attempting to mobilize and use technology (taken hei in the sense
of both hardware, or equipment, and software, or organizational tools) to
meet some of these basic needs of those who by and large have been left out
of the development process of the last thirty years.
In chapter 7, Julian Bharier examines the problem of supplying safe and
clean water. The magnitude of the issue can be gauged from the well-
known, yet often forgotten, fact that there are today in the developing
world over 2 billion people who have no access to safe drinking water. Most
of the technologies needed to provide them with this basic amenity are well
known, but as Bharier clearly shows, the central issue facing policymakers
and development agencies such as the World Bank is to ensure the wide-
spread dissemination and diffusion of these technologies. This is done
essentially through projects, and the author touches here on the central
issue of replicating successful projects so as to reach the widest possible
number of beneficiaries. He also shows that the key element in successful
replication is organizational ability rather than technology in the hardware
sense of the word.
In chapter 8, Charles G. Gunnerson examines some of the main low-
cost technological options in sanitation and waste disposal and shows how
the Bank's socioeconomic and technological research in this field is begin-
ning to feed into the design of new projects in this sector. Perhaps the most
important lesson to be drawn from this action-oriented research work is
that low-cost sanitation technologies are not only a viable alternative to
capital-intensive water-borne sewerage systems developed in the in-
dustrialized countries but are also tth. only feasible alternative if poor coun-
tries are to meet the needs of hundreds of millions of people for safe, yet in-
expensive, waste disposal.
In chapter 9, Herbert Werlin presents case studies of the World Bank's
experience in meeting the needs of the poor in urban areas for low-cost
shelter. The concept of sites and services, pioneered by the Bank along with
103



104                Technology, Finance, and Development
a number of other organizations, represents a major social innovation in its
own right and appears to be a potentially extremely successful contribution
to the seemingly insoluble problem of urban housing in developing coun-
tries. The experiences Werlin describes show that the critical determinants
in the innovation process are organizational tools, such as land tenure
systems, pricing mechanisms, and the provision of inexpensive credit-not
new types of hardware. Werlin also suggests that the problems of innova-
tion and improvement in urban areas are not only technical (in the organiza-
tional sense) but also, and very largely, political and social, and he shows
the important role of action-oriented research in the design and implemen-
tation of urban projects. This chapter points to another major emerging in-
novation: the concept of integrated urban development, similar in many
ways to the idea of integrated rural development.
The last chapter in this part deals with basic education. Based in large part
on the innovative experiences of a few African countries, this chapter by Fran-
cis J. Lethem shows not only that there are low-cost technologies in the field
of education but that these technologies can be extremely successful in pro-
viding basic education to those who have been left out of the traditional
educational system. The innovations described in this chapter-from Mali's
functional literacy program to Upper Volta's rural education centers-suggest
that many developing countries, often in conjunction with World Bank
educational projects, have developed or are in the process of developing what
amounts to a truly appropriate educational technology.
The four chapters in this part do not cover all of the basic human needs.
Health, for instance, has been left out, not because the subject is unimpor-
tant-quite the contrary-but because this is an area traditionally covered
by other agencies (the World Health Organization and the UN International
Children's Fund in particular) and because the World Bank has only re-
cently begun to move in this field.
The four experiences or cases presented here suggest a number of impor-
tant conclusions for policymakers and others interested in the role of
technology in the development process. The first of these lessons is that largely
as a result of its new policies focusing on meeting the needs of the poorest peo-
ple, the World Bank has become one of the world's major proponents of, and
innovators in, appropriate technology, a term that here includes all types of
low-cost technologies aimed at meeting the basic needs of the poorest and
most underprivileged. This view of the World Bank as a major force in the
field of appropriate technology may come as a surprise to those who still view
this conceptual innovation as the preserve of a few marginal groups at the
fringe of the industrialized societies or as a counterculture in the elite of the
developing nations. These experiences of the Bank show very clearly that low-
cost technology, even if it is not called specifically by the name appropriate,
has become an integral part of mainstream development thinking.



Appropriate Technology and Basic Needs                 105
A second lesson that stands out from these experiences is that in a
number of areas-water supply, sanitation, housing, and education-there
are many viable alternatives to the traditional capital-intensive technologies
developed in the industrialized countries. These alternative technologies
may somtimes be rather experimental, and the social technology for ensur-
ing their widespread diffusion may not yet be fully mastered, but they do
work. What is more, many of these technologies are already well known
and, although much research is required to understand how best they can be
diffused to those who need them, are adequate from a purely technical
point of view. This indirectly suggests that one of the strategic issues in the
field of appropriate technology today is not that of doing more research on
hardware, as most appropriate-technology proponents seem to believe, but
rather that of understanding the social processes of innovation and in-
tegrating more appropriate types of technology in the design of develop-
ment projects.
A third lesson is that appropriate technology, contrary to what some of
its critics tend to argue, is neither an obstacle to development nor the
manifestation of a plot by well-meaning intellectuals against accelerated in-
dustrialization in the developing countries but rather one essential tool in a
well-balanced development effort. Appropriate or low-cost technology is
certainly not a panacea, but in a number of sectors it is the least expensive
and possibly the most effective means of meeting the basic needs of the
most underprivileged.



Water Supply and
Waste Disposal
Julian Bharier
There is very little of the theory or technology of water supply and waste
disposal that has not been known for a long time. Over 2,000 years ago,
Romans drew their water from the Tiber or from wells and springs. Yet the
city grew so rapidly that these sources soon proved inadequate. Aqueducts
had to be built to bring water from outside the seven hills, and sewers were
built to dispose of the wastewater,
As far back as the first century A.D., Frontinus, the water commissioner
of Rome, realized that even this supply was becoming insufficient, and he
began to ration water among users by various metering devices. The
Romans were neither the first nor the last to be concerned with municipal
water supply and waste disposal practice, for the same reasons that we are
today: to protect human health and provide a safe and aesthetically pleasing
environment for living.
Disinfection of polluted water also had been practiced for many cen-
turies; boiling and filtering water to remove impurities had been recom-
mended by the Greeks at least as early as 500 B.C. From the middle of the
nineteenth century, when sanitarv conditions in England became intolerable
because of the concentration of people in urban areas in the wake of the in-
dustrial revolution, efforts to purify water by consumers intensified. The
correlation between increased purification of water and a decline in the in-
cidence of water-borne diseases did not pass unnoticed. Epoch-making
discoveries in bacteriology from around 1880 onward showed that cholera
and typhoid, as well as many other serious diseases, could be water carried
and that many intestinal diseases were caused by drinking water polluted
with human waste. Hence, many of the more advanced countries con-
structed central treatment facilities.
In most advanced industrial nations, the water supply systems, par-
ticularly in towns and cities, are very similar, as are the waste disposal
facilities. In many developing countries, it is now realized that there are
distinct advantages in the construction and operation throughout every ur-
ban community of a water supply system along the lines of those now found
in the towns and cities of the advanced countries. Such a system incor-
porates a centrally controlled and treated source of water, wide-ranging
transmission lines, and metered, multiple-tap connections in every house or
apartment. Such a system, properly managed, can provide large social and
economic benefits. The systems are convenient for consumers, reduce users'
107



108                 Technology, Finance, and Development
costs of storage and purification, and, through their universality of use, can
limit the possibilities for infection. Meters can be used to levy a range of
tariffs, which in turn can be used to produce a financially viable public
undertaking, to discourage waste, to assist investment decisions, and,
possibly, to contribute to income redistribution.
Experience in both rich and poor countries shows that cheaper distribu-
tional technologies, such as public standposts, have drawbacks. Standposts
are subject to vandalism, and vandalism can bring about wastage. Health
hazards can result if adequate drainage is not provided around them, and it
is usually difficult to collect revenue from them. Patio or yard connections
(outside connections serving a single residential building), though they are
usually more convenient and though revenues are more easily collected, also
have drawbacks (wastewater disposal, for instance, starts to become a prob-
lem). Much study is still required before the optimum design of a distribu-
tion system, which evolves through the various stages of standposts, patio
connections, and modern multiple-tap connections in houses, can be deter-
mined.
Nevertheless, it is now quite clear that if all of the 2 billion people in the
developing world who do not have access to safe water and sanitary waste
disposal are to be provided with this access by any reasonable future date,
say, the end of this century, cheaper service standards must be considered.
These are generally well known and have been used at some stage in the
now-rich countries, abandoned only when service was upgraded.
Because these are old rather than new technologies and are low level
rather than high level, even if they employ modern materials such as
plastics, there is often opposition to their use by governments in the
developing countries. This opposition is based less on rational economic
and social reasons than on the fact that there is little external or internal
political mileage to be gained from them. Externally, the appropriate, in-
termediate, or low-level technology generally has a much lower import com-
ponent. This may assist the balance of trade but will not be appreciated by
foreign suppliers of the advanced equipment or by foreign visitors to the
country. Internally, popular reaction tends to depend first on the existing
distribution of technology within the country (a country that has advanced
technology in its larger cities may find it difficult to get the smaller cities to
accept a lower-level technology); second, it depends on whether people per-
cieve the benefits of low-technology water supply and waste disposal in rela-
tion to their existing facilities. There are some countries where the shock of
a cholera epidemic has changed people's perception of the health benefits to
be achieved, but generally most people count benefits in terms of their own
convenience rather than their improved health.
The type of technology appropriate for any given water supply system de-
pends on health and sanitary factors, functional factors, and environmental



Water Supply and Waste Disposal                         109
factors. The techniques used must be suitable in relation to the health im-
provements expected from them; they must be suitable from the point of
view of design and performance; and they must operate without adverse
side effects on the physical and social environment of the area concerned.
For most small communities, ranging in size from individual house-
holds to, say, 1,000 people, it is usually economic to employ low-level
technology to obtain a safe water supply. The technology may take the form
of a properly protected rainwater collection system or groundwater spring,
a simple gravity feed system from a surface source, or, at a somewhat
higher level of technology, a hand-dug or bored well. The well should be
protected against pollution from contaminated surface water or ground-
water and from external contaminants, such as dirty buckets used for draw-
ing the water. In most cases, this implies a sensible location of the well, a
good lining, a well head consisting of a headwall and drainage apron, and,
best of all, a covered top with a fitted pump. The per capita investment
costs of any of these systems will be one-fifth to one-tenth that of a full-
fledged treated water supply system in an urban area, but experience shows
that it is difficult to ensure that proper maintenance is carried out.
For waste disposal, there are many technological alternatives between
the pit latrine and the complete (water-borne) sewerage system. Indeed en-
vironmental sanitation can be improved significantly by the installation and
proper maintenance of systems with costs per household one-third to one-
tenth those of conventional sewerage, providing certain conditions are met.
Many different techniques can be used at different stages in a waste col-
lection and disposal system, and one important point to note is that to a
large extent social customs determine the range of feasible lower-level
technologies. In some countries, the reuse of human waste on the soil goes
against local customs; in others, communal facilities are frowned on, or
deposition is always into running or stagnant water. In contrast, there ap-
pear to be no social constraints in any country on water-borne sewerage,
possibly because the system (except for deposition facilities) remains un-
seen. When the costs of alternative systems are being considered, these
customs must clearly be taken into account.
Since the end product of a safe water supply and waste disposal facilities
is health, the quality of service levels is as important as the levels
themselves. A poorly maintained or badly operated water supply system
may produce an unsafe supply, irrespective of how many people have access
to this supply. In some cases, where the growth of population causes
overuse of the system and leads to intermittent supplies, the whole system
may be rendered unsafe because of the intrusion of contaminated water
from outside the system. Thus, further investment in a city's water supply
may be justified even where a high proportion of the population has house
connections and their present water supply is safe if, in the absence of any



110                 Technology, Finance, and Development
action, future growth of the city is likely to lead to a breakdown of this ser-
vice. In other cases, the beneficial effects of a safe water supply may be
reduced by poor sanitation practices, or conversely, sensible sanitary
precautions by consumers may make a technically unsafe supply of water
safe for all practical purposes. These factors generally cannot be put into
quantitative terms. As a result, it is often very hard to assess whether, for
example, people in a particular community are actually better off now than
they were twenty years ago in terms of water supply. The same is true for
waste disposal. For example, there are many cities with water-borne
sewerage facilities working near full capacity that, when flooded during the
monsoon, become almost as much of a health hazard as if no facilities ex-
isted at all. Safe facilities for ten months of the year are not safe facilities.
Changing Emphasis in the Bank's Lending Policy
Before 1971, the major emphasis in the World Bank's lending for water
supply and waste disposal projects focused on the development of urban
facilities. The idea was that service for towns and cities should take priority
over rural service because the demands placed on traditional urban systems
by rising population densities and the concurrent public health problems are
much greater, concentrating any given amount of investment in towns and
cities would benefit a larger number of people, and the planning of major
urban water supply and sewerage projects could have an impact on the
broader problems of urban planning. It was also felt that water-borne
sewerage was the only satisfactory method of removing human waste in ur-
ban areas.
These arguments emanated largely from the Bank's experience in lend-
ing for water supply and sewerage, which had started only in 1961 and had
expanded relatively slowly through the decade. Before 1971, Bank lending
in the sector had been almost exclusively for country capitals or very large
cities and was generally regarded simply as a contribution to economic iq-
frastructure in the same way as investment in any other public utility such as
power or telecommunications. This was in keeping with the Bank's underly-
ing philosophy in the 1960s that national income growth, stemming from
increases in productive investment based on suitable economic infrastruc-
tures, would trickle down to all social groups in the economy.
During the 1970s, the Bank's perception of the process of economic
development changed. It was realized that the process of growth differed
dramatically in countries at different stages of growth; that concentration
on development efforts in the urban areas often worsened conditions in the
towns because it led to massive immigration from the rural areas; that at-
tempts to replicate the economic structure of rich industrialized countries



Water Supply and Waste Disposal                          111
could be successful only under special circumstances; and that whatever the
development process in a particular country, some of the population was
likely to lack the means to obtain even the bare necessities with which to
achieve the potential for a productive existence. '
In line with this change in perception came a reevaluation of the Bank's
role in water supply and waste disposal. As a result, the Bank now regards
adequate water supply and waste disposal facilities not only as contribu-
tions to infraJcructure but also as social services with a major impact on the
quality of life. It is now accepted that without adequate and convenient sup-
plies of safe water for drinking and washing and without adequate waste
disposal facilities, people cannot attain a reasonable minimum standard of
living. Water that is unsafe for human consumption carries and spreads
disease; water that is inconveniently situated leads to considerable loss of
productive time for those who have to fetch it; inadequate supplies of water
can frustrate attempted improvements in many aspects of social welfare;
and inadequate waste disposal leads to the spread of a wide range of
parasitic and other debilitating diseases. There is also increasing recognition
that all aspects of sanitation, defined broadly as all actions or processes that
promote hygiene and prevent disease by establishing and maintaining
sanitary conditions, must be considered. This includes the educational pro-
cess by which people are made aware of the causes of disease and of the
preventive measures made possible through the use of safe water, proper
disposal, and general cleanliness. Consequently, since the early 1970s, a
growing proportion of loans in the Bank's expanding lending program in
water supply and waste disposal has been directed toward smaller towns and
villages, and greater emphasis has been placed on the developrnent of waste
disposal so that the full health benefits of safe water supply can be realized.
The use of low-cost techniques designed to improve the access of the
poor to such services has become an integral part of the Bank Group's lend-
ing in many parts of the world. Since 1978, for example, over half of the
water supply loans have included financing for low-cost methods of pro-
viding service to the urban poor. Because of the present backlog of people
without access to adequate supplies of safe water and sanitary waste
disposal, particularly in the rural and urban fringe areas, as well as the ex-
pected growth of population, there is tremendous scope for expansion of
this type of lending.
Research on Low-Cost Technologies
As a basis for this expansion, the World Bank has carried out and commis-
sioned a number of operationally oriented research projects. One of the
first major research projects in this field was a study on village water supply



112                 Technology, Finance, and Development
in 1972. Because the technical issues were fairly straightforward and well
understood, this study emphasized the economic, social, financial, and ad-
ministrative issues characteristic of village water supply and sanitation pro-
grams and outlined some general principles. These were subjected to em-
pirical testing in a follow-up research project on rural water supply in 1978,
which, on the basis of village studies, attempted to determine factors com-
mon to the success or failure of water supply programs. This research
highlighted the problem of quantifying the benefits of investments in the
sector, even though it has clearly been established that water can be a vector
of disease and that the provision of a safe and adequate supply is essential
for the protection of public health.
To address this issue, the Bank commissioned a background paper on
the measurement of health benefits of investments in water supply to iden-
tify the interrelationships among the numerous factors that impede the ac-
curate forecasting of the health impact of changes in water supply.2 An ade-
quate quantity and quality of water must be considered together with other
factors such as social, political, economic, environmental, and educational
variables, which have a significant impact on the health of a population.
The proposed impact study methodology combines standardized meth-
ods of measuring relevant variables with simplified methods of data collec-
tion while maintaining as high a degree of reliability as possible. Three
variables are of particular relevance:
1. The water-use variables, representing the quantity and quality (in terms
of fecal pollution) of water supply.
2. The health variables, representing the large group of relatively universal
water-related diseases, symptoms, and conditions. The one to fourteen
age group, considered to be most sensitive to waterborne and water-
related diseases, should form the basis for the examination and collec-
tion of information.
3. The health-related variables, including the extent of health and general
education, sanitation- and health-related facilities, dietary differences,
and economic, social, and cultural differences.
The use of questionnaires and surveys, fecal inspection, and clinical ex-
amination of skin, as well as the status of physical development and per-
sonal hygiene, were among a large number of alternative information
sources examined by the panel. For practical field applications, however,
the panel recommended the use of selected health state indexes that could be
of significant value. Alternative forms of health impact studies, including
retrospective studies and longitudinal studies of total health impact, were
also discussed. The panel concluded that the benefits could not be fully
quantified given the present state of knowledge and that studies to establish



Water Supply and Waste Disposal                         113
a rigorous relationship between water supply and health would not only be
extremely expensive but would also lead to conclusions with doubtful ap-
plications elsewhere. Another important finding of the early research was
that in order to bring about a rapid improvement in the access of low-
income groups to adequate water supply and sanitation facilities, it was
necessary to ensure that service standards were not unduly high and that ap-
propriate technologies would be employed. Research in the field of water
supply and waste disposal has been dominated by these criteria.
A study on the design of low-cost water distribution systems attempts
to provide designers with simplified analytical tools to improve the design
of secondary distribution systems to serve slum, squatter, and urban fringe
areas.3 Such areas, including some larger rural communities, require a
basic needs supply network that does not overtax scarce financial
resources. Therefore it is essential to eliminate overdesign and hence to
minimize costs.
Relatively simple mathematical models are used that take into account
specified input data relating to the population to be served, the rate at which
that population is increasing, andl the area occupied by the population. The
decision variables include the accessibility of water to consumers (for exam-
ple, the spacing of standpipes), per capita consumption levels, minimum
allowable pressures in the network, and the measures to be taken to improve
system reliability (such as extent of looping or number of valves).
The models have proved useful in extensive fieldwork and analysis of
supply networks in two cities, one in the Middle East and the other in West
Africa. The methodology has enabled quick analysis of the effect of several
design options and assumptions on system costs.
Research and development cost computed has been completed for water
supply hardware in rural areas. The Bank sector policy paper on village
water supply recommended the use of hand pumps and shallow wells to
augment the supply of safe water in groundwater reservoirs. The major
problem was that available hand pumps, which have been designed for light
use in temperate climates, were unsuited to the conditions and use patterns
in rural areas. Research was commissioned on a hand pump for rural areas
of developing countries to define conditions of service in the rural milieu
and to initiate developmental work on a rugged hand pump.4 The design
was to make greater use of locally available materials and be mechanically
simple enough to allow for trouble-free maintenance. Principle features of
the hand pump include the following:
1. A polyvinyl chloride (PVC) replacement for the steel used for the well
casing. PVC is extruded in many developing countries and has an added
advantage of being inert. Furthermore, PVC casing is not affected by
corrosive groundwater conditions.



114                 Technology, Finance, and Development
2. The piston and check valve were made of interchangeable components
to reduce complexity. Suction losses are avoided (thus increasing effi-
ciency) by keeping the valve and piston submerged.
3. Locally available buoyant materials (such as bamboo, wood, and
galvanized steel tubing with sealed cavities) are used to construct the
pump rod, which connects the lever (handle) and piston. This helps
reduce the amount of energy expended in lifting.
4. The design included allowances for minor structural modifications,
such as change in color size and lever arrangement. Also, the use of
leather cup seals to minimize wear on cylinder walls and of metal-wood
interfaces for pivot points are recommended.
An effective but low-cost well screen was needed to control the migra-
tion of soil particles carried by the water from alluvial aquifers through the
various well and pump components. Commercial screens, manufactured
from plastic or metal, had some drawbacks, which had to be overcome.
Metal screens, although more effective than plastic types because they were
rugged and had a larger open area (20 to 35 percent), were expensive. The
plastic screens had a smaller open area (1 to 10 percent). A study was
therefore commissioned on the development of PVC well screens for local
fabrication to tackle the problem.5 A less expensive PVC screen of medium
strength and adequate open area was needed. A sufficiently reliable fabrica-
tion technique was also important to allow for manufacture in developing
countries. Developmental work resulted in an inexpensive but rugged plastic
screen with an open area of 20 to 25 percent. The fabrication technique
employs a circular saw to make a continuous helical cut in a standard pipe.
Stiffeners are used to strengthen the pipe. The final design, called the
Roboscreen, will require further developmental work to improve the
fabrication technique and will have to be tested under field conditions.
A program of testing of wood bearings for hand pumps formed part of
the developmental work on the use of metal-wood interfaces to reduce wear
on pump parts.6 The hand assembly, in particular the pivot points, is sub-
jected to heavy loads during pumping. Under such heavy use (typically eight
to twelve hours per day in many villages), the metal-metal interfaces wear
out quickly. Initial tests on metal-wood interfaces produced less wear. Oil-
impregnated wood bearings coupled with steel pipe shafts were found to
show little wear. The investigation was expanded, from early work involv-
ing bubinga (Guibourti spp.) wood, to wear tests on eight samples of bu-
binga and common pine bearings. The eight samples, four of each type of
wood, were tested simultaneously on 1/4-inch (inside diameter) galvanized
steel pipe rig. The results indicated that wood handles work well on simple
pivots and that oil-impregnated wooden handles are more durable than dry
ones.



Water Supply and Waste Disposal                         115
The greater share of the World Bank's investments in this sector be-
tween 1962 and 1983 was for water supply. The problem of waste of water
was a recurrent one, and losses of water at public standpipes and unac-
counted-for water were a major source of concern. A number of research
projects have addressed this issue of wastage. In most projects, the level of
unaccounted-for water was found to be very high, and measures to reduce
such losses are under study. This research project will eventually produce a
Manual on Control of Unaccounted-for Water, which will help identify the
extent and causes of unaccounted-for water and define the levels of
unavoidable losses in relation to norms of good performance.
A related study on the costs and benefits of water metering has applied
the theoretical economic framework underlying the decision process on
whether to meter household water supplies to examples drawn from several
Asian cities. The study attempts to clarify some critical points in this area.
All of these studies, including another one on the state of the art in
wastewater (agricultural and industrial) reuse, are proceeding in parallel.
The Bank has recently completed a two-year research project to study
appropriate technology for water supply and waste disposal. The long-
range objective of this research was to help the Bank direct the benefits of
its water and sanitation loans to the urban and rural poor. The immediate
objectives were to determine the technical and economic feasibility of
various options available for water supply and waste disposal in developing
countries; the economic, environmental, and sociological effects of the
technologies that provide for conservation of water and reclamation of
wastes; and the scope for designing technical improvements of existing in-
termediate technologies to improve their efficiency or increase their
transferability and acceptance.
Data were collected on existing sanitation technologies in over fourteen
countries, which encompassed a variety of stages of development, cultural
and institutional forms, and environmental conditions. Field consultants
were chosen from developing countries to the extent possible, and detailed
studies of two to four communities in each country were made. For each
technology studied at the community level, a technical evaluation was car-
ried out of the system's construction and operation. Using standard cost-
benefit techniques (including economic conversion factors where appro-
priate), each technology's economic feasibility was analyzed, and average
household costs were computed. Special emphasis was given to the ability
and willingness of consumers to pay for the system, their real or perceived
improvement in health and living conditions, and any obstacles to adapta-
tion of the technology for other communities.
As a complement to the field studies, a detailed bibliographic search for
literature relevant to low-cost waste disposal was carried out by the Inter-
national Development Research Center (IDRC). Over 18,000 potentially



116                Technology, Finance, and Development
relevant publications selected by key word indexing were reviewed. Less
than 2 percent were of practical value for developing-country application,
however, and 25 percent of those relevant were unpublished documents ob-
tained from private libraries. Thus the publication of this abstracted
bibliography was a significant contribution for disseminating information
on appropriate sanitation technologies for developing countries.
A second complementary input to the field studies was the work of the
Ross Institute of Tropical Hygiene in London, England. Researchers there
undertook an evaluation of the relationship of different technologies for
waste disposal to specific categories of water- and waste-related diseases.
Their analyses suggested that no simple ranking of waste disposal
technologies according to their effects on community health is possible.
While good sanitation is certainly an important factor in promoting good
hygiene, a sophisticated and expensive sewerage system is neither a
necessary nor a sufficient condition for high levels of general health.
Reports from the field studies and other inputs indicate that there are
many technological alternatives between the pit privy and the complete
sewerage system. Environmental sanitation can be significantly improved
by the installation and proper maintenance of systems costing one-tenth to
one-third as much per household than conventional sewerage. When com-
bined with water supply systems by standpipe service, the transmission pro-
cess of most water--elated disease can be broken at significant savings.
The Dissemination of Research Results
The findings of the World Bank's research projects in water supply and
waste disposal are disseminated in various ways to officials of member
governments, professionals involved in the technical or financial aspects of
investment and/or aid in the sector, and the Bank's operational staff.
A major concern is to establish the commitment of the governments of
developing countries to the principle of providing safe water and adequate
waste disposal facilities to all people in their countries, not just to the richer
people in larger towns. This, in turn, often requires a decision to reorient in-
vestment and institutional planning, as well as to accept the need for low-
cost technologies, In this respect, the Bank has made important contribu-
tions to international conferences, in particular to the UN World Water
Conference held in Argentina in May 1977. At this conference, a resolution
was passed that the 1980s would be known as the International Drinking
Water and Sanitation Decade, and targets for access to service were set for
1990. Although the likely impact of such resolutions and targets should be
assessed with caution, World Bank staff have already found increasing in-
terest in the move toward 100 percent coverage for water supply and waste
disposal in a number of member countries.



Water Supply and Waste Disposal                        117
The World Bank has also taken steps to provide middle-level managers
and engineers from the developing countries with the results of continuing
research. Lectures and seminars have been (and are being) given by Bank
staff to participants at the practical courses of the Economic Development
Institute and the International Institute for Hydraulic and Environmental
Engineering in Holland, as well as at OXFAM conferences and at the Ross
Institute. The Bank has also financed workshops in Ghana organized by the
International Reference Center and in francophone Africa by the World
Bank/World Health Organization Cooperative Program Staff, and efforts
are being made by seminars and other means to ensure that consultant firms
working in the developing countries are kept up to date on Wor!d Bank
work. Because of the importance of these techniques in disseminating
research findings as widely as possible, World Bank staff are increasing
their emphasis on presenting lectures and participating in workshops
organized by professional groups.
The most important element in the dissemination process is the inclu-
sion of pilot or demonstration schemes in World Bank projects. A major
example of this is the loan for provincial regions of the Philippines (FY
1977), which included $200,000 for training local staff for operations in the
rural areas. The Bank has arranged that a former staff member, an expert in
water supply and public health and a well-known proponent of low-cost
technology, will carry out this program. Under the Bank's loan to Nicara-
gua (FY 1978) for rural water supply and sanitation, the hand pumps and
well screens developed under Bank research projects, as well as the wooden
bearings for pumps, are being tested. The U.S. Agency for International
Development (USAID) and the UN International Children's Fund (UNICEF)
are also proposing the trial installation of the PVC screens in wells in several
countries.
An integral part of the Bank's preparation for future loans in the sector
is an appraisal of how research results can be translated into practice. To
this end, the Bank has joined forces with the UNDP to implement a global
project, costing about $750,000, designed to demonstrate the feasibility of
low-cost water and sanitation techniques in rural and urban fringe areas.
This will be achieved through the development of prototype systems in con-
sultation with local communities and using local consultants. The methods
identified consist of technologies that will reduce the costs of providing
water supply and sanitation services, simplify operation and maintenance,
and be socially acceptable to the intended beneficiaries. The project em-
phasizes the training of local consultants and community workers in low-
cost water and sanitation technologies and will concentrate on projects that
can be duplicated elsewhere.
The effect of the Bank's dissemination of research findings on low-cost
technology for water supply and waste disposal will be seen in its sectoral



118                 Technology, Finance, and Development
lending program during the coming years. How quickly this happens will
depend on the Bank's ability to encourage greater government commitment
to providing services for the poor, on the degree of communily participa-
tion in construction and maintenance programs, and on the absorptive
capacity of backup organizations. Results so far indicate Znat the elapsed
time between obtaining research findings and their practical implementa-
tion is relatively short; thus there should be a substantiaJl increase in projects
incorporating these new technologies during the coming years.
Sector Strategy and Finance
Any strategy for the development of the water supply and waste disposal
sector must dovetail with the government's strategy for the economy as a
whole. At the least, it should imply a recognition by the government of the
roles played by this sector and a comm-itment to establish or strengthen sec-
tor institutions, allocate appropriate investment funds for the sector, and
ensure adequate funding for operation and maintenance; otherwise the
quantity and quality of water supply and waste disposal facilities will
become an ever-larger constraint on social and economic development.
Although every country has many priorities besides water supply and waste
disposal, methods must be found to ensure that investments in this sector
can compete for funds against other investment priorities.
In this respect, mention should be made of four rules, which appear to
apply generally in the sector. First is that the systematic development of
source works, together with construction of transmission and distribution
networks, has to occur before the final consumer can be provided with ser-
vice. Second, domestic consumption of water is usually a small part of total
consumption. Third, there is a ratchet effect in levels of service such that,
once house connections for water supply are available to consumers, it is
usually politically impossible to downgrade their supply to, say, communal
standposts (or to reallocate shortages) and may well be technically impossi-
ble if the water supply is associated with sewerage connections since the
sewers will not work without adequate water supply. Equally, it is in-
equitable to refuse house connections to new applicants who can afford to
pay the costs (in practice, such people will usually find a way to obtain an il-
legal connection if a legal one is denied to them). Fourth, it is usually
politically and economically impossible (or self-defeating) to attempt to
provide levels of service for the poor that are better than those for the not-
so-poor.
With these rules in mind, the first step in developing a sector strategy is
to recognize that for most water supply and waste disposal undertakings,
there is a long lead time-seven to eight years from identification of a project



Water Supply and Waste Disposal                         119
to full implementation. The five-year time horizon of most development
plans is not sufficient for the sector and should be extended to about fif-
teen years. Second, it is essiential to produce a systematic framework for
sector development, starting from the water sources to be used, through
the mains transmission networks, to the final elements of the distribution
networks, with an analysis of the implications for waste disposal at all
stages.
Third, a decision should be taken, in view of other developments in the
country, on the types of service to be provided at different stages in the in-
vestment program and the ways these will be upgraded over time. This is to
ensure that source and transmission mains investments for one type of ser-
vice will be suitable and economic for an upgraded type of service. For ex-
ample, for a city with 20 percent of the population having access to house
connections, 20 percent to patio connections, and 60 percent to standposts,
a certain size of source and transmission mains may be appropriate. If,
however, it is intended to upgrade this service to, say, 60 percent house con-
nections, 30 percent patio connections, and 10 percent standposts, this may,
because of the higher levels of essential water now required, make this same
investment in source and transmission main, inadequate.
Fourth, it is necessary to determine the extent and coverage of invest-
ment within the distribution networks. Some water supply and waste
disposal undertakings provide only the transmission mains, leaving the
costs of investment in small distribution networks, including house connec-
tions and/or meters, to the final consumer; for others, investment includes
all items in the distribution network up to and including the meters in patio
or house connections. In the former case, it is clearly necessary to assess the
ability of households to provide their share of the investment; if such invest-
ment is not affordable by all, it may well be that unexpected surplus capac-
ity will exist in the water supply system.
Use of different types of technology and service standards for water
supply and waste disposal often implies different types of institutional ar-
rangements. For example, maintenance of a small rural water supply
scheme may be best organized through an informal arrangement in the
villages concerned; waterborne sewerage, however, must usually be organized
by a government or semigovernment institution; simple well protection or
cartage of human waste may be carried out by extension agents of the
government or by the private sector. The range of organizational structures
is wide, although, as the Bank puts greater emphasis on new-style projects
in the water supply and waste disposal sector, it is likely that existing
organizations in developing countries will be asked to make loans to less
formal organizations. Already, Bank loans are being channelled to in-
dividuals for house connections and to village committees for small rural
projects, and this process will gain momentum.



120                 Technology, Finance, and Development
An important element in the development strategy of the water supply
and waste disposal sector is the scope for cost recovery through tariffs and
other charges. With respect to tariffs, there are two major factors. First, the
revenue base of the entities providing the service is usually fairly limited (ir.
other words, there are large numbers of potential consumers with relatively
low incomes, and therefore the amount they can afford to spend on these
services is limited). Second, demand for these services is increasing rapidly,
not only because of rapid population growth and the effect of rising levels
of income but because the increasing density of population in communities
is threatening the adequacy of existing services.
Since it is difficult to measure the benefits of water supply and waste
disposal, and these difficulties are compounded when comparisons are at-
tempted between the benefits accruing to consumers as a result of different
types of technologies (for example, between waterborne sewerage and on-
site disposal of human waste), standard cost-benefit approaches cannot
normally be used. Consequently, greater emphasis is placed on pricing
policies that, on average, relate tariffs to the long-run incremental cost of
supplying the service. Such a policy provides a means of signaling the
justification for an expansion of service, as well as establishing a bench-
mark by which other social or economic objectives may be evaluated.
There are also operational problems in using the concept of marginal
cost. One problem is how to deal with the costs of large increases in the
source, transmission, and distribution capacity of a particular system.
There is no fully satisfactory answer to this problem, and, as a compromise,
the operational definition normally comes down to an estimate of incremen-
tal operating and capacity costs averaged over time.
A second problem is that marginal cost pricing may not produce ade-
quate financial results since it ignores sunk costs and so may lead to
operating deficits. As a practical matter, it is usually esserntial to ensure that
the entity is financially viable and financially independent. This means that
it should earn a positive return on its assets (preferably one that equals or
exceeds the opportunity cost of capital) and should be able to finance all (or
a significant part of) future investment. Linking marginal cost pricing and
financial viability often can be achieved through designing a tariff structure
that takes into account what various groups of consumers can afford while
aiming at an overall (weighted) average tariff level consistent with the two
objectives. Such a structure normally consists of increasing block tariffs,
with the richest consumers subsidizing the poorest or, at least, with the
tariff for a basic minimum level of consumption for all being subsidized by
higher charges for consumption in excess of this minimum amount. The ex-
tent of cross-subsidy within the tariff structure will depend on the amounts
demanded by different types of consumers, if, as is often the case, over 80
percent of consumers account for less than 20 percent of consumption. The



Water Supply and Waste Disposal                           121
other 20 percent may not have to be charged much in excess of marginal
cost. An important point to note in this respect is that for efficient pricing
and financial viability, a service must serve the rich as well as the poor.
The type of cross-subsidy used is linked to technology since the type of
service determines the potential for obtaining revenue for that service. A
metered house connection allows many options for charging consumers,
ranging from a flat rate to variable charges for different quantities consumed.
A nonmetered house connection or a patio connection generally must rely
on a regularly collected fixed charge system, sometimes linked to the size of
the property, the size of pipe, the number of fittings, or the estimated
number of users. Charges for standposts can be levied according to the
volume consumed (if there is an attendant) or per household in the area
served. In many cases, however, the consumers pay no charges at all; all
standpost consumption is subsidized by other users or paid for by the
municipality or local government on a fixed-charge basis.
It is sometimes argued that economically efficient pricing in the water
and wastes sector is a contribution to the overall economic efficiency of the
country; however, this depends on a number of factors. First is the situation
in other sectors; if these do not apply the same economic pricing principles,
then there is no guarantee that an efficient tariff structure for water and
wastes will increase national welfare. Second is the technical efficiency of
the sector; if, as is often the case, a large part (20 to 50 percent) of the water
produced is not paid for-because of leakages in the supply network,
deliberate evasion of payment, or poor revenue collection procedures-then
the subsidization of this amount by those who pay may actually reduce na-
tional welfare. Third, specific climatic, geographic, or temporal conditions
may require special pricing arrangements if national needs are to be met ef-
ficiently. And fourth, a lack of sufficient general information among con-
sumers about the personal and social benefits of proper water supply and
waste disposal will affect their decision as to the willingness to pay for ser-
vice and will thus affect the rationale behind marginal cost pricing.
There are difficulties in developing a suitable tariff structure for urban
water supply; these are even greater for rural water supply and all types of
waste disposal facilities. For many small rural water supply and on-site
waste disposal schemes, which generally have a very high labor component,
payment is most easily arranged through free labor provided by the con-
sumer and, possibly, through a nominal (subsidized) charge for the
materials required; in addition, the consumer may also be responsible for
maintenance. For waterborne sewerage, it is usually easiest to put a sur-
charge on the water tariff to reflect the incremental cost of providing
sewerage, even though this will still not justify the type of sewerage selected,
nor, in many cases, will it give consumers a real opportunity to show will-
ingness to pay.



122                 Technology, Finance, and Development
The costs of water supply and waste disposal to consumers who have
house connections are not always those of the tariffs alone. There is often a
connection charge, which can range from a nominal amount to one that is
so large that it effectively prevents some connections from being made.
Thus a major issue, particularly in many urban areas, is who pays for the
connection. There are two aspects to this question, depending on whether
the charge is simply a reflection of actual costs of the connection or whether
it represents a clearing price for queues of customers who can afford the
connection. In the first instance, potential consumers may have to pay for
parts of the system on the basis of accident or location (for example, the
farther away a house is from the mains or the materials depot, the higher
the cost) and the economies of scale (such as the savings on a once-for-all
connection of all houses in a particular neighborhood) may be gained
neither by the individuals nor society as a whole. If the government accepts
the basic needs approach in water supply and assesses all benefits, properly
weighted, relating to health, capacity usage, and so on, it will usually be
found that if the water supply project is justifiable, then so is the financing
by the water supply entity of house connections or at least of enabling house
owners to obtain loans to finance the connections themselves. In the second
instance, the queuing for the connection, and the apparent ability and will-
ingness of consumers to pay for this connection, is a clear indication (in the
same way as the ability and willingness to pay a higher tariff) of the need for
an expansion of the supply system. Indeed, while the connection charge
may assist financially the entity in the early stages, in the longer run it would
be preferable to include all costs of expanding the system (including finan-
cing of the house connection) in the tariff.
In addition to house connections as part of the investment costs of any
project, some provision should also be made (either through the establish-
ment of specific funds or other means) for providing financial assistance for
future house connections, as well as for minimal in-house installations. This
is particularly important in low-income areas and is already standard prac-
tice in some development institutions, such as the Inter-American Develop-
ment Bank.
Where service levels lower than house connections are considered, the
main criteria in determining the type of service are the number of people to
be served and the amounts they can afford to pay for service. Where even a
basic minimum level of service cannot be paid by thb consumer, the second
criterion must be expanded to incorporate the potential for internal cross-
subsidies.
The actual tariffs and charges set will depend on the financial goals of
the entity, the social goals of the government, the economic analysis of the
investment planners, the political viability of tariff changes, and the afford-
ability of the tariffs by consumers. Consequently both the average level of



Water Supply and Waste Disposal                      123
tariffs and their structure will be very much a matter of compromise among
these various aims. Moreover, none of these various aims will be achieved
unless revenues are actually collected for water consumed.
Conclusions
The Bank's lending program for water supply and waste disposal will ex-
pand rapidly during the next ten to fifteen years. Moreover, the structure of
Bank lending in the sector will also change, with greater concentration,
where feasible, on new-style projects aimed at providing affordable access
to service for the poor in both rural and urban fringe areas. Obtaining the
full health benefits of this investment will require an efficient, workable
balance between the sectoral approach, through the handling of source
development, transmission, and distribution of services in a vertically in-
tegrated manner, and the package approach, through the horizontal in-
tegration of water supply and waste disposal with health, education (in-
cluding health education), shelter, nutrition, and environmental aspects.
There are no simple rules of thumb that can be followed about the weight
given to each approach in any given country; however, speed of action is
essential when dealing with people who suffer from absolute poverty and
are deprived of a basic minimum of services.
There are many advantages in a package approach, but access to service
of any one element of the package must not be delayed while other elements
are prepared unless it can clearly be shown that such a delay would be cost-
effective. The water supply and waste disposal sector is clearly able to
prepare, appraise, and supervise projects at a relatively low cost in terms of
staff time, and it can deliver, on time, the necessary service to the target
groups. With known and proved technology, there is an excellent chance
that the objective of providing safe water supply and sanitary waste disposal
facilities in the foreseeable future can be achieved.
Notes
1. See Robert S. McNamara's annual addresses before the board of
governors of the World Bank since 1972.
2. Measurement of the Health Benefits of Investments in Water Sup-
ply, Putblic Utilities Report No. PUN 20 (Washington, D.C.: Energy, W'ater
and Telecommunications Department, World Bank, 1976).
3. Design of Low-Cost Water Distribution Systems, Public Utilities
Report No. RES 11, (Washington, D.C.: Energy, Water and Telecom-
munications Department, World Bank, 1977).



124                Technology, Finance, and Development
4. A Hand-Pump for Rural Areas of Developing Countries, Public
Utilities Report No. RES 9(a) (Washington, D.C.: Energy, Water and Tele-
communications Department, World Bank, 1978).
5. Development of PVC Well Screens for Local Fabrication, Public
Utilities Report No. RES 14 (Washington, D.C.: Energy, Water and Tele-
communications Department, World Bank, 1978).
6. Testing of Wood Bearings for Hand Pumps, Public Utilities Report
No. RES 13 (Washington, D.C.: Energy, Water and Telecommunications
Department, World Bank, 1978).



Sanitation Systems for
0              Developing Countries
Charles G. Gunnerson
Between 1976 and 1978, the World Bank undertook a research project on
appropriate technology for water supply and waste disposal. The need for
the research and its implementation lies in the $60 billion estimated cost of
providing safe water to those in developing countries who do not now have
it and the additional $300 billion to $400 billion to dispose of this water if
conventional practices are followed. Initial implementation of research
findings is underway in cooperative World Bank-UNDP demonstration
projects and in Bank-supported sector projects.
The long-range objectives of the research project were to improve the
efficiency of the Bank's lending operations and to improve its ability to
direct the benefits of its loans to the urban and rural poor. The immediate
objectives were to determine the technical and economic feasibility of
available options for water supply and waste disposal in developing coun-
tries, the economic and environmental systems effects of technologies that
provide for conservation and recycling of water and other resources, and
the scope for designing technical improvements of alternative technologies
to improve their efficiencies or add to their transferability and acceptance.
Emphasis was on sanitation, a necessary but insufficient requisite of good
health, and its interrelationships with water supply and resource recovery.
The research methodology drew together local consultants and par-
ticipants from fourteen countries at various stages of economic develop-
ment and technological transition. Appropriate technology, according to
the operational definition adopted in the project, is a replicable process or
technique that provides a socially and environmental'ly acceptable and a
technically upgradable level of service or product at the least social cost.'
Lack of quantifiable health and other benefit information reinforces the
need for careful and complete cost calculations that consider incremental
costs to the economy rather than simply those to the ministry or utility. For
this, shadow pricing of foreign exchange, unskilled labor, power, and
other inputs is necessary. In addition, all costs to the householder, such as
indoor plumbing and labor contributed for latrine construction, must be
taken into account; for example, the economic cost of flushing water raises
total sewage systems cost by 20 to 30 percent. Finally, adjustments must be
made for unused capacity (which produces -no benefits) during the early
years of a large water or sewerage project when its costs are compared with
those of small decentralized alternatives. The traditional methods of costing
125



126                  Technology, Finance, and Development
used by engineers often ignore these factors and thus bias the choice of
technology toward large capital- and import-intensive designs. The research
results presented here will be most successfully applied when system stabil-
ity is considered.2 Environmental and technological descriptors of stable
systems include small-scale, diffuse, diverging, redundant, separated from
geophysical hazards (such as floodplains), recycling of materials (easy with
carbohydrates, difficult with chlorinated hydrocarbons), conservation of
energy, and matching of capacity to demand (where emphasis is on end use
rather than supply). Socioeconomic descriptors include sustainability, em-
phasis on marginal rather than sunk costs, replicability, individual dignity
(uniqueness, color), user access and participation in planning and im-
plementation, indigenous innovation, high employment, entrepreneurship
(as opposed to vertically integrated monopolies), good community health,
low costs, and minimum service levels matched to basic needs.3
Service Levels
Water supply service levels establish sanitation service requirements. A safe,
adequate water supply is also something people are willing to pay for.4 It
has not always been this way. In the first official British document to deal
with sanitation for the working classes, Edwin Chadwick urged the installa-
tion of water systems under pressure not so much to provide a safe supply
but to flush away the wastes.5 This says that waste disposal, which on the
average is invariably more costly than water supply, should be paid for pro-
portionately by the user. But the user perceived a need for water only, not
for its disposal. These perceptions became conventional wisdom when John
Snow's classic work, written in 1854, showed the cause-and-effect relation-
ship between a single polluted well and local incidence of cholera.6 Costs of
sewerage systems have accordingly been borne by the community through
cross-sectoral transfers of funds. Because it is cheaper to treat water sup-
plies than to treat wastes, investments in waste treatment are deferred, and
streams and lakes that supply the water become polluted.
Water Supply Service Levels
In rural arcas, domr.'tic water may be carried as much as 5 kilometers.
Distance affects the amount of time spent carrying water, but it has little ef-
fect on the amount of water used.7 Although water use may be as little as 2
liters per capita per day (lcd), most people using water carried by
householders or vendors from springs, wells, standpipes, or kiosks consume
20 to 25 lcd. The value of gathering at the village well has been overrated, at
least in Central America where quarreling may dominate socializing.8



Sanitation Systems                                        127
In fourteen cities of 150,000 to 12 million people where there are World
Bank water supply projects, average use is 33 lcd from neighborhood stand-
pipes and 120 lcd from yard or house connections. Corresponding ranges
were 5 to 71 and 63 to 194 lcd, respectively. There are local areas where low
or intermittent system pressures provide much less water. In areas with rain-
fall greater than 80 centimeters per year, there is no correlation between
average water use and precipitation. Luxury consumption of water greater
than 100 lcd is based on availability and convenience of house connections.
Household storage capacity for hand-carried or vendor-delivered water
may be a limiting factor. Storage systems include pottery jars where water is
cooled, rainwater catchments, and 55 gallon drums sometimes filled by hose
from a nearby standpipe.9 Available data on operations of water supply
systems indicate that all essential public health benefits of a safe water sup-
ply are provided by water service levels of 20 to 50 lcd for drinking, cook-
ing, utensil washing, bathing, and pour-flush toilets. '0 The amount used for
bathing depends on the climate. In Moslem countries, estimated water use
for ablutions and anal cleansing is 0 to 2.5 lcd, depending on availability.
Water for laundry, garden and stock watering, and occasional stock
washing (as in Egypt) often requires higher service levels or alternative
sources of supply.
Sanitation Service Levels
In the twenty-five communities, no consistent relationship was found be-
tween areal use and sanitation systems except for three similar Southeast
Asian communities with 160, 180, and 207 lcd, and on-site systems for 90,
66, and 47 percent of the populations, respectively. As water service levels
exceed 50 to 100 lcd, off-site disposal of sullage (grey water), often com-
bined with sewage, becomes necessary.
Health Aspects of Service Levels
Improved community health is generally considered the major benefit of
improved sanitation; however, repeated attempts have failed to establish
quantitative relationships between these benefits and sanitation costs. For-
tunately, achieving rather than merely measuring benefits is the primary ob-
jective of improved sanitation."1
The risks of infection from human feces are well known. Urine is
ordinarily sterile, the only exception being in areas where urinary schis-
tosomiasis is prevalent. Feachem and his colleagues have summarized cur-
rent knowledge of excreta-related diseases, their environmental charac-



128                  Technology, Finance, and Development
teristics, and the effectiveness of alternative sanitation systems in preventing
them.'2 All of these diseases can be controlled by the physical separation of
feces and people. This means that with proper operation and maintenance of
toilets and surrounding areas, all types of sanitation can provide the same
health benefit to the user. In practice, because of aesthetic, cultural, and op-
erating requirements, household systems in which odors are vented outside of
the latrine and from which insects are excluded tend to be better maintained.
The fecal hazard of sullage has yet to be demonstrated. Crude estimates
assuming a high value of 150 lcd of sullage and based on U.S. data indicate
that per capita discharges of the bacterial pollution indicators, fecal coli and
fecal streptococci in sullage, are 106 and 105 bacteria per day, respectively. 13
If these indicative values are generally representative of pathogenic bacteria
concentrations, they would constitute approximately one median infective
dose per capita contribution of sullage. Corresponding per capita discharges
in feces are approximately 5 x 1010 and 109, respectively-some four or five
orders of magnitude greater than those for sullage. This means that even
though ratios of pathogens to indicators may be higher for sick people than
for healthy ones, relative risks of infection from nightsoil or sewage are
four or five orders of magnitude greater. This is consistent with case study
results about possible differences in health profiles between people living in
sewered areas and in adjacent areas with nightsoil collection and sullage
discharge to surface drains.
Some concern has been expressed over a possible contribution by sullage
to increased populations of the mosquito, Culex pipiens, which breeds in
polluted water and is a vector of filariasis.'4 A good theoretical case can be
made for this concern, although no field evidence to support it has been ac-
cumulted to date even though sullage and sewage treatment plant effluent are
being used for garden watering and green-belt irrigation in North Africa and
elsewhere. The potential importance of sullage to mosquito breeding is deter-
mined by environmental factors such as low aridity and local soil permeabil-
ity, which allow the water to remain on the surface long enough to permit
mosquito breeding. Where there are extended periods of relative drought,
persistent surface impoundments of sullage could contribute to extending
periods during which mosquitoes normally breed. In sum, while disposal of
large amounts of sullage resulting from high water service levels may require
sewerage in densely populated areas, in areas of lower water consumption
and/or lower population density, the problem of sullage is a low-priority one.
Community Access and Participation
Community access and participation in selection of service levels, im-
plementation, and capital recovery elements of sanitation programs are es-



Sanitation Systems                                      129
sential. Specific objectives of community participation are the selection of
technologies that are acceptable to the community and offer the benefits
they consider irnrortant at a cost they can afford, can be operated and
maintained by the local community with minimum input from outside agen-
cies, and use the most effective materials and methods of construction.
Work toward achieving these objectives begins in early planning and
feasibility study phases and includes identification of formal or informal
community leadership and communication channels; determination of ex-
isting practices in water use and excreta disposal and the community's at-
titudes toward them; determination of the community's willingness to pay
for desired improvements through cash contributions, labor, or materials;
organization and execution of any agreed self-help construction input; and
operation and maintenance of communal facilities, assistance to users in
maintaining individual facilities, and collection of funds.'5
Six tasks have been identified as the minimum for a community par-
ticipation program that leads to a successful project:
1. Unstructured interviews with community leaders and a limited number
of users to identify user attitudes and preferences.
2. Design and testing of a questionnaire for structured interviews.
3. Structured interviews with a representative sample of households.
4. Presentation of feasible technologies with their costs to the community
or its leaders to determine willingness to pay.
5. Organization of construction and execution of the work.
6. Continued operating, maintenance, and monitoring activities, in-
cluding the assessment and collection of fees.
The first three tasks should be undertaken at the beginning of project
development, the fourth toward the end of the selection phase, and the final
two scheduled to meet technical requirements and community work patterns.
In sum, community participation and assessment of the willingness to
pay for improved service levels depend on both household income levels and
perceived needs. The assessment is affected by the accuracy, completeness,
and timeliness of information exchanged between the residents and those
who are conducting the feasibility study. Analysis of social factors and con-
duct of interviews should be the responsibility of people accepted by the
community or by members of the community; they are too important to be
entrusted to strangers.
Institutional Factors
The constraints impo- -i by limited management and technological skills are
well known. It is c,. asionally assumed that sewers require management



130                 Technology, Finance, and Development
skills only during their construction period and that thereafter they work by
gravity. Only rarely is this so; more commonly, they become clogged by ex-
cess solids or too little water, their surfaces or joints may corrode and fail so
that groundwater infiltrates and sewage exfiltrates, or else the street sur-
faces above them collapse because of inadequate inspection and mainte-
nance. In contrast, adequate institutions can make the simplest and least
costly systems work.
Other institutional matters include cost recovery (and water conserva-
tion) by means of increasing block tariffs for water and assurance of land
tenure before evaluating willingness to pay. Terms of reference for engi-
neering feasibility studies or design services can be expected to include the
following: fees based on time and materials rather than on a percentage of
construction costs; additional funds and time for an effective counterpart
training component, which is part of a much broader continuing national
training program; an increase in fees (but no increase in time) for inter-
disciplinary development of community willingness to pay; and the require-
ment for financial and economic comparisons of alternative technologies
and potential upgrading sequences and schedules.
Alternative Sanitation Technologies
Basic design factors for sanitation systems include 0.8 to 1.2 lcd of excreta,
with as much as 1.8 lcd in areas with vegetarian diets. Traditional and
potential anal cleansing materials must be considered. Water-seal toilets or-
dinarily will not accept rocks, mudballs, maize cobs, large leaves, or similar
materials; the only exception is the aquaprivy. Water use for anal cleansing
varies from 2 to 5 lcd where water is carried to 30 or more liters per latrine
per hour with continuous-flow piped systems. Pour-flush toilets requires 3
to 6 lcd. Excreta from dry systems can be readily composted with minimum
amounts of dry cellulosic material such as straw, ricehulls, and wood chips,
for bulking. Anaerobic composting (generally greater than 20 percent
solids) or digestion (generally less than 10 percent solids) is feasible with low
water use. High water use requires treatment (for example, by oxidation
ponds), pretreatment, and ocean discharge, or some combination of treat-
ment and disposal systems.
The generic classification system shown in figure 8-1 includes only
systems that are in use and systems with minor modifications to those in
use. It does not include exotic household schemes such as incinerating or
recirculating toilets, which are too expensive and too energy intensive, or
systems for adding proprietary microbial cultures or enzymes. System
suitability for household or community excreta disposal and for sullage
(grey water) disposal is indicated. Change from a communal to a household
system ordinarily will be preferred by the user because of the additional
privacy it affords. Other examples of sanitation-upgrading sequences are



1. Oemshanlaiei     5n            *T
2. T-echlatrne 11                                        1          2
Dy 3. Pit attai                    4
4 Rend daeNMs Eunh Close        3                      'nnm-4a
5V.Ventilated i,ilve pi, I-.-a  3                                                                                                                                         C
OsIte      -7 C     -atmunascampostlng 4hine                                                                     3 0
8. Pou-l.tsh late.sa ahaky     3
9 P-t flash lairme, aquap-ay- soahakay  3
Wal   t O Pour.llush.septlc tanhi aull  3
-411 S         ,liage  pfhsh. AqUptvy. s-akaay  3 *
12 Suliage-llsh. septi l tu k. saaaay  3
L 13 C    ntinalseptictank        2                                              9                   10                        1                          12
Sanstatmen          14 L     -du mc 1s , , knfh iaka<;y.
systentsso 1 * 0 i .T R
Qdit sitte t,  5 Lasasalunsactstetn flsh. quapvyt1*** n llLJo.
Oat sWa.          sy            q t asat
16. Los-aolum anitlesush.septn tcnk.
W  -  orseu           1 | *  * *  |[13 Same as 12 ecept conventi-nal ctn eaflush  114, 15, 16 Same as cespcnding co-igo aI.n i a 8 t 121  117 See standard mnanuals and -ts.-
W     17 Cn-n-tianaseweage            2                                                       ,-,ecep  elev, a mi -  h law volume-flush.
Olfits   r18. Vauuhtndvacuutanlsk           I
19 Vau, -manualremovaL trck.orat  4
20. Bucket lutine               5
21 Mnh-Aol -ke.t -- a           2
--- MovmIt ot liquids                                                                                           19                     20                             21
* mo,m,ntnol *oalds
Adapted from: World Bank, Water Supply and Waste Disposal. Poverty and Basic Needs Series (Washington, D.C., September 1980).                                          c
Figure 8-1.          Generic Classification of Sanitation Systemsa



132                  Technology, Finance, and Development
presented in the concluding section of this chapter. Meanwhile, some
generalizations about major classifications can be made:
On-site systems are appropriate where water use is low or where sullage
is disposed of separately.
On-site systems, because they are dispersed, have less environmental
impact than off-site systems.
On-site systems are generally preferable where population densities are
low.
Costs of off-site systems are generally higher than for on-site.
Institutional and management strengths are more important for off-site
systems.
Dry systems offer the same health benefits and are ordinarily less costly
but require the same user care and efforts as wet systems.
Off-site systems generate more employment.
Actual costs are country specific, so a particular technology may fall into
either the low- or medium-cost category. Table 8-1 summarizes the costs of
technologies studied in detail by the Bank's research project. For low-income
households, low-cost sanitation systems ranged from 2 to 6 percent of
average household income, Corresponding costs for high-cost systems were
9 percent for a communal toilet and 10 percent for a household composting
toilet.
Case study data from Kyoto, Japan, are revealing. This historic city has
a modern, well-operated water supply and sanitation system. Of a popula-
tion of 1.5 million, 41 percent are served by sewers, 41 percent by vaults and
vacuum trucks, 15 percent by septic tanks, and 3 percent by other means.
Sewage and diluted nightsoil are treated by conventional activated sludge
with sludge incineration. Total 1978 annual costs per household were $641
for sewerage, of which $79 was for flushing water, $172 for vaults and cart-
age, and $390 for septic tanks. Health and environmental benefits were the
same for all systems. No differences in health profiles were found among
residents in areas served by sewers or by vaults and cartage. Although
sullage from the latter areas necessarily discharges to surface drains and
streams, no differences in stream water quality were found, except for the
point-source effect of the sewage treatment plant discharge. Stated reasons
for changing from nightsoil collection systems were the same in Kyoto as in
other Asian cities: difficulties in obtaining nightsoil collectors, the unwill-
ingness of farmers to use nightsoil, and the desire for modern convenience.
Staffing may be more of a long-range planning problem than a current



Table 8-1
Financial Requirements for Investment and Recurrent Cost per Household
(1978 dollars)
Percentage      0
Total            Monthly          Monthly           Hypothetical            of Income of     m
Investment         Recurrent          Water           Total Monthly           Average Low-     C/
Cost              Cost              Cost              Costa             Income Householdb   cn
CD
Low cost                                                                                                                       3
Pour flush toilet                70.7              0.2               0.3                2.0                      2           c)
Pit latrine                      123.0                                                  2.6                      3
Communal toiletc                355.2              0.3               0.6                8.3                      9
Vacuum truck cartgage            107.3             1.6                                  3.8                      4
Low-cost septic tanks           204.5              0.4              0.5                 5.2                      6
Composting toilet               397.7              0.4                                  8.7                     10
Bucket cartagec                  192.2             2.3                                  5.0                      6
Medium cost
Sewered aquaprivy               570.4              2.0               0.9               10.0                     11
Aquaprivy                      1,100.4             0.3               0.2               14.2                     16
Japanese vacuum
truck cartage                  709.9             5.0                                 13.8                     15
High cost
Septic tanks                   1,645.0             5.9              5.9                25.8                     29
Sewerage                       1,478.6             S.1               5.7               23.4                     26
Source: J.M. Kalbermatten, D.S. Julius, and C.G. Gunnerson, Appropriate Sanitation Alternatives: A Technical and Economic Appraisal, World
Bank Studies in Water Supply and Sanitation (Baltimore: Johns Hopkins University Press, 1982, p. 64).
aAssuming investment cost is financed by loans at 8 percent over five years for the low-cost systems, ten years for the medium-cost systems, and twenty
years for the high-cost systems.
bAssuming average annual income per capita per capita of $180 and six persons per household.                                  c,>
cBased on per capita costs scaled up to household costs to account for multiple-household use in some of the case studies.    C.)



134                Technology, Finance, and Development
operating one; working foremen in Japan, Taiwan, and Korea reported that
they could hire enough workers for the task. The changing value of night-
soil as a resource was more elusive. In Southeast Asia, it is frequently used
as a fertilizer for fish ponds, and in both mainland and island countries it is
used, sometimes with animal manures, to generate methane (biogas).
Significantly, farmers in and around Kyoto, after having reportedly used
chemical fertilizers for many years, are beginning to revert to the ancient
custom of making private arrangements with householders to remove their
nightsoil for use as fertilizer and presumably to restore or maintain tilth of
the soil.16 In 1977, 8,000 household vaults were served in this way.'7 The
desire for modern convenience is real, and as long as costs are internalized,
it is an appropriate goal. '8
Alternative Waste Treatment and
Disposal Alternatives
A variety of alternatives for waste treatment and disposal are available.'9
Two that are particularly suited to developing countries are composting and
stabilization ponds.
Recent developments in the United States for treating raw sewage sludge
include successful use of a composting method that is equally applicable to
sludge from septic tanks, digesters, or biogas generators or to nightsoil. A
reliable and least-cost process is the Beltsville Aerated Rapid Composting
(BARC) system developed at the U.S. Department of Agriculture's Agricul-
tural Research Service Laboratories in Beltsville, Maryland.20 The process is
based on mixing sewage sludge with wood chips. Sawdust is added as an addi-
tional bulking material to absorb the greater amounts of liquid in the
nightsoil. The BARC system has been used effectively to compost nightsoil
from the National Capital Park Service latrines. The estimated 1977 cost of
sludge composting with the BARC system was $35.40 to $46.40 per dry ton
in a 10 ton per day plant. The system is suited for developing countries
because of its simple operation of limited inexpensive mechanical equip-
ment and because of its highly effective and uniform heat inactivation of
pathogens, which makes the final compost safe from a public health point
of view.
Nightsoil use as a fertilizer in agriculture as practiced in China and other
Asian countries for centuries has helped maintain soil fertility in intensively
farmed areas. Recent reports indicate that one-third of the fertilizer re-
quirements of agriculture in China has been provided by recycled nightsoil.2'
The public health problems in nightsoil treatment are severe, however;
research has amply demonstrated that nightsoil and sewage sludge carry
high concentrations of the full spectrum of pathogenic bacteria, viruses,
protozoans, and helminths endemic in the community, many of which are



Sanitation Systems                                        135
highly resistant to conventional nightsoil and sewage sludge digestion and
storage.
From a survey of the literature on nightsoil treatment, it can be concluded
that the only safe nightsoil treatment method that will ensure effective inac-
tivation of helminths such as Ascaris eggs and all bacterial and viral
pathogens is heat treatment to a temperature of 60°C for sever!'1 Fours or
50°C for several days.22
Stabilization ponds are indicated for treatment of sewage from pour-
flush or cistern-flush sanitation systems or for diluted nightsoil. Space may
be limited in areas of high population density. To ensure an essentially
pathogen-free effluent requires five ponds and a total detention time of fif-
teen to thirty days. During this period, wastes are stabilized by bacteria and
algae. Pathogens are removed from the water by ingestion into pond bac-
teria or by sedimentation. Sludge removed periodically can be stored for at
least one year to ensure pathogen inactivation, or it can be composted.
Effluents from well-operated conventional secondary treatment plants
discharged to streams cause generally minor local pollution. Discharges to
lakes may create undesirable changes in aquatic life because of their fer-
tilizer content. Land disposal for treatment or irrigation in industrial coun-
tries or for direct reclamation by sewage farming in developing countries is
practiced throughout the world.
Ocean disposal is a viable alternative for coastal communities. Require-
ments for domestic waste treatment are usually met by screening, occasionally
supplemented by flotation. Outfall locations, depths, and configurations are
determined by site-specific beach use, initial dilution requirements, currents
and travel time waves and tides, absence of shell fisheries, and the rates at
which bacteria from the effluent disappear from surface waters. This disap-
pearance depends primarily on sewage characteristics and treatment,
followed by sedimentation and then by mortality factors, such as by sun-
light, competition, and predation. Dilution in the open ocean, which
follows initial dilution over the outfall, is a minor factor, and expensive
determination of eddy diffusion coefficients is more of an exhilarating
academic exercise than a study of a controlling factor. Lowest system costs
may be realized by a series of outfalls rather than by assembling flows with
expensive interceptors and then dissassembling them with expensive diffusers.
Ocean disposal is an inherently flexible option; it can be relocated, ex-
panded by additional outfalls, or modified by additional treatment as funds
permit and needs for upgrading require.
Reclamation Alternatives
Reclamation of energy by methane (biogas) generation from anaerobic
digestion of animal or plant wastes is an increasingly viable option as fossil



136                    Technology, Finance, and Development
fuel prices increase. At the household level, it may require too high a capital
investment, and at the municipal level it may involve excessive methane
transmission costs. The optimum size for neighborhood or community
systems is probably site specific but as yet undetermined; in some cases it
would properly include dung, otherwise used directly as fuel. Indirect fuel
production from effluent irrigation and fertilization of grasses and fast-
growing shrubs may be appropriate along desert margins.
Irrigation and fertilization of food or fiber crops is widely practiced, the
main concerns being public health ones, which can be quickly dealt with by
stabilization ponds and aerobic composting. Intermittent requirements for
either water or fertilizer may necessitate storage facilities, however.
Fish ponds can be fertilized by human or animal wastes with sustained
yields of 2 to 20 tons per hectare per year depending on the sophistication of
design and operations.23 Alternative approaches suggested by figure 8-1
provide both immediate improvements and the assurance of future upgrad-
ability. A few of these are listed in table 8-2.
In sum, many technologies and service levels are available to meet per-
ceived water and sanitation needs. Engineering feasibility studies should in-
clude comparisons of a spectrum of service levels and alternative tech-
nologies, assessment of community willingness to pay, and economic as well
as financial costs. Engineers should not design water systems and rate struc-
tures without regard to waste disposal requirements, nor should sewerage
systems be planned without considering marginal costs of flushing water
and unused capacity. Least-cost solutions are those in which capacity closely
matches demand, a requirement that is met more easily in dispersed systems
than in centralized ones.
Table 8-2
Some Alternative Upgrading Sequences for Sanitation Systems
Classification                                     Technologya
Off-site to off-site               Bucket latrine (20) to vault with manual removal
(19) to vault with mechanical removal (18)
Off-site to on-site                 Bucket latrine (20) to ventilated improved pit
latrine (5) to pour-flush or sullage-flush with
soakaway (8 or 12)
On-site to on-site                  Pit latrine (3) to ventilated improved pit latrine
(5) to Reed Odorless Earth Closet (4) to sullage-
flush latrine with septic tank (12)
On-site to off-site                 Ventilated improved pit latrine (5) to vault and
vacuum truck (18) to small bore sewers (14)
On-site to off-site                 Low-volume cistern flush with soakaway (14) to
low-volume cistern flush with sewer (14)
aldentification. numbers from figure 8-1.



Sanitation Systems                                             137
Pigs provide for direct conversion of animal and human feces to protein
and in some Central American, Southeast Asian, and South Asian com-
munities, for collection and transportation and aesthetic (if not completely
hygienic) factors as well. Less well documented are reports of similar
saprophytic attention from goats, cattle, dogs, fowl, and birds. Both
engineered and inadvertent recycling and reclamation of resources augment
system (or ecosystem) stability.
Sanitation System Selection
The dependence of sanitation technologies on water service levels has been
stressed throughout this chapter. The average costs of this dependence are
clearly revealed in table 8-3. Costs of 20 lcd from standpipes at I meter or
50 meters radius from the household with on-site disposal are compared
with 100 lcd from a yard or house connection and sewers. At 20 lcd, sanita-
tion costs averaged 3.3 times water costs, and at 100 lcd, the ratio is 4.4 to 1.
These ratios are consistent with those from Caminos and Goethert and from
a number of more recent Bank projects for upgrading low-income areas.24
An extreme case is found in one Middle Eastern capital city where plans are
being implemented for initial construction of sewers at $1,000 per capita,
some ten times the annual GNP per capita.
Problems may arise when gradual improvements are made to water
system service levels to the point where there is too much sullage for on-site
disposal; a $25 per capita water improvement may carry with it a future
$250 per capita obligation to provide sewers or other drainage for sullage.
Table 8-3
Estimated Average Water and Sanitation System Costs in 1978
(U.S. dollars per household for water service levels of 20 to 100 lcd)
Water Service Level         Average Costs per Household
Population               A verage       Water
per Hectare   lcd     Radius (meters)  Supplya    Sanitation          Total
100            20           0             52          70                122
20          50            116           70               186
100           0           425         1,500b            1,925
350            20         100             23           70               93
20          50             51          350              401
100           0           310         1,500b            1,810
800            20         100            10           107               117
20          50             25          355               380
100           0            178        1,500b            1,678
Source: World Bank, 1980.
aDistribution costs only.
bGravity sewers, no rock excavation, minimum treatment, and marginal costs of flushing water.



138                 Te,hnology, Finance, and Development
Notes
1. L. Squire and H. van der Tak, Economic Analysis of Projects (Bal-
timore: Johns Hopkins University Press, 1975).
2. I am indebted to former associates at Stanford Research Institute,
Menlo Park, for this simplified model, many elements of which are restate-
ments of the first and second laws of thermodynamics and their ecological
derivatives that energy flows and materials recycle. Other sources include
E.F. Schumacher, Simall Is Beautiful (New York: Harper and Row, 1973);
N. Jequier, ed., Appropriate Technology: Problems and Promises (Paris:
Organisation for Economic Cooperation and Development, 1976); and
A.B. Lovins, "Scale, Centralization and Electrification in Energy
Systems," in Future Strategies forEnergy Development (Oak Ridge, Tenn.:
Oak Ridge Associated Universities, 1977), pp. 88-172.
3. Lovins' "Scale," further characterizes sustainability as "more im-
portant than the momentary advantage of any generation or group [so that]
long-term discount rates should be zero or slightly negative, reinforcing a
frugal (though not penurious) ethic of husbanding."
4. Adequacy is subjective. Three liters per capita per day (lcd) will sus-
tain life, 20 to 30 lcd provide all of the health benefits of a safe water sup-
ply, and larger amounts provide for convenience. Flushing of wastes is ob-
viously to be preferred to earlier tossing them from Edinburg windows or
wrap-and-toss systems of some East Asian and North African urban areas.
However, flushing has historically been a luxury made possible during ex-
ceptional times such as the expansion of the Roman Empire from the fourth
century B.C. through the first century A.D.; in nineteenth-century England
when revenues of the East India Company were diverted to the crown; and
during the twentieth century's unprecedented economic development of
North America and northwestern Europe.
5. Edwin Chadwick, Report on the Sanitary Condition of the Labor-
ing Population in Great Britain (1843; reprint ed., Edinburgh University
Press, 1965).
6. John Snow, On the Mode of Communication of Cholera (London,
1855) reprinted in Snow on Cholera (London: Oxford University Press,
1936).
7. G.F. White, D.J. Bradley, and A.U. White, Drawers of Water
(Chicago: University of Chicago Press, 1972).
8. A.U. White, "Patterns of Domestic Water Use in Low Income
Communities," in R. Feachem et al., Water, Wastes and Health in Hot
Climates (London: Wiley, 1977).
9. M. Elmendorf and P.K. Buckles, Socio-Cultural Aspects of
Water Supply and Excreta Disposal, PU Report No. RES 15 (Washington,
D.C.: Energy, Water and Telecommunications Department, World Bank,
1978).



Sanitation Systems                                    139
10. White, Bradley, and White, Drawers of Water.
11. J.M. Kalbermatten, D.S. Julius, and C.G. Gunnerson, Appropriate
Sanitation Alternatives: A Technical and Economic Appraisal (Washington,
D.C.: Energy, Water and Telecommunications Department, World Bank,
1978).
12. R. Feachem, D.J. Bradley, H. Garelik, and D. Mara, Health
Aspects of Excreta and Sullage Management (Washington, D.C.: Energy,
Water, and Telecommunications Department, World Bank, 1978).
13. Kalbermatten, Julius, and Gunnerson, Appropriate Sanitation
Alternatives.
14. R. Feachem et al., Health Aspects of Excreta and Sullage Manage-
ment, op. cit.
15. This approach has been developed in part from that proposed by
A.U. White and G.F. White, "Behavioral Factors in Selection of Technol-
ogies," in C.G. Gunnerson and J.M. Kalbermatten, eds., Appropriate
Technology in Water Supply and Waste Disposal (New York: American
Society of Civil Engineers, 1979).
16. M.G. McGarry, M. Stainforth, and T.L. Lee, eds., Compost, Fer-
tilizers, and Biogas Production from Human and Farm Wastes in the Peoples
Republic of China, Tech. Ser. 8a (Ottawa: International Development
Research Centre, 1972); and M.G. McGarry, Developing Country Sanita-
tion (Ottawr.i: International Development Research Centre, 1972).
17. See Kalberniatten, Julius, and Gunnerson, Appropriate Sanitation
Alternatives.
18. Robert C.T. Lee, personal communication, Taipei, Taiwan, 1967,
observed that when a country passes from agricultural support of industry
to industrial support of agriculture, the nonfarm income of farm families
begins to exceed their farm income, and they lose interest in using nightsoil.
The opportunity costs of their labor increase and chemical fertilizers are
more convenient.
19. Appropriate Sanitation Alternatives: A Field Manual (Washington,
D.C.: Energy, Water, and Telecommunications Department, World Bank,
1978).
20. E. Epstein, G.B. Willson, W.D. Burge, D.C. Mullen, and N.K.
Enkiri, "A Forced Aeration System for Composting Wastewater Sludge,"
Journal of the Water Pollution Control Federation, no. 48 (1976):688-694.
21. McGarry, Stainforth, and Lee, eds., Compost.
22. H.I. Shuval, C.G. Gunnerson, and D.S. Julius, Nightsoil Compost-
ing, N.P. Report No. RES 12(a) (Washington, D.C.: Energy, Water and
Telecommunications Department, World Bank, 1978).
23. M.G. McGarry, The Importance of Water Reuse (Ottawa: Interna-
tional Development Research Centre, 1978).
24. H. Caminos and R. Goethert, Urbanization Primer for Design of
Sites and Services Projects (Washington, D.C.: World Bank, 1975).



Urban Shelter
and Community
Development
Herbert H. Werlin
The urban population of the developing countries is expected to continue to
grow by more than 4 percent a year in the next fifteen years, and in many
large cities its rate of growth exceeds 6 percent, which. corresponds to a
doubling in the size of urban areas over a decade. To accommodate this
growth with permanent conventional housing of even minimum cost stan-
dards is virtually impossible, given the limited resources that are available.
Currently the supply of such housing is generally only a fraction of the in-
crease in the number of urban families. Except in some of the richer
developing countries, most urban families cannot afford conventional
housing unless it is very heavily subsidized by public authorities, which will
be able to pay for only relatively small programs. '
During the 1970s, the World Bank launched more than thirty urban
development projects aimed at helping almost 6 million poor urban dwellers.
These sites and services and slum upgrading programs have pioneered what
increasingly appears to be a feasible alternative to conventional slum
clearance programs and low-cost housing schemes. Sites and services ba-
sically involve the subdivision of urban land and the provision of a number of
public utilities and services, as well as community facilities for residential and
commercial use. Slum upgrading essentially is the improvement of that area's
undesirable physical and social environment. Developing countries increas-
ingly are adopting these two approaches of the World Bank to urban develop-
ment problems, and this chapter describes some of these projects, which
represent one of the largest-scale applications of appropriate technology.
These two approaches are probably important social innovations in their own
right. From a technological point of view, they are also interesting in that
they show clearly the interdependence between the hardware of a project
(physical infrastructures and equipment) and its software (organizational
forms, pricing mechanisms, and legal arrangements, for example).
Evolution and Design of Sites and Services Projects
The primary reason for setting up sites and services projects is to provide
shelter for urban dwellers unable to afford conventional public housing
Acknowledgments are due to John Driscoll, assistant editor of the Urban Edge, for his
assistance in the preparation of this chapter.
141



142                 Technology, Finance, and Development
units. The number of people in such a situation is usually very high; in most
cities of the developing countries, it represents between 50 and 80 percent of
all residents. Systematic large-scale sites and services projects for the benefit
of the poor are of relatively recent origin, and their development has been
greatly influenced by the writings of such people as Charles Abrams, John
Turner, and Otto Koenigsberger and by the initial experiments conducted in
the 1960s in India, Latin America, and East Africa.
Many of the early projects were undertaken carelessly and reluctantly.
They were seen as a temporary or intermediate stage between slum-clearance
programs and public housing projects. Leaders feared that site and service
schemes would perpetuate the slum conditions and shanty dwellings that they
were anxious to discourage. Consequently these early experiences tended to
be negative. The sites chosen were either difficult to develop or far removed
from employment opportunities. In some cases, security of tenure was not
guaranteed. In others, excessive arrears were allowed to accumulate. Ad-
ministration and maintenance were often inadequate. As a result, projects
tended to deteriorate, reintroducing hostile official attitudes.
Economic, administrative, and political problems continue to haunt site
and service projects. Some countries are unable to acquire adequate and
suitable urban land at a reasonable cost. The tendency also remains to pro-
vide too high a service level, given the income of the beneficiaries, or to im-
pose inappropriate standards. The lack of experienced and qualified
technical staff, the weakness of local government, the unwillingness or in-
ability to delegate responsibility for decision making, and the failure of
public communication have been factors in delaying action.
Recently, however, there has been a dramatic turnabout through much
of the developing world in official attitudes toward site and service projects.
For example, Kenya, heartened by the success of its initial efforts in this
area, is now planning its second World Bank-supported project. This
change in attitude largely can be attributed to better recognition of the types
of problems likely to be encountered in such projects and to the consequent
improvement in their design and execution. This is perhaps best illustrated
by a few examples.
Zambia, among other countries, has shown the value of initially keep-
ing standards as low as possible, while making provision for upgrading
standards as household incomes increase. The so-called basic plots, con-
sisting of communal water supply and pit latrines, cost only $750, compared
to $1,320 for the least expensive normal plots, containing individual water
and sewer connections. As such, they can reach the lower-income groups
with the greatest need for housing. At the same time, they are viewed as an
initial stage of phased servicing, which, depending on occupant demand,
could lead to eventual normal servicing standard.



Urban Shelter and Community Development                 143
In Usulutan, El Salvador, the population showed little interest in a site
and service project because it was easier and cheaper for people to buy an
illegal plot from a local landowner. Since distances from the pirate subdivi-
sions to town are short and water is easily available from shallow ground-
wells, the advantages of the official project, which included larger open
areas, piped water, and waterborne sewage, were not worth the price differ-
ence. Based on this experience, the agency in charge of such projects (the
Fundacion Salvadorenia de Desarrollo y Vivienda Minima, or FSDVM) now
undertakes a market survey prior to each site development to determine
alternatives and preferences to tailor supply to demand better. Typically
these surveys cover the residents' capacity to pay, their locational and
design preferences, their needs, and the land market. After market surveys
have been completed, FSDVM offers eligible residents the opportunity to
select within city limits the size, cost, and service level of their plots. In addi-
tion to various lot options, participants in successful recent projects are
allowed considerable autonomy in building their homes.
To keep site and service projects within the financial reach of low-
income urban residents, many countries include a mixture of income
groups. In Korea's Gwangju site and service project, for example, nearly 30
percent of the larger plots were auctioned off to residents. The demand for
these market-priced plots was so great that the city has fully recovered the
land and infrastructure costs for the entire site through the sale of the larger
plots. As a result, the lower-income families have been charged a substan-
tially reduced cost for their plots, with the net profit going into a revolving
fund that will be used for similar projects. Another practice is to sell cen-
trally situated land within the site to businesses or shopkeepers. In Lima's
sites and services project, 161 of the 867 serviced plots have been set aside
for the construction by self-help or n"iltipurpose expandable shop cores.
The presence of upper-income groups a.1d businesses within a site and ser-
vice area not only generates income and jobs but also makes the project
socially and politically more acceptable.
For many years, government authorities have faced the accusation that
their public housing and plot allocation processes are ethnically or politically
biased. The Kenya government therefore developed certain procedures for its
first World Bank-supported site and service project to ensure public con-
fidence in the allottee selection process. First, persons wanting to acquire
plots must prove that they have lived in Nairobi for at least two years with
their families. Applicants also must prove that their incomes are below the
Kenyan equivalent of $90 a month. For this purpose, a variety of documents
are acceptable, including a letter from an employer, social worker, ad-
ministrative officer, or minister certifying the applicant's length of residence
and income.



144                  Technology, Finance, and Development
Second, applicants must agree in writing to fulfill the requirement of
living on the lot and to erect an acceptable structure within a certain period
of time. They are prohibited from selling, transferring, or otherwise dispos-
ing of their rights to tenancy, except to the Nairobi City Council, for the
first five years after acquisition. This regulation is intended to prevent plots
being acquired for speculation, a situation that existed in Nairobi's
Kariobangi Scheme where most of the allottees had sold their plots within a
few years.
Third, the selection of allottees from among qualified applicants is ac-
complished by a computer through a random number program. Each step
in the process is given as much publicity as possible. Prior to the final selec-
tion, the list of certified applicants and their application number is posted,
and, as soon as the selection process is completed, the names and numbers
of the allottees are made public.
Finally, allottees are required to pay the equivalent of $77 between the
announcement of allocations and the date they occupy their lots. This
deposit covers water and sewerage connection fees and is credited against
the allottee's outstanding loan principal. The deposit represents a tangible
commitment by the allottee and provides minimal security against which the
initial loans can be made.
The importance of providing credit to occupants of project sites is now
generally recognized. This can facilitate the construction of permanent dwell-
ings and as such decrease the time required for the start of occupancy. Where,
as in Lusaka, the majority of households use contract labor, the availability
of credit can generate considerable paid employment. This has also been the
experience in El Salvador, where over 40 percent of households employ other
people to help finish their dwellings. Here, loans of between $50 and $260 are
available for materials or labor necessary to construct, complete, or expand
the core units in the FSDVM site and service projects.
Technical assistance is provided in many projects. In Zambia, building
plans and artisans skilled in masonry, bricklaying, and carpentry are made
available to participants. Periodic inspections ensure that participants'
structures conform to minimum regulations. Community development staff
assist participants in completing and improving their homes. In the Nairobi
site and services project at Dandora, technical assistance, supervision, and
retroactive loans have been successfully combined, accounting for the fact
that within six months, nearly two-thirds of the 954 plots initially allocated
contained completed and approved houses with one or more rooms. Fol-
lowing the selection by the allottee of one of the thirteen available plans and
the approval of the first two rooms, a series of phased loans totaling over
$400 becomes available.
In El Salvador, successful use has been made of collectors to reduce ar-
rears. These collectors receive a bonus of a small percentage of amounts col-



Urban Shelter and Community Development                 145
lected over a fixed minimum. Families showing debts of over three months
are visited by FSDVM staff to arrange an adjusted repayment schedule.
After six months, cases are passed to the Legal Department to initiate
foreclosure proceedings. A clear and reasonable compensation policy
governs resales in such cases. In Zambia, each section leader of the United
National Independence party, the sole political party, has been made
responsible for the payment records of about twenty-five households. For
this purpose, section leaders are expected to cooperate with city treasury
representatives, to whom payments are made directly. Other measures
taken by the Zambian government to reduce payment arrears and defaults
include making eviction of tenants legally less difficult and restoring the
local council's eviction authority.
Lessons from Eastern Africa and the
Second-Generation Projects
The experience of the World Bank with four urban development projects
that were substantially completed in the 1970s in Eastern and Southern
Africa (Botswana, Kenya, Tanzania, and Zambia) have set the pattern for
new projects now being implemented in countries that face similar problems
of rapid urban growth, limited financial resources, rudimlentary institu-
tions, and inexperienced or untrained staff.2 These new projects form what
might be called the second gerneration and differ from their first-generation
predecessors on five main counts: the emphasis on construction loan pro-
grams, the availability of a wider range of housing and infrastructural op-
tions, the supply of more appropriate community facilities, the improve-
ment of employment opportunities, and the provision of better technical
assistance.
To promote self-help building, some of the earlier projects provided
loans for bricks, cement, and sand. In Botswana and Zambia, the loans
were large enough to build two rooms in the serviced site areas. The loans
were handled by the local authorities and distributed through a system of
materials depots. Experience revealed, however, that most households used
small contractors to build a major part of their shelters because of a lack of
building skills or the shortage of time for this work. Consequently, in more
recent projects, there has been a shift from materials loans to construction
loans, thus enabling the participants to hire labor. In situations where short-
ages and high costs occur for materials such as cement, borrowers are given
the option of cash loans or vouchers redeemable at materials depots.
The earlier projects concentrated on providing a few standard features:
serviced sites for dwellings with minimum on-plot features, relatively low-
cost infrastructure, inexpensive layout of plots, and convenient location for



146                Technology, Finance, and Development
employment and transportation, By 1975, urban projects began to include a
wider mix of options. In some cases, higher-income groups are allowed to
buy larger plots for residential or commercial purposes at the prevailing
rates. The profits from these sales are then used to reduce charges imposed
on impoverished families. To reach the very poor, an increasing effort is be-
ing made to provide only basic surveyed plots together with a communal
water supply. Such an approach is being used in Tanzania to meet the needs
of the bottom 20 percent of the urban population normally excluded from
sites and services projects. Because of the number of options offered, it has
been increasingly recognized that allottees need more guidance from the
staff in selecting plans. Demonstration houses and classes for those in-
terested are becoming more common.
Primary schools, dispensaries, community centers, and markets built in
the first-generation projects used conventional standards as to numbers and
types of facilities. In many cases, the standards were significantly above the
low-cost, affordable standards agreed on for the other components. Conse-
quently, more attention is now being paid to the development of simpler,
more functional, and lower-cost facilities. At the same time, an effort is be-
ing made to build community facilities within which a number of services
can be provided or integrated. While officials have often maintained a rigid
position regarding standards, some have gradually come to recognize the
benefits of fiexibility. In Kenya, the Nairobi City Council eventually agreed
to accept a low-cost primary school specially designed for the project.
Because local acceptance was so wvidespread, the council has now adopted
this design as its standard for primary schools throuighout the city. Another
approach is to upgrade existing facilities, thereby minimizing requirements
for additional personnel and expenditures. This is what has been proposed
in Ethiopia, Tanzania, and Botswana. In these countries, innovation and
experimentation have also been encouraged in the areas of nutrition and
health delivery, and these projects include demonstration gardens, com-
munity lectures, staff training, and vehicles and equipment for follow-up
home visits.
The first-generation urban projects were designed to be labor intensive
and to provide significant employment in the construction and building in-
dustries, but they only indirectly promoted employment.3 The extent to
which attention is now being paid to stimulating direct employment and
higher productivity among beneficiaries is indicated by the fact that on the
average, 8 percent of second-generation project costs are devoted to such
activities. These funds are directed toward components such as sites and
sheds, business credit, and technical assistance for small-scale enterprises.
Another approach is to encourage the informal sector within projects-that
is, the income-earning activities of plot holders without an official license.
The importance of this has been most apparent in Kenya's Dandora project,



Urban Shelter and Community Development                147
where about 25 percent of the residents use their plots for small businesses,
such as selling food and other goods, workshops, providing services, and
brewing beer. Because these activities are so important, the Nairobi City
Council and other Kenyan local authorities are reconsidering current legal
restrictions and are also planning to expand markets and workshops to ac-
commodate demand.
As the projects have become more complex, technical assistance has
grown more extensive. The average percentage of total project costs going
to technical assistance has increased from about 10 percent in the first-
generation projects to nearly 15 percent in the second generation. At the
same time, technical assistance has become more varied. The second Kenya
project, for instance, includes technical assistance for studies aimed at
strengthening institutions involved in urban development. Provision is
made in the second Botswana project for a review of the national housing
policy and a study of small-scale enterprises. More attention is also being
paid to nutrition, sanitation, and general public health. With regard to such
persistent problems as low-cost sanitation, maintenance, and cost recovery,
more technical assistance may be needed. While pit latrines are unaccept-
able in some projects, waterborne sanitation is too expensive for the very
poor, and efforts to find viable least-cost alternatives are continuing.
Maintenance of infrastructure has also been a problem in most projects.
And with the exception of Kenya, cost recovery remains a major issue in
Eastern Africa projects, requiring an increased effort to help local authori-
ties establish simple, workable, and politically acceptable mechanisms for
the collection of fees and other dues.
Upgrading Slums: Social and Economic Problems
The sites and services projects described represent the first alternative ap-
proach to conventional urban development projects. The second, in which
the World Bank has also played a pioneering role, is the upgrading of urban
slums. What makes a slum, according to a growing number of experts, is
not the poor quality of its housing but rather its undesirable physical and
social environment. The solution is not to demolish the housing but to im-
prove that environment. If one can rid existing slums of unsanitary human
waste disposal, open drains and ponds, inadequate and polluted water sup-
plies, litter, filth, and muddy unlit lanes, one need not worry too much
about the shanty dwellings within them. It is remarkable to see, once the en-
vironment has been improved, how capable slum dwellers are of organizing
themselves and improving their standard of living, given the right sort of en-
couragement. This has been clearly demonstrated in a slum upgrading pro-



148                 Technology, Finance, and Development
ject in Manila (Tondo Foreshore) that began at the end of 1976, where the
residents have chosen architectual styles of great vitality and individuality.
In many cities in developing countries, from one-fourth to one-third of
the urban population lives in squatter and slum areas. Because of these vast
numbers, efforts to clear and rebuild these areas almost invariably fail. In
Madras, for example, the Tamil Nadu Slum Clearance Board, set up in
1971, managed to complete over 36,000 dwelling units during the first seven
years of its existence, but this was inadequate to clear the slums of the city
and rehouse the approximately 175,000 families living in them. Moreover,
the entire capital cost of these units had to be absorbed by the government
since the residents could afford to pay only maintenance expenses.
In addition to the expense of slum clearance programs, there are other
reasons for the alternative approach of upgrading. The first is that given the
sc;le and spread of slums in most cities, it is often politically not feasible to
rt:,ove them. The second is that squatters or slum dwellers are generally
among the poorest citizens, and any relocation attempt removes them far-
ther from sources of employment, thereby reducing their capacity for
economic survival. The third reason is that once occupants are given security
of tenure and access to credit, their savings can be mobilized and directed
into shelter. Finally, it should be noted that within many slum Settlements
are established community organizations that form the strong support
system necessary for the social and econorriic survival of low-income urban
squatters.
Slum upgrading is almost always a slow and difficult process.4 Each
country or city must develop its own solutions to the particular problems
encountered. One of the most common problems is that of terrain. Slums
are often located in precarious areas (ravines, hills, floodplains, beaches),
which make them difficult to upgrade. Furthermore, the expense of pro-
viding services may make cost recovery impossible. The knowledge that
such places might more practically be used for other purposes that would
yield higher rates of return only increases frustration.
In many cities, particularly in Asia and Latin America, slums may not
be large but are very densely populated. To upgrade such slums as the Ton-
do in Manila (with 900 to 1,200 people per hectare) or Klong Toey in
Bangkok (250 people per hectare), some relocation is desirable in order to
provide services. If attractive land is available nearby for overspill site and
service projects, some of the residents may be persuaded to leave. However,
usually they are reluctant to move, and relocation procedures must be
developed that are efficient, equitable, enforceable, and also acceptable to
each group within the community.
The ownership of slum land tends to be very complex. Seldom do
residents own both the houses they live in and the land on which they live.
Many residents are squatters, illegally occupying the land and paying little,



Urban Shelter and Community Development                 149
if any, rent. The situation is further complicated in many countries by the
lack of adequate records and trained personnel to keep them. To upgrade
slums without addressing this tenure problem may simply add to the wealth
of absentee landlords. Yet if landlords are not given adequate compensa-
tion, they may create political and legal problems for the government.
Moreover, there is the danger of encouraging future illegal invasions of
property by giving security of tenure to squatters. But failure to give tenure
to residents generally discourages self-help and mutual-help efforts to im-
prove their property.
Unless goverr ents can recover the costs of slum upgrading projects
from beneficiaries, they may be discouraged from undertaking them, but
cost recovery is often difficult. Because slum dwellers tend to be the poorest
of the poor, they may not be able to afford to buy their land and houses or
pay for services. Since so many are without wage-earning employment, their
income tends to be erratic and undependable. They are not likely to be
creditworthy, are likely to be unable to obtain loans for house im-
provements, and may also be unaccustomed to paying for dwellings or ser-
vices. And what if slum dwellers refuse to pay for upgrading programs? To
evict them can be financially, practically, and politically difficult. The situa-
tion becomes even more complicated in cities lacking an adequate tax
assessment and collection system. If the affluent are not paying for im-
provements to their areas, can the poor be expected to do so?
Without substantial community support and initiative, slum upgrading
is difficult, if not impossible. The participation of the residents is par-
ticularly important for the maintenance of these projects. Questions of
tenure, mutual help, relocation, compensation, charges, tax or fee collec-
tion, and enforcement of requirements can be successfully resolved only
with the help of the community. Community involvement is most effective
when it operates through established leaders, groups, and organizations.
When such leaders and groups exist, it is important to involve them from
the start in the planning of the project. But in certain slum areas, there is no
social unity. There may be divisions along racial, religious, linguistic, or
class lines. When landlords and tenants live together within the slum, local
decision making may be especially difficult. All of these divisions are likely
to be intensified at times of political unrest and economic hardship. In addi-
tion, lack of education among slum dwellers frequently compounds the
problem. Planners therefore have to work closely with people in the hope
that the necessary organization and spirit of mutual help will develop spon-
taneously. Often, however, there is a shortage of professionals with training
and experience in community work. Because of the persistence of these
problems, countries need to be aware of them before undertaking slum-
upgrading projects, but, as the following case studies indicate, they can be
overcome with sufficient planning and determination.



150                 Technology, Finance, and Development
The Philippines Tondo Foreshore Project
Manila's largest slum, and the one in most pressing need of basic urban ser-
vices, is the Tondo Foreshore. This area was reclaimed from the sea in the
late 1940s and squatters moved in shortly after. The community covers
almost 180 hectares and has a population of roughly 27,000 families
(180,000 persons) in 17,500 structures. The median family income is about
$575 a year, 60 percent of the median income of the Manila metropolitan
area as a whole. The Tondo's level of environmental sanitation is very low
because of the high population density, lack of water and human waste
disposal facilities, and very poor drainage. Partly as a result of these prob-
lems, the area's residents suffer from severe health problems.
Toward the end of 1974, the government undertook feasibility studies
for the redevelopment of the Tondo Foreshore. The plan that was initially
recommended allocated roughly half of the land area to commercial and in-
dustrial purposes and significantly reduced the density of the remaining
land. This would have resulted in the vast majority of residents being
dislocated to Dagat Dagatan, a large site located about 3 kilometers north
of Tondo. Following public discussion and protests, the government decided
in February 1975 to implement a modified plan. This plan, in contrast to the
earlier one, was designed to provide services to families in place and to
minimize dislocation to the level required for purposes of developing in-
frastructure.
The revised Tondo Foreshore Development Project demonstrates the
extent to which squatter upgrading is an appropriate alternative to resettle-
ment, which was previously the government's policy. It seeks to provide a
water supply network, a sewage system, streets and footpaths, schools,
health clinics, and loans for home improvement. Special loans are also
granted to small businesses in the area, and a team of advisers identifies and
promotes small business expansion. Among the services provided were
sewage, drainage, water supply, streets and footpaths, schools and health
clinics, loans for home improvement and small businesses, and technical
assistance.
For the 500 families displaced in the Tondo and the 1,500 families
displaced by the expanded international port complex, 2,000 serviced sites
were provided in Dagat Dagatan, about 3 kilometers north of Tondo. Three
options were presented to each of the Tondo's ninety blocks, allowing the
residents to decide how their houses would be rearranged to ease construc-
tion and improve street access.
Development costs were covered with a twenty-five-year renewable
lease, at an annual interest rate of 12 percent, with an option to purchase
after five years. Upgrading costs were relatively high, each unit containing
sinks and toilets, but over half of the expense was expected to be paid by the



Urban Shelter and Community Development                151
industrial and commercial enterprises occupying about 16 percent of the
land. Recent observers of the project have been favorably impressed by the
progress made. According to one World Bank representative, the area has
undergone dramatic improvement. Although reblocking proved to be ex-
pensive and time-consuming, it stimulated far more private investment than
predicted. Residents undertook so much construction that the original core
units provided by the National Housing Authority were soon unrecogniz-
able. And according to a 1978 survey, 90 percent of the residents were
satisfied with the project.
The Tondo project is a model of what can be accomplished by slum
upgrading. Because of the historical importance of this success, the project
is being studied by a special monitoring unit and a number of conclusions
are beginning to emerge. The first is the major importance of tenure. While
the significance of any one factor is difficult to determine in such a proj-
ect, land security (even without formal tenure) appears to be one of the
most important considerations to residents. In many cases, tenure seems to
be even more attractive than the provision of basic services.
A second conclusion is the importance of the problem of reblocking
costs, which in this case have been beyond the means of the poorest 25 per-
cent of the slum's residents. Unaware of costs, residents have tended to
select the most expensive reblocking option. Project teams have therefore
recently been explaining more carefully the implied costs and encouraging
families to select one of the less expensive options. Because reconstruction
and repairs during the reblocking process have proved more costly than an-
ticipated, the amounts available as loans to participants are being increased.
More careful attention to road layouts, verification of tenure status, and
cost analysis of engineering requirements have also helped cut costs.
Reblocking has been made more efficient by the development of "super-
block teams," consisting of block representatives who aid the residents in
the various decisions about lot sizes and shapes, hence speeding the reblock-
ing process.
A greater effort is underway to explain the costs of upgrading to
residents and to get prior commitments from them to pay for the level of
services they require. Instead of the original 48 square meter lots, 36 square
meter lots have recently been proposed. This reduction would minimize the
risk of default; however, there is growing recognition that about 20 percent
of the households have difficulty in meeting monthly development charges.
This suggests the importance of strengthening the income-generating com-
ponents of the project; hence, small business loans and vocational skills
training centers have been made increasingly available.
According to initial surveys, community satisfaction remained high
even during reblocking disruptions. Much of this high spirit is thought to be
due to the work of the Community Relations and Information Organization



152                 Technology, Finance, and Development
(CRIO), which serves as a liaison between community residents and National
Housirig Authority (NHA) staff. CRIO is responsible for presenting the pro-
ject's objectives and implementation schedule to the community, for assisting
them at the time of relocation, and for discussing problems with community
leaders. It also publishes a monthly newsletter about the project. While NHA
has always maintained a close relationship with the leaders of the barangays
(the country's smallest official political unit, comprised of 500 to 2,000
families), it has recently attempted to work more closely with the represen-
tatives of unofficial political, religious, and occupational groups. Community
planning councils have been formed wherever slum upgrading is taking place.
UNICEF is providing special assistance in community participation, sponsor-
ing a number of seven-day planning seminars with up to fifteen participants
from government agencies concerned with slum improvement, and up to
twenty-five resident participants. These seminars have so far prove,d helpful
and are expected to continue periodically.
The country's second integrated urban project, supported by a recently
approved $32 million World Bank loan, will build on the lessons taught by
this first project. In addition to meeting the basie needs of more low-income
families in Metro Manila, it will develop affordable solutions to the prob-
lems of poverty, shelter, and sanitation in three regional cities of the Philip-
pines: Cebu, Davao, and Cagayan de Oro. The strategies being developed
now are expected to have a major beneficial effect over the next ten years on
the lives of the country's poorest people. NHA proposes to devote about 50
percent of its funds to slum improvement, 25 percent to new sites and ser-
vices, and 25 percent to fully completed housing units.
The slum improvement component in the regional cities is designed to
fit infrastructure and social facilities into existing settlements without
relocating more than 10 percent of the families. Displaced families will be
relocated in adjacent areas and in no case farther than 2 kilometers from
their present location. Minimum services will be offered to improve public
health and safety, affordable to all but the destitute. A somewhat higher
level of service will be available to communities willing to pay the extra price
for it. The approach will be flexible, allowing gradual improvement of stan-
dards as they become affordable. Cost recovery will be made possible
through leases and freehold titles, for which there will be clarifying titles; by
providing security of tenure, the government expects to encourage signifi-
cant economy. The economic rate of return from increased property values
as a result of this project is estimated at about 37 percent. More important,
about 48,000 people will benefit, at a cost of $83 per person, which is ap-
proximately one-third that of previous resettlement programs.
Indonesia's Kampung Improvement Program
Indonesia has the most ambitious slum upgrading program in the world.
Much of this program has focused so far on a population of over 6 million



Urban Shelter and Community Development                 153
in Jakarta, a city growing at an estimated 4.5 percent annually. This rapid
growth is putting an almost intolerable strain on the government's capacity
to provide basic services. Until recently the city's low-income kampungs
(neighborhoods) generally lacked piped water, sarnitary facilities, solid
waste management, flood control, and transport systems. Most of the
population had to rely on contaminated wells or expensive water vendors
for drinking water and had no alternative to drainage canals, ditches, rivers,
and other open waterways for bathing, laundering, and defecation.
To cope with this situation, the Indonesian government began its Kam-
pung Improvement Program (KIP) in 1969, with World Bank assistance
since 1974. While the approach in Manila has been intensive and meticulous,
providing complete services in one area before going on to the next, the ap-
proach of KIP has been more sweeping, providing minimum services to
dramatic numbers of people. By the end of 1979, some 3.5 million people in
Jakarta benefited from this program's provision of paved roads, footpaths,
watertaps and drains, sanitary facilities, garbage collection, primary
schools, and health services. During its third Five-Year Development Plan
(1979-1984), Jakarta expects to provide minimum basic services to almost
all of the existing low-income residential areas in the city.
The success of Jakarta's KIP has inspired efforts to extend it to other
cities, beginning with Surabaya, Ujang Pandang, Semarang, and Surakarta.
In all cities undertaking a World Bank-assisted KIP, kampungs have been
chosen on the basis of environmental conditions, density, age, access to ex-
isting infrastructure, and popular support for upgrading. After household
surveys, the kampungs are ranked on a point system, and an effort is made
to ensure that the benefits are uniformly distributed in an equitable manner
within the geographic limits of a participating city.
To keep costs low (about $40 to $65 per capita), only the minimum
necessary services are being introduced, within the following quality-control
standards: all dwellings must be within a maximum distance of 100 meters
from a one-way road and 300 meters from a two-way road; pavement widths
are 4 meters or 6 meters on right-of-way of 6, 8, or 10 meters depending on
traffic conditions; footpaths are paved to within 20 meters of every dwelling
not located on a road; narrow footpaths of 1 meter width are provided, where
feasible, to link interior groups of houses to the main footpath system;
primary drains are built as required, and open secondary drains are provided
along roads and footpaths; each section of the kamipung that contains
twenty to fifty families will have at least one standpipe, and where sufficient
supplies are available, private connections to the main city supply or deep
wells are possible; pit privies for individual families and household groups
are provided wherever appropriate soil conditions exist, and in other areas,
communal toilet and washing facilities are provided for each twelve
families; handcarts and bins are provided in all cities for solid waste
disposal, and motor vehicles and trailervv are to be made available for large
cities; and primary schools with enough space for about 75 percent of school-



154                 Technology, Finance, and Development
age children and small health clinics are to be provided, with necessary fur-
niture and equipment.
To overcome persistent problems of land acquisition and tenure, each
city undertaking KIP projects is allocated full-time Land Office staff. Their
responsibilities are to register all public land occupation and tenure claims,
arrange for public land occupants to purchase their plots, determine land
and building values, acquire land for public access and facilities, and im-
prove methods of compensation to those whose land has been expropriated.
Because current urban property records are inadequate, it is considered
impractical to impose plot charges on KIP beneficiaries. Moreover, because
the types of urban services provided under KIP are similar to those rou-
tinely provided without direct charge to higher-income neighborhoods, the
government has agreed not to introduce a special tax into KIP areas.
However, it has undertaken to improve the existing system of property taxes
by training staff in property valuation, initiating a five- to ten-year property
valuation program, and basing assessment on market values rather than
currently unrealistic rental values. The increase in the land property tax to
date has been highly encouraging.
Conclusions
The sites and services and slum upgrading projects carried out in the de-
veloping countries with the financial and technical assistance of the World
Bank show convincingly that it is possible to meet the housing needs of the
urban poor at a cost that is affordable by both the poor and the countries
concerned. There is still a long way to go from the 6 million people who un-
til now have benefited from such projects to the tens, if not hundreds, of
millions of urban poor throughout the world. But the projects now under-
way, or recently completed, have helped to develop the organizational ex-
perience and knowledge critical to the long-term success of any major inno-
vation of this type. They have also shown that appropriate technology, in
the housing sphere at least, is neither a catchword nor an ideological gim-
mick but an effective and workable alternative to conventional capital-
intensive technologies.
Notes
1. Sites and Services Projects (Washington, D.C.: World Bank, 1974).
2. These experiences have been summarized in a report, Review of Ur-
ban Projects in East Africa, by Carolyn Tager and Praful Patel of the
World Bank's Urban Projects Department (Washington, D.C.: World
Bank, 1980).



Urban Shelter and Community Development               155
3. One exception in this respect was the Bank's first project in Botswana,
where 5 hectares of commercial land and 11 hectares of industrial land were
provided to encourage small-scale industries, artisans, and other employers
to locate their activities in the project site.
4. See Stephen H.K. Yeh, and A.A. Laquien, Housing Asia's Millions
(Ottawa: International Development Research Centre, 1979), and M.C.
Hoek-Smith, Institutional Constraints in the Development of Informal
Housing Areas (Nairobi: Housing Research and Development Unit, 1977).



Basic Education
10Francis J. Lethem
Education is a service, just as is the provision of health or agricultural ex-
tension, and it might be defined as a delivery system, or combination of
delivery systems, by which a country or a community can achieve one,
several, or all of the following objectives: to ensure that some or all of its
members are informed, functional citizens; to prepare its youth to bt
employable and trainable by the modern sector of the economy; to train
adolescents or adults in the performance of specific productive activities; to
advance knowledge; to preserve or disseminate cultural, religious, social or
political values; and to develop each individual's optimum potential-
intellectual, spiritual, emotional, physical or social-and technical or ar-
tistic aptitude. To achieve each of these objectives, there are a variety of
ways in which educational systems can be structured, knowledge imparted,
and target groups defined. Each way represents a technology.
The multiplicity of potential objectives that education systems aim at
achieving suggests that the design of appropriate technologies in education
has to be a complex matter. Furthermore, educational objectives are not
always clearly stated, their priority is not always evident, and it may not
always be possible to separate substance from technology or methodology.
Not surprisingly, therefore, educational planners have tended to focus
their attention on formal education administered by the Ministry of Educa-
tion, to the detriment of preemployment or on-the-job training activities
carried out by the Ministry of Labor, other governmental agencies, or
private employers. Other educational processes-such as those occurring
through the work of agricultural extension agents, health or other com-
munity workers, the military, political parties, trade unions, or religious
organizations-may have been largely ignored. In the process, the prevail-
ing educational technology-formal education-has been accepted as
given, regardless of whether it is appropriate to the needs, objectives, and
capabilities of a particular country or community.
The recent focus of development thinking and efforts on specific target
groups or target areas is challenging the conventional wisdom. The kinds of
questions now asked of education systems are whether they meet the needs
of the rural and urban poor, of women, of illiterate adults, of the
unemployed, or of the farmers who will benefit from an irrigation scheme.
Are they, in effect, meeting society's basic educational needs?
157



158                Technology, Finance, and Development
Appropriateness of Education
The concept of appropriateness in education implies a number of condi-
tions:
1. That the educational needs of the target groups have been assessed
(ideally with their help).
2. That a technology or a combination of technologies and delivery
systems are available or can be developed to meet those needs.
3. That the final product, service, or knowledge thus acquired is useful,
acceptable, and affordable by the intended users.
4. That the production and delivery process makes the most economic use
of the available resources, at minimum social cost, and is compatible
with local institutions, culture, and environment.
These conditions mean in practice that what is taught in primary school
should be geared to the needs of the majority. As Andre Chervel suggests,
the teaching of certain grammatical concepts in primary school was (and is)
often inappropriate for learning to write the French language, an essential
objective of the primary school.' This is particularly so when the gram-
matical subtleties are in reality a preparation for the teaching of Latin, a
subject chosen in secondary school by only a minority. The concept of ap-
propriateness also means that what is taught should meet the needs of the
intended beneficiaries as they perceive them and that the delivery of the ser-
vice should take into account the constraints under which the beneficiaries
live or does not generate costs that they cannot bear, even though the cost of
operating the schools may be borne by the government.
Although there are few instances where the recipient population is in a
position to express its views unambiguously on the appropriateness of
education to its needs, one such case came to light during the design of the
educational component of a World Bank rural development project in
Ghana's Upper Region. At that time (mid-1975), about 90 percent of the
adult population in that region was still illiterate, and only 20 percent of the
primary school-age group were in school (against 60 percent for the country
as a whole). Primary school enrollments had been declining (from 42,000 in
1968-1969 to 31,000 in 1972-1973), and adult mass literacy programs,
which initially generated considerable enthusiasm, had been abandoned.
Parents resisted formal primary schooling for a number of reasons:
their unsatisfied expectations that schooling would lead to paid employ-
ment; their feeling that schooling had not helped to meet some of their other
needs (for example, to obtain better farming results or to improve family
health); the poor quality of instruction and inadequate supervision, which
left the Upper Region at a disadvantage relative to other parts of Ghana in



Basic Education                                      159
terms of access to further education; the school year (September to July),
which competed against farm work for the children's time during the brief
period, starting around April, when the rains fell in the Upper Region; the
perceived alienation of the pupils completing primary school from their
homes and their parents' way of life, one of the factors contributing to the
exodus of young people to the towns in the rest of the country; and the con-
sequent lack of school leavers for essential farm work, thus requiring the
use of younger children for such tasks as herding and bird scaring.
As for the mass literacy program, several factors seemed to be involved
in its failure. As in primary school, literacy was erroneously perceived by
the population as leading toward wage employment; furthermore, since
primary schooling focused on reading and writing instead of arithmetic
or weighing (which have immediate relevance to everyday life), literacy did
not result in any improvement in local living standards. Although literacy
was taught in some of the main local languages (Gurenne, Dagaari, and
Kasem), these languages were never used in official administrative and com-
mercial documents-hence the inability of the population to improve the
ways in which it coped with the most elementary transactions affecting it.
The teaching methods were too rigid, and the voluntary instructors, who
received no financial and little psychological or social rewards, lost interest.
The government changed its emphasis in 1956 toward physical rural im-
provements, such as well digging through self-help, and the Department of
Community Development withdrew its material support for literacy train-
ing, including the essential follow-up represented by the rural newspaper,
which was published in the Dagaari and Kasem languages.
These examples illustrate the concept of appropriateness of product as it
applies to education. When education as a product or service is considered
appropriate, there is a further need to ensure that its production (and
delivery) process will be appropriate to the environment in which it is to be
used. A striking case was provided by consideration of television (ITV) as
the principal medium of instruction at the primary level in Niger.
ITV was an expatriate-financed and -operated educational research
project. Administratively and pedagogically it was isolated from the
mainstream of the Ministry of Education's activities: it reached only about
900 pupils in one cohort who otherwise would not have gone to school, used
professionally unqualified classroom teachers (mature primary school
leavers who were given special training in communication skills), and super-
vised them continuously since all were teaching within a radius of 20 miles
from the production center. Pedagogically, however, the experiment pro-
vided a breakthrough, not only in relation to the pupils' performance in read-
ing, writing, and arithmetic but also in terms of the relevance of the programs
to the children's rural background and their personality development.



160                   Technology, Finance, anid Development
While this success led to the financing of ITV schemes in other coun-
tries, Niger's Ministry of Education had to conclude that in the Niger en-
vironment, the experiment was not replicable nationwide. Niger's popula-
tion is widely dispersed. The road network was insufficient to ensure the
maintenance of television sets and regular distribution of printed materials
to the teachers and pupils. Capital and operating costs were too high for the
country to bear; ITV would have substituted a foreign exchange, capital-
intensive medium of instruction for a local, labor-intensive technology (the
professionally qualified primary teacher) at a time when the absorption of
secondary school leavers was becoming a problem. Pedagogically, ITV would
have imposed the use of one language (probably French) in primary educa-
tion at a time when the government's policy was to introduce national
languages in the first grades (a pedagogically and culturally superior ap-
proach). Finally, the necessary reliance on expatriates for preparing the ITV
programs without adequate local control might have resulted in broadcasts
inconsistent with national goals, values, or political beliefs. Ultimately, ITV
would have mainly benefited the already favored population in the main ur-
ban and semiurban areas, to the detriment of the rural areas.
Educational realities, however, are not always as clear-cut as the above
illustrations might suggest. This becomes evident when one is attempting to
work out criteria for the design of education and training programs ap-
propriate, say, for rural areas. The World Bank Education Sector Working
Paper published in December 1974 proposed the following, much more
complex criteria for such programs:
(a) They should be functional. This means that they must serve well iden-
tified target groups (participants in particular crop or area develop-
ment projects, health, population, nutrition program, etc.) and meet
their specific needs (improved production and management, adoption
of new methods of child care, etc.).
(b) Rural education projects should be designed as part of a total education
delivery system. In Colombia, e.g., the SENA (Servicio Nacional de
Aprendizaje) program is responsible for providing training for skills, on
a national basis, for both adults and adolescents. It is governed by a
council which includes the Ministries of Education and Labor, the Na-
tional Planning Office, and management and labor organizations.
Education projects can also become the focal points of coordinated ac-
tion through the use of multipurpose centers to serve other activities,
such as cooperatives, health and family planning services.
(c) Education in rural areas should be integrated with other rural develop-
ment activities at both the national and local levels. At the national
level development of a common framework of policy for various rural
development activities is essential with emphasis on making produc-
tivity and welfare-oriented activities complementary. At the local level
coordination or integration is necessary to ensure that education pro-
grams are functional and adapted to the needs and opportunities of
the local milieu.



Basic Education                                       161
(d) Rural education projects should be replicable in terms of their costs
and managerial requirements. For example, the national vocational
training schemes in Colombia and Thailand have reduced costs
through the use of mobile training units.2
To help meet the basic educational needs of the poor, it will be
necessary to conceive both a product (basic education) and a delivery system
appropriate to the purpose. Can this be done? Can the one be disassociated
from the other?
Basic Educational Needs
Any attempt to define the concept of basic educational needs necessarily
leads to a philosophical discussion of what education is about, for whom,
and for whose benefit. Education-formal, nonformal, and informal-is
an essential component of any society's fabric, a privileged means for the
society to preserve and perpetuate itself.3 Hence, depending on cir-
cumstances, education can be used to promote economic and social
development, to preserve social stability, or to reinforce economic and
social inequities. In that respect, basic educational needs have nothing in
common with shorthand definitions such as the provision of four years of
primary education. As vividly argued more than ten years ago by Ivan Il-
lich, by teaching the poor subjects that are irrelevant to them, possibly in a
language not their own, by judging their achievementL through examina-
tions reflecting urban middle-class values, and by lowering teachers' expec-
tations of their performance, education systems in most countries have suc-
ceeded in persuading the underprivileged of their incompetence.4
The concept of basic educational needs is precisely the opposite: it in-
volves the will of a society to determine what such needs might be, at a point
in time, with a view to finding ways in which they can be satisfied. In
general, basic educational needs should consist of a combination of three
essential elements:
1. Communication and general knowledge skills, which at the basic level
should include literacy, numeracy, and general civic, scientific, and
cultural knowledge.
2. Living skills, including knowledge of health factors, sanitation, nutri-
tion, family planning, the environment, cultural activities, management
of the family economy, and how to create and maintain a home.
3. Production skills, embracing all forms of activity directed toward mak-
ing a living or the production of goods and services.
The combinations of these essential elements vary with the intended bene-
ficiary. From the point of view of the individual, education should provide



162                Technology, Finance, and Development
the means to achieve full potential within the environment in which he or
she is living. This might mean acquiring the means toward self-
development, self-reliance, and growth: learning how and where to acquire
additional knowledge. Each social unit might define its basic educational
needs in a different manner. Not all members of a family need to have the
same skills, but the family unit needs to possess most of the living skills
enumerated. Not all of the village community needs to be able to deal with
government authorities in administrative matters, but each family should
have the minimum communication and general knowledge skills necessary
to verify that its interests are well represented. The actual combination
would also vary over time. An individual's basic education needs would be
satisfied over his or her lifetime, and as a society evolves and its economy
develops, its basic educational needs would change accordingly, becoming
more sophisticated or specialized. Thus, basic educational needs are a
dynamic concept for the individual, the community, and society, in time
and in space. The community must have the means to function both within
its boundaries and in a wider context; the individual must be provided with
a minimum of literacy and numeracy but must also have reasonable access
to further education.
These considerations add up to this definition: the concept of basic
educational needs represents, for each society, what it determines to be the
minimum required-or the minimum it can afford-to achieve its priority
economic and social objectives including as a minimum the satisfaction of
society's other basic needs such as shelter, health, food, water, or employ-
ment; prepare itself for longer-term development objectives; and enable
each individual to develop more fully as a human being.
What does such a definition mean in a specific context? Here is Father
Balenghien's proposal, as a result of many years of experience with func-
tional literacy programs in Mali, of what the country's basic educational
needs might be:
1. Domain of health: Sufficient knowledge for the people to solve their
problems themselves (for example, to prevent and in some cases to treat
illnesses) and the knowledge necessary to improve their nutritional
habits and their adaptation to the environment.
2. Economic domain: The knowledge and skills required to render their
work more profitable through the application of more efficient produc-
tion methods.
3. Sociocultural domain: Command of basic skills in the native tongue
(reading, writing, and numeracy), understanding of the usages and
customs governing social life in the community, and sufficient under-
standing of national or local culture and religion to facilitate integra-
tion into the community.



Basic Education                                           163
4. Domain of civil life: Functional knowledge required to enable the peo-
ple to regulate their relations with the various administrative services
and functional knowledge enabling them to fulfill their role as citizens
and to participate actively in the life of the community.
Our colleagues from the UN Educational, Scientific and Cultural Or-
ganization (UNESCO), who were attempting to synthesize the experience of
the Sahelian countries in meeting their population's basic educational
needs, rightly felt that the preceding list should be qualified as follows:
The specifications of minimum educational needs within each of the above
categories may vary considerably in different regions of the same country
in terms of requirements of the population, the level of its aspirations,
often linked with the cultural level, the position already attained on the one
hand and the available resources on the other. It also varies with the target
groups. In other words, except in the case of "absolute poverty", the
definition of these needs is a delicate job and an opinion poll would seem to
be most useful. The people themselves should express their priority needs in
the course of such an inquiry, and this can be quite naturally coupled with
the evaluation of existing educational activities.5
Even in a national context, our definition remains theoretical as long as
the priority target groups have not been determined and their basic educa-
tional needs assessed. Each society has to make its own decisions, and these
will reflect the various forces at work. In all cases, the priority might be
defined according to the following criteria suggested by Abdun Noor in un-
published World Bank materials:
1. Functional groups: If agriculture is the mainstay of the economy, then
all the population connected with that sector.
2. Socioeconomic status: The poorest of the poor, the children of the
middle-income group, and so on.
3. Development targets: All of the population covered by an integrated
rural development project.
4. Age: On the rationale that the earlier training is imparted, the greater
its contribution to development will be.
5. Multiplier effect: Education of women and other selected core groups.
6. Geographical criteria: Starting from rural to urban areas or vice-versa,
but thinly distributing the resources, as was followed durinr, the Cuban
literacy movement.
7. Ethnic or special groups: Nomads, landless peasants, and others.
8. A mix of all or some of the above, which will reflect the right priority of
needs in a society.



164                 Technology, Finance, and Development
Whatever the mix of priorities, the needs of many cannot be met in the
short run-hence the importance of fitting the programs adopted to meet
the needs of certain groups into a broader strategy to ensure that those who
have to be left out in the short term do not remain deprived. Various basic
education programs should be integrated into a national strategy to meet
basic educational needs.
Basic Education
Basic education is not as elusive a concept as that of basic educational needs,
which basic education is supposed to meet. The educational establishment
in many countries has naturally attempted to use the term interchangeably
with primary education, give or take a few years of schooling. In a nonformal
context, on the other hand, some people view basic education as a program
exclusively for youth, leading either to employment or to better integration
with rural society, while others perceive it as the preliminary step for adults
toward a program of lifelong education. In other cases, it is equated with
adult (or functional) literacy.
All of these views are erroneous as a general concept, even though they
may be valid in terms of the target group to which they apply, if the proposed
technology (both the knowledge or know-how taught and the delivery system)
is not appropriate to the needs of the target group and the constraints. In
other words, while basic education might be equated in certain coumItries with
the completion of their compulsory cycle of formal elementa-V (primary or
basic) schooling, in most countries basic education will have to consist of a
combination of educational provisions-formal, nonformal, and infor-
mal-that together constitute a minimum package of attitudes, skills, and
knowledge that a given society will require from every one of its members.
The essential ingredient of basic education is that there should be a na-
tional will to meet (though not necessarily in the immediate future) the
minimum educational needs of its most deprived members. The country
should organize itself to design a viable strategy to meet this objective and
then undertake to implement it.
Only in recent years did such a will appear in the United States when
Americans became aware that their standard educational provisions were
still leaving a surprising number of adults unable to function effectively in
their own society (for example, by filling out a job application, understand-
ing a newspaper in English, or obtaining a driver's license) and even more so
in the case of ethnic and linguistic minorities whose special needs had received
little attention.
With the provision of basic education becoming an increasingly wide-
spread goal, a number of educational innovations were bound to appear



Basic Education                                        165
worldwide to help those who were not being reached by formal schooling.
To succeed, these innovations had to be appropriate in terms of content and
delivery.
To illustrate what the provision of a basic education involves, let us con-
sider the cases of Upper Volta and Mali where the World Bank made some
of its early loans aimed toward the education of the rural poor.
Rural Education in Upper Volta
The concept of rural education launched in Upper Volta around 1960 was
based on the observation that since only 10 percent of the school-age
children could benefit from primary schooling during the foreseeable
future, some useful but low-cost education should be provided to rural
children (aged fifteen or above) who had been bypassed by the system.6 This
took the form of Rural Education Centers (CER) where basic agricultural
techniques and handicrafts, together with literacy and numeracy, were to be
taught over a three-year period by specially trained instructors appointed on
a fixed term contract.7 This program had a pioneering role; the evaluation
of its weaknesses, which were well publicized, has contributed to major im-
provements that have benefited not only Upper Volta but many other coun-
tries faced with similar educational choices. The problems can be summarized
as follows:
1. Initial misrepresentation by the local political authorities of the actual
educational objectives.
2. Lowering of the minimum school entrance age, under the resulting
parental pressure, which made the CERs a clearly inferior alternative
education compared with the primary school and made the integration
of the younger CER leavers into farm life more difficult.
3. Use of French as the teaching language although it was hardly used in
the rural setting and not understood by the trainees.
4. Control over the teaching force by primary teachers instead of by agri-
cultural extensionists and location of the program within the Ministry of
Education instead of the Ministry of Agriculture and its regional ad-
ministrative dependencies (regional development organizations, ORD).
5. A weak central administration.
6. Haphazard location of the CERs instead of in those communities where
other productive investments were made.
7. Limited parental and community participation.
The government has now fully realized the potential of its rural educa-
tion system as an element of its rural development policy. It is implementing



166                 Technology, Finance, and Development
measures to correct all of these deficiencies and has already achieved a
number of successes, notably in regard to the capability of the CER leavers,
who despite their lack of formal qualifications, often show greater self-
confidence, initiative, and entrepreneurship than primary school completers
or dropouts, and to the impact of rural education on modernizing certain
traditional village structures, and increasing the participation of women in a
number of decisions from which they were previously excluded.
Upper Volta's rural education system can be considered an important
component in the country's strategy toward meeting basic education needs.
Once this system has solved its remaining administrative and logistical
weaknesses, it might become the core for expanding basic education efforts
toward the adult population. There will also be a need to determine whether
some kind of articulation with the formal system, even on an exception
basis, may be desirable.
Functional Literacy in Mali
While Mali is facing many economic and social issues similar to those of
Upper Volta, its strategy toward meeting basic education needs is quite dif-
ferent. It developed from Mali's experience with functional literacy programs
for adults and seems to aim first at meeting the needs of the producers and
then at broadening its reach toward younger people.
Mali's functional literacy program blends the use of several comple-
mentary media (literacy teaching, printed materials, radio, rural press) with
a model organizational structure in such a way that functional literacy has
become an integral component of the extension function of several govern-
ment-sponsored agricultural development schemes. Its impact is such that
laws have been recently approved requiring that new investment projects in-
clude literacy as one of their components.
Whereas mass literacy campaigns are based on the assumption that
literacy is a desirable good by itself and are therefore mainly concerned with
the mechanics of reading, writing, and arithmetic and not with their uses in
everyday life, functional literacy, by definition, aims at meeting certain
elementary needs of specific adult target groups in relation to their profes-
sional activity. If its programs are properly designed, functional literacy has
to be considered as an appropriate technology.
Functional literacy centers are established in priority zones for the
extension services and only after the village itself makes the decision to em-
bark on the program.8,Such a decision implies several commitments: to
create a committee to supervise the village literacy program, to appoint
literates (or nonliterates) to be trained as instructors, to construct and fur-
nish the center, and to support (in kind) the services of the instructor and



Basic Education                                        167
bear the cost of consumables. About 500 hours of instruction are required
to achieve literacy and numeracy, spread over a two-year span to avoid the
periods of intensive agricultural work. The farmers in the groundnut
scheme, for instance, would learn to weigh and record their crop and its
value, as well as the quantities of production factors purchased.
This example of the nature of functional literacy suggests that it will not
remain neutral in terms of a village's socioeconomic development. Once
peasants are able to verify the weight of their crop and the price they should
obtain for it, they can prevent mistakes or abuses by purchasing agents;
next, the village may create mutual self-help associations or cooperatives
and eventually take over the responsibility for the collection and commer-
cialization of the groundnuts; finally, farmers may better understand
government regulations, especially those relating to the payment of taxes,
and also better assert their position with local and regional authorities, thus
acquiring a greater participation in managing their lives.
Functional literacy, although not indispensable for learning the relatively
simple improved agricultural techniques taught by the extension agents, is
nevertheless likely to reinforce the learning process by linking the timing of
the two activities. It is likely that the combination of the work of the literacy
instructor, the volunteer villager himself, and the extension worker would
by itself represent a good mix at the village level.
The concept and content of functional literacy are well adapted not only
to the needs of the farmers but also to the design of its delivery system.
Functional literacy is taught in a village building constructed by the villagers
from local materials and provided with simple handmade wooden furniture.
A National Center supplies each village with four storm lanterns or two
pressure lamps (instruction is given at night since peasants have other ac-
tivities during the day), a blackboard, a radio set, initial writing material,
and subsequent didactic materials.9 These materials have to be tested with
great care since the intended message can easily be misunderstood. In addi-
tion, the impact of the literacy program is reinforced by the Ministry of In-
formation, which assists in the broadcasting of the rural radio programs to
accompany the literacy classes and also edits and prints the Bembara-
language newspapers, Kibaru, written by the National Center (one of the
few reading materials to reach villages).
In recent years the National Center has been divesting itself of the day-
to-day administration of functional literacy, which is being delegated to
literacy staff placed under the authority of the management of the ap-
propriate production scheme. Hence the latter can ensure that both the
substance and timing of the literacy program reflect to the maximum the
technical concerns of production. Reciprocally, the production scheme's
administrative and logistical means are used for the accounting and
materials distribution needs of the literacy programs.



168                 Technology, Finance, and Development
An evaluation of the program emphasizes the importance of local capa-
bilities for successful implementation.'0 For instance, in villages where the
programs were sponsored by a traditional youth association (ton), atten-
dance by students and instructors was better, the proportion of female par-
ticipants was higher, and more financial resources were made available. The
evaluation also reveals that in many villages, literacy is not yet an individually
felt need. Although all participants seem to have acquired a better knowledge
of agricultural and health practices than nonparticipants, only the smnall num-
ber who become entrusted with community responsibilities requiring
literacy or numeracy skills retain these skills.
At this point, it is not clear whether, as originally intended, the func-
tional literacy program should turn its attention to different age groups,
such as adolescents or children. This question is now being studied with
great care by all those concerned with education in Mali and other African
countries.
The Search for Appropriate Technologies and the
Mechanics of Delivery
The search for appropriate technologies to meet basic educational needs
suggests that in many instances the collaboration, and sometimes the leader-
ship, of ministries other than the Ministry of Education will be required. It
has often been observed that an appropriate institutional design or the choice
of an appropriate implementation agency may be a precondition for the
adoption of certain technologies and the achievement of certain benefits.
In Mauritania, for instance, a pilot experiment financed by a World
Bank loan attempted to fit traditional education, which is perfectly adapted
to the environment and widely diffused, into a modernization process with
respect to its content (literacy instruction in modern Arabic, practical calcu-
lations, useful knowledge) as well as the educational methods employed."
For the experiment to be meaningful, it had to have the support of the re-
ligious and political authorities, which it did. To meet basic education
needs, Benin is exploring the potential of youth clubs (under the Ministry of
Agriculture) for rural youth and a system of successive industrial and com-
mercial learning modules (under the Ministry of Labor) for urban youth.
In Burundi, UNESCO recently suggested that the government experi-
ment with a system of literacy centers similar to those now operated by the
churches. Pupils would attend the centers two days a week and be expected to
be literate in their language and have a minimal proficiency in arithmetic. The
proposal argues that the government should establish a dual system of basic
education as a temporary measure, with literacy centers gradually being con-
verted into primary schools as resources permit. The best pupils in literacy



Basic Education                                         169
centers would also have the chance to transfer into primary schools. In view
of the existing financial constraints, possible rejection of the proposed dual
system would lead to denying further most children the access to any sort of
education at all, and consequently the gap between literates and illiterates
would continue to widen.
Although the right educational provisions and administrative ar-
rangements may have been designed, the key to the success of any basic
education system will be its acceptance by the intended beneficiaries. If
parents want access for their children to formal primary education, it may
be better to come up with a system of peripheral lower primary schools
feeding into nuclei upper primary schools such as that established in El
Salvador. To reduce costs, the schools operate on double shifts, and
teachers often handle several grades in the same classroom. In these cir-
cumstances, physical planning becomes a crucial factor in the design of
basic education.
The mechanics of delivery of basic education are important. School
buildings, furniture, and equipment should be appropriate to the use re-
quirements, the environment, and local resources. For instance, in El Sal-
vador the primary school buildings financed by the World Bank in 1974 are
of simple construction, relying insofar as possible on the use of locally
available materials. Walls are either of brick or of ordinary plastered con-
crete block; however, because the schools are located in a seismic area, it
has been found necessary to incorporate fgi'6-i    concrete posts, for
which cement and steel must be impormt d. Roofing is generally of cor-
rugated asbestos tiles, and windows are l.tied with only wire screens and
simple wooden shutters. Construction was carried out partly by contracts
awarded on the basis of local bidding, but such tasks as site clearance and
the provision of access ways, water supply, drainage systems, and site fenc-
ing were handled by the local communities under the direction and technical
support of the government agency in charge of community operations.'2
As early as 1969, the Bank-financed education project in Guyana re-
quired that prior to starting design work, in-depth studies compare the
capital and maintenance costs of school buildings built either with locally
obtainable wood or imported cement. Considerable attention was also given
to environmental factors for the disposal of effluents and in relation with
human comfort. Sergei Kadleigh, who was instrumental in the formulation
of the design criteria, reported that design implementation actually exceeded
his expectations and that the schools had proved not only to be educationally
functional but also remarkably cool without any air-conditioning. In
general, he recommends that school building designs-besides meeting user
educational requirements, facilitating internal communication, easily ac-
commodating future growth, and being structurally safe-should pay
special attention to the following:



170                 Technology, Finance, and Development
1. Climate and the environment: for instance, "open spaces between and
around buildings should be furnished with trees, plants and water for
the control of soil erosion, sound insulation, glare and reflection, solar
radiation, temperature, screening frotn view, shelter from the wind,
and air purification."
2. Human comfort and well-being: "The design of the building envelope
should be such that it modifies the external climate to provide the oc-
cupants with year-round acceptable conditions of comfort and well-
being for living and working, by natural means without the use of ar-
tificial aids. Mechanical [energy-consuming] methods of ventilation,
heating, cooling or air-conditioning should be resorted to only when the
results of the most effective use of natural conditioning need augment-
ing to provide acceptable conditions; such as might be the case when
storing books, delicate instruments and equipment and perishable
goods like food and medicine."
3. Appropriate technology: realistic performance standards for space,
structure, and the environment (climatic and ecological design) should
be established and quantified for design purposes.
The economics of the building and allied industries should be in-
vestigated and analyzed in depth with particular reference to local man-
power, skills, and employment needs on the one hand, and on the other
hand, to the availability and nature of the resources (labor, materials,
and energy) required for school construction. The results should be
tabulated and evaluated in terms of the government's long- and short-
term development economy and the particular needs of the local com-
munities where the schools are located.
De,i' ,is using alternative combinations of construction manage-
ment, labor and skills (to benefit employment and reduce costs), and
materials (to husband natural resources and energy both during con-
struction and throughout the life of the completed buildings, as well as
to reduce costs) should be explored and evaluated for each basic type of
school and institution in the project. In each case, the most appropriate
design for the local community in the larger context of the government's
development economy should be selected, together with the most ap-
propriate and economical methods of implementation. Buildings should
meet the performance standards, be readily adaptable to different
characteristic sites, take full economic advantage of repetitive elements,
and by simplicity in planning, take into account developments in educa-
tional methods and media.
Alternative sources of energy for light and power such as from the
sun, wind, water, and the recycling of waste products also should be fully
explored and evaluated against the prevailing sources. Designs should in-
corporate the systems of greatest benefit to the local community.



Basic Education                                           171
Cost evaluation should include operation and maintenance costs
(costs-in-use) as well as capital costs. Designs should reflect the op-
timum balance between these two orders of costs measured against the
opportunity cost of capital over the life of the buildings.'3
It might be useful to reflect on the importance of textbooks in the learn-
ing process, especially when this process has to occur in an environment
where little written material is available and teachers are not qualified. As
Stephen Heyneman stated:
We should not forget what every rural primary school teacher in Africa or
Asia already knows: that the textbook is an educational technology too.
Though not new, books have never been widely diffused in less wealthy
societies. When first introduced they can stimulate profound changes.
Books have the capacity to deliver massive amounts of new information to
the most remote locations. To operate they depend neither upon electricity
nor consumable supplies. If the content is not understood, books can be
studied again and again; if quickly understood, individuals can read ahead.
Ideally, books can be delivered to all children equally, urban, rural, rich
and poor alike.14
Basic Education and the Role of the World Bank
Is basic education a dream that no amount of technology or administrative
skill might ever satisfy? Doesn't it imply that when a community or society
comes close to meeting its basic educational needs, it would automatically
set itself new and higher targets? This is quite logical, and this is precisely
what life is about. Progress results from setting attainable goals. Success
generates self-confidence, entrepreneurship, and creativity, as well as new,
more ambitious goals. This is as true for individuals as it is for com-
munities. Therefore it is my hope that the concept of basic education-and
basic needs in general-will lead to major progress toward setting into mo-
tion a mechanism that will help to meet the poorest people's most elemen-
tary educational needs and be suitable for meeting society's increasingly
sophisticated demands. At each step appropriate technologies and ad-
ministrative arrangements will be required, and they will vary.
Now may be the time for groups of countries, regions, or communities
facing limited resources and other constraints and with enough of a com-
mon cultural heritage to pool their efforts, to learn from each other, and to
design their own strategies toward meeting what they define as their basic
educational needs.
Since 1962, when the Bank financed its first project in the education sec-
tor, the provision of basic education increasingly has been recognized as a



172                 Technology, Finance, and Development
central element in economic development. Although initial lending was
largely restricted to hardware in projects designed to meet manpower needs
directly, by 1970 it was accepted that the Bank should lend for education
projects with important long-term significance for economic development.
The Bank's 1974 education policy paper listed the provision of a minimum
basic education, as fully and as soon as available resources permit, as a prin-
ciple for its investments in education, and the number of loans with innova-
tive components in both formal and nonformal education systems increased.
This principle was repeated in the Bank's 1980 education sector policy paper,
which explained that "the Bank's interest in helping to expand education op-
portunities for both school-age and adult populations is closely related to its
efforts to promote a broad approach to development, and its desire to assist
in meeting basic human needs. Appropriate basic education enables the ma-
jority of the poor, in both rural and urban areas, to lead productive lives and
to benefit from social and economic development of the community."'5
In the provision of educational opportunities to school-age children,
this experience encompasses such innovative approaches to the provision of
basic education as the use of educational radio and television in primary
education (Malaysia), self-paced instruction (Bangladesh), production of
textbooks and instructional materials (Indonesia), provision of a national
network of workshops attached to primary schools (Rwanda), establish-
ment of a nuclear system of primary schools, with several primary schools
containing only the lower grades feeding into centralized upper-grade
primary schools (El Salvador), and skill training related to employment
opportunities for primary school leavers (Tunisia).
The Bank has financed many project components in nonformal educa-
tion in an attempt to reach out to school children and nonliterate adults.
These components involve the teaching of literacy, numeracy, and voca-
tional and agricultural skills. Some examples of these components have
been rural youth clubs (Benin), nomadic training centers (Somalia), na-
tional and provincial centers for lifelong education with coordinated ad-
ministrative and program development support (Thailand), district-level
learning funds to support income-generating learning activities at the village
level, designed and carried out by the learning group members themselves
(Indonesia), and village-level basic training schemes (Yemen Arab Republic).
The Bank will continue to support innovative projects and programs in-
tended to improve the quality and efficiency of first-level education and im-
prove access to learning opportunities for groups not equitably served.
Notes
1. Andre Chervel, Histoire de la grammaire scolaire (Paris: Payot,
1977).



Basic Education                                        173
2. World Bank, Education Sector Working Paper (Washington, D.C.:
World Bank, December 1974), pp. 25-26.
3. Philip H. Coombs and Manzoor Ahmed in their pioneering work,
Attacking Rural Poverty: How Non-Formal Education Can Help (Baltimore
and London: Johns Hopkins University Press, 1974), p. 8, propose the
following definitions: "Informal education . . . is the lifelong process by
which every person acquires and accumulates knowledge, skills, attitudes and
insights from daily experiences and exposure to the environment-at home,
at work, at play; from the example and attitudes of family and friends; from
travel, reading newspapers and books; or by listening to the radio or viewing
films or television. Generally, informal education is unorganized and often
unsystematic; yet it accounts for the great bulk of any person's total lifetime
learning-including that of even a highly 'schooled' person.
"Formal education ... is the highly institutionalized chronologi-
cally graded and hierarchically structured 'education system,' spanning
lower primary school and the upper reaches of the university.
"Nonformal education . . . is any organized, systematic, educa-
tional activity carried on outside the framework of the formal system to
provide selected types of learning to particular subgroups in the population,
adults as well as children. Thus defined, nonformal education includes, for
example, agricultural extension and farmer training programs, adult
literacy programs, occupational skill training given outside the formal sys-
tem, youth clubs with substantial educational purposes, and various com-
munity programs of instruction in health, nutrition, family planning, coop-
eratives, and the like."
4. Ivan Illich, Deschooling Society (New York: Harper and Row,
1971).
5. M. Botti, M.D. Carelli, and M. Saliba, BasicEducation in the Sahel
Countries: A Study Prepared for the IBRD (Hamburg: UNESCO Institute
for Education, 1978), pp. 52-53.
6. This ratio is similar in most Sahelian countries. It is what can be ac-
commodated within national education budgets, which already claim such a
share of national resources-between 3 percent and 5 percent of gross
domestic product (GDP)-that there is little margin for expansion (total
public resources rarely exceed 15 percent of GDP). The main limiting factor
is teacher salary (ten to fifteen times GNP per capita for a primary teacher
against two times in a country like the United States or Japan).
7. This would exclude the instructors from the ranks of the civil service
and allow a limiting of their contractual salaries to about $650 per year ver-
sus up to $1,900 per year for a fully qualified primary teacher.
8. This section is based on unpublished materials by my colleague,
Michael J. Wilson, who was asked by the World Bank to appraise the finan-
cial needs of the literacy centers.



174                Technology, Finance, and Development
9. The National Functional Literacy Center, administratively under
the Ministry of Education, operates as a source of pedagogical expertise for
the research, development, and production of literacy materials, with the
technical substance provided by the specialized ministry-the groundnut,
rice, or cotton development schemes under the Ministry of (Agricultural)
Production, for instance. It is also responsible for the evaluation of the
results of its interventions.
10. Direction nationale de l'alphabetisation fonctionnelle et de la lin-
guistique appliquee, Rapportfinal de l'evaluation de l'alphab&tisationfonc-
tionelle dans l'OACV (Bamako: Ministere de l'education nationale, 1978).
11. Botti, Carelli, and Saliba, Basic Education, p. 101. Traditional edu-
cation refers to the country's Koranic school system.
12. David H. Lewis: "Appropriate Technology in Education," in Ap-
propriate Technology and World Bank Assistance to the Poor (Washing-
ton, D.C.: World Bank, 1978).
13. Sergei Kadleigh, "International Consultancy," in Proceeding of the
Royal Institute of British Architects (London: RIBA, 1977).
14. S. Heyneman, J. Farrel, and Manuel A. Sepulveda-Stuardo, Text-
books and Achievement: What We Know, World Bank Staff Working
Paper No. 298 (Washington, D.C.: World Bank, 1978).
15. W.D. Haddad et al., Education Sector Policy Paper (Washington,
D.C.: World Bank, 1980).



Part IIl
Technology Transfer
Technology transfer has become one of the central objects of international
negotiations, as well as a major bone of contention between industrialized
and developing countries. This political phenomenon can be attributed to a
number of factors, the most conspicuous of which is the growing realization
of the dramatic imbalance in the distribution of the world's scientific and
technological resources. The developing countries, taken as a group, account
for little more than 3 percent of the world's research and development ex-
penditures and around 12 percent of its total research manpower. There is
strong evidence that this imbalance is likely to persist for a very long time,
despite the efforts made by many developing countries to build up their own
scientific and technological infrastructure. These countries have, in effect,
become structurally dependent on technologies from the industrialized na-
tions. The issue at stake is not so much that of redistributing the world's
scientific and technological resources-an impossible task in the best of cir-
cumstances-but that of helping to build technological capacity to buy,
adapt, or copy the most appropriate among the available technologies and
to obtain equitable terms when the technology has to be bought.
The five chapters in this part examine the ways in which development
projects prepared and financed by the World Bank have served as a major
channel of technology transfer from industrialized to developing countries
and, to a lesser extent, between developing countries themselves. Three of
the five chapters deal with sectors that until recently were the mainstay of
the Bank's lending activities: the development of water resources, power
generation and distribution, and the production of fertilizers. A fourth
chapter deals with the support to basic manufacturing industries by the
IFC, an affiliate of the World Bank. The fifth chapter deals with a sector
relatively new to the Bank, the engineering industries, but with a number of
common characteristics with the other four, notably the basic or infra-
structural nature of its projects.
The technology transfers that have taken place in the sectors presented
here (with the exception of the engineering industry) should be seen as a side
effect or precondition for the operational success of specific development
projects. When the Bank finances a major power generation project or an
important water development scheme, for instance, the main object is not
to transfer technology but to carry out a clearly identified development proj-
ect that is likely to have a positive economic and social impact and to ensure
an adequate financial return on the large investments devoted to it. All proj-
ects call for important transfers of technology in the form of both hardware
and software, but what is ultimately more important than the efficiency
175



176                 Technology, Finance, and Development
of the transfer process itself is the complete mastery by the borrowing coun-
try or institution of the knowledge transferred through the project.
On the basis of a number of specific case studies, the authors of the five
chapters presented here show how the process of transfer operates and how
the borrowing institution gradually came to master the organizational,
managerial, and more narrowly technical aspects of the project. Their im-
plicit definition of the term technology tends to stress the transfer of
operating technology and, to a lesser extent, design capability more than the
transfer of an ability to generate indigenous technological innovations.
These chapters suggest a number of important lessons. The most con-
spicuous is that, at least in the sectorv analyzed here, large amounts of tech-
nology are being, and have been, successfully transferred to the developing
nations. Another lesson is both the simplicity and the complexity of the
transfer process. The transfer is simple in the sense that it is essentially a
learning process that involves the training of workers, technical personnel,
and managers, drawing on experience and past mistakes and gradually
building up an ability to operate machines and run a complex production
system. In this respect the Bank has an experience that is probably unrivaled
elsewhere in the world.
Technology transfer, however, is also a complex and multifaceted pro-
cess. It does not simply involve a supplier's selling a specific piece of
technology to an often inexperienced buyer in a developing country but
rather a whole galaxy of actors working in different capacities at various
stages of the project. These include the governmental agencies (or, in the case
of IFC, the industrial corporations) that identify and propose a project, the
consulting firms that prepare it in detail, the manufacturing firms that are
pitted against one another in the bidding for the supply of equipment, the
financial institutions that cofinance the project, and the institution that is
set up or reorganized to run it. And when the World Bank is involved, it
acts not only as a financier but also plays the part of an adviser and
sometimes promoter of the project.
There are also other lessons that stand out from the case studies ana-
lyzed here. In chapter 11, P. Kirpich shows that in the development of water
resources, one of the critically important elements in a successful technology
transfer is organizational continuity and the lifelong commitment of in-
dividual institution builders to the project. Foreign experts have an impor-
tant role in the early stages, but ultimately such schemes are viable only if
they are controlled and operated by local people.
In chapter 12, R.H. Sheehan and S. Ramachandran also point to the
crucial importance of institution building and dispel a number of myths
about the appropriateness of technology and the difficulties of making the
right technology choice. In their view, the most appropriate technology is
the least-cost technology, and although the Bank has generally tended to



Technology Transfer                                     177
choose fairly conventional types of technology in its power generation and
distribution projects, there is no evidence to suggest that this was either the
second-best technology or one that was inappropriate to local conditions.
In his analysis of fertilizer development projects in chapter 13, C. Pratt
brings to light the incremental nature of the technology transfer process. It
begins with such simple things as the bagging of fertilizers imported in bulk
from abroad and ultimately ends with the development of an indigenous
capability to design, engineer, construct, and possibly export complete fer-
tilizer plants. What is particularly interesting about Pratt's presentation of
this technology transfer continuum is his thesis, backed by solid economic
and technical considerations, that developing countries cannot and will not
all move up through this technological continuum, from simple processing
operations to the indigenous design of turnkey plants. The reason is not so
much the absence, present or anticipated, of a capability to move up the~
ladder of technologicar sophistication as very nature of the technology in-
volved. Fertilizer projects tend to be exceptionally large and bulky, produc-
tive units must become larger if unit costs are to be kept competitive, and it
makes little sense, except for the largest of the developing countries, to try
to build a complete technological capability ranging up to the design of
complete plants. In effect, the technology transfer taking place in the
framework oI^ a fertilizer project is often a one-of-its-kind transfer. But
even if, as in most other cases, it does not have any direct multiplier effects
on local techriological capabilities, it is nevertheless economically very im-
portant, if only because of the savings on foreign exchange and the likely
increases in agricultural output resultirng from a greater availability of
fertilizers.
In chapter 14, H.G. Hilton examines a wide range of industries built up
with the financial and technical assistance of the IFC. All of these indus-
tries-pulp and paper, textiles, iron and steel, cement-belong to the
private sector and are in some way basic to the industrialization process.
Like the other authors in this part of the book, Hilton stresses the impor-
tance of training in the technology transfer process and points to an impor-
tant yet largely neglected fact: any transfer of technology is meaningless if
the user of that technology is not able to maintain productivity levels above
certain minimum standards. Plants operating at 10 or 20 percent of their
rated capacity are u-ltimately much more costlv to a country than all of the
foreign exchange their output was intended to save.
The engineering industrieq examined in chapter 15 by F. Moore repre-
sent a fairly new field  f in- .+ement for the World Bank, but they are ex-
tremely important because of their technological multiplier effects on other
industrial sectors. The author shows that the projects financed by the Bank
in countries such as Thailand and Korea are aimed not simply at transfer-
ring technology-either as a primary or as a subsidiary goal-but rather



178                 Technology, Finance, and Development
at building up indigenous technological capability. These projects are still in
their early stages, and for this reason it is difficult to evaluate them. But the
work carried out in preparing and designing them already suggests that one
of the first and most rewarding steps in building up such a capability is to
inmprove what already exists, and such improvements often can be carried
out with only minor capital investments.



Water Resources
Development
Phillip Z. Kirpich
Water resource planning has always been a key concern of the World Bank
and its borrowers. Given the critical water shortages in many developing
countries, as well as the growing flood, soil erosion, and pollution prob-
lems, it is likely that sound water planning will become even more important
in the future. Several characteristics of sound water planning have emerged
from such planning. It has become increasingly clear that it is not only the
physical factors (water quantity and quality, aquifer characteristics, soil
properties) that must be considered but also the economic and social
elements. To mention just a few examples, investments in rural areas directly
concerned with water too often have retained a bias toward heavy construc-
tion or industry. Many large dams have, been built primarily to provide
hydroelectric power for industry. When irrigation has been the major pur-
pose, a dam could be fully completed befiore a single farmer's channel had
been dug, or it could have been in exis'ence for ten years without agreement
on water costs, distribution, types of cultivation, and the institutional ar-
rangements for financing, storing, moving, and selling the food produced.
Twenty years ago, the term project hacl a narrower meaning than today;
it meant physical works or facilities for limited objectives, such as a canal
system for irrigation, a waterworks for ;potable water, a power plant, a
highway, a school building, or an industirial plant for a specific product.
Economic and financial analyses were made to determine the project's justi-
fication from national and local viewpoints. Today the physical works are
much more varied and are no longer considered in isolation. This is so not
only because of the environmental effects, which in recent years have re-
ceived much public emphasis, but also because software elements must be
included as integral parts of a particular project. These elements can be ex-
tremely important, as can be seen from the data in table  1-1, which show
the relative importance of the various components in two typical integrated
rural development projects financed by the World Bank.'
Practitioners now accept that in the initial stages of the project cycle
(which includes the identification, selection, and preparation of projects but
not their detailed design, construction, or operation), some general prin-
ciples should be used.2
Adopt a multidisciplinary approach, making use of a team composed of
engineers, economists, agronomists, chemists, financial analysts, and soci-
ologists, as appropriate. Public works departments traditionally have been
179



180                  Technology, Finance, and Development
Table 11-1
Typical Components of Integrated Rural Development Projects
(percentage of total budget)
Papaloapan            Tungurahua
Project,              Project,
Mexico                Ecuador
Irrigation works                           25                    58
Feeder roads                              20                      5
Potable water and sewerage                 15                     2
Rural electrification                      7                      1
Schools                                    8
Health clinics                             7                      1
Community centers                          2                      1
Agricultural credit                                              24
Agricultural technical assistance
(including rain-fed agriculture)         15                     7
Marketing assistance                        1                     1
Source: World Bank, 1978.
dominated by engineers, but they are quickly learning that they must have a
minimum understanding of the other disciplines for effective teamwork.
Improvement in channels of communication among planners in various
government agencies is essential, as well as between them and the politician.
If public works departments are dominated by engineers, other key agen-
cles-public health, agriculture, finance-are not. This tends to make inter-
agency cooperation difficult, especially when communications are impeded
by jargon incomprehensible to those in other disciplines or to politicians.3
Contacts and dialogues between the project planners and local people
(officals, urban dwellers, individual farmers, or groups of farmers) should
be established early in the planning stage and maintained continuously.
Ways should be worked out together for making use of local knowledge and
securing local participation in planning, construction, and implementation.
It is surprising how many excellent ideas and suggestions the local people
can come up with. It is, moreover, elementary good psychology to get par-
ticipation on the part of local r.-ople rather than to spoon-feed them.
Unemployment and underemployment are grave problems in such situa-
tions, so it is obvious that labor-intensive methods are to be preferred. This
is so not only for economic reasons but also as a means of unemployment
relief and as a way of obtaining vital local participation in the implementa-
tion of the. project at an early stage. At a recent international congress,
much time was devoted to advanced methods, mainly involving electronic
gadgetry, for improving operating efficiency while reducing labor re-
quirements for water distribution networks. Commentators pointed out
thai the economic worth of these gadgets had yet to be proved, even for



Water Resources Development                                181
advanced countries. The doubt would be even greater under conditions of
labor surplus.
Methods of demonstrated success are not necessarily transferable from
one country or locality to another. This may seem obvious, and yet it is a
common mistake to assume that they are. Conventional gravity irrigation
canal systems of the arid or semiarid zones do not work well in the humid
tropics of Latin America or in Bangladesh, a humid-zone country where
landholdings are unusually small.4 In the Punjab (India and Pakistan), the
green revolution in a way perplexed planners because almost spontaneously
tens of thousands of shallow wells were installed by private farmers in the
space of a few years. These were mostly electric-driven, low-capacity cen-
trifugal pumps, which, in physical terms, are far less efficient than large-
capacity deepwell-turbine pumps; yet the former are clearly superior in
economic and human terms.
Seemingly obtuse stubbornness on the part of the poor, subsistence
farmers (generally a majority or a sizable minority in many developing
countries) when they refuse to adopt readily modern methods of irrigation
or to use improved seeds, fertilizers, or pesticides is usually justified because
they cannot afford to take risks. This fact is of fundamental importance in
planning water control schemes for agriculture, since the nature of the
physical works and their sequence and speed of construction are directly af-
fected. A difficult preliminary task thus is to persuade subsistence farmers
of the value of the new methods through demonstration on a relatively
small scale, at least to start.
Water users should pay charges to cover two items: project operation and
maintenance and the capital investment made to construct the project. Even
small farmers or small urban consumers should pay the first in full (to ensure
continued effective operation of the project) and as much of the second as
possible, taking into account the repayment capacity of the water users and
the needs for incentiv. to discourage waste of water, for disincentives to
discourage pollution, and for revenue to assist in retiring indebtedness.5 In
regions where water is scarce or becoming so, block systems, whereby charges
per unit of volume increase as the volume increases, are receiving growing at-
tention.6 Pricing policies for water obviously have many political overtones.
The Bank, by insisting on reasonable financial performance targets for agen-
cies that distribute water, has been able to relieve local officials of some of the
agony of politically difficult pri.cing decisions while at the same time reducing
the burden on the national budg,.Z.7
Project Leadership
Successful project execution requires effective leadership, since, in addition
to an interdisciplinary team, a leader is necessary to coordinate the efforts



182                    Technology, Finance, and Development
of the separate disciplines and provide linkages with outside agencies and
with the local people. In my opinion, the ideal leader is one who has
mastered one of the disciplines mentioned and in addition has acquired con-
siderable understanding of the other disciplines; he or she should also keep
up with local and world events. Such leaders are rare because the educational
systems of most countries provide technical training that is too narrowly
oriented toward a single discipline. Insufficient time is given to related
disciplines and to the humanities; people lacking such training should be
called technicians and not professionals.
Technology Transfer through Foreign Experts:
Advantages and Limitations
If a country lacks leaders of the kind described, it can import them, but
such an expedient may be of only limited and temporary value since plan-
ning must go on continuously for many years and since foreign experts re-
quire a long time to acquire sufficient knowledge of local conditions.
In discussing the role of foreign experts, the various stages of the proj-
ect cycle need to be considered. Following identification and preparation, a
project proceeds to detailed design, construction, and operation, As figures
Z D
0
z
(D Bz
BASIC DATA            DEVELOPMENT             PROJECT
COLLECTION              PLANNING            IDENTIFICATION
Key: A, foreign experts provide guidance but primary responsibility is with authority; B,
foreign experts participate but primary responsibility is with authority; C, foreign experts take
the lead but authority participates to ensure coordination with long-range plans and proper
operation following completion; D, foreign experts take full responsibility.
Figure 11-1. Long-Range Planning



Water Resources Development                                     183
PREPARATION   DESIGN. WORKSTMJRUWONKS  MDESW:N  CONSTRUCTION,  OPERATION
Key: A, foreign experts provide guidance but primary responsibility is with authority; B,
foreign experts participate but primary responsibility is with authority; C, foreign experts take
the lead but authority participates to ensure coordination with long-range plans and proper
operation following completion; D, foreign experts take full responsibility.
Figure 11-2. Project Execution
11-1 and 11-2 illustrate, foreign experts may have an important role in
these various phases, which are not always clearly distinguishable from one
another. The precise role of such experts is, in fact, a rather neglected ques-
tion that has not been the object of much systematic or detailed study.8 Yet
the answer is important since good development experts are too rare and
valuable for their services to be wasted.
If the role of the foreign expert is to be studied as it deserves, the com-
plex processes of bringing a development project into being have to be ex-
amined stage by stage, and the work done in each stage has to be examined
and analytically divided. ILn the design and construction of large-scale water
resource projects, we must, moreover, make a distinction between major
wvorks and minor works. Large dams, transmission lines, pumping stations,
processing plants, ana major canals fall in the first class and require dif-
ferent treatment from minor strulctures-distributary lines and canals, small
bridges and buildings, and the like.
Large-scale water resource projects for developing agriculture usually
involve a larger total effort in minor works than in major. An irrigation,
drainage, or groundwater project typically contains many miles of small
canals and drains, as well as many wells and ancillary structures. Rural roads



184                Technology, Finance, and Development
must often be added, and sometimes farm works as well, such as clearing,
leveling, and other kinds of land preparation. The aggregate cost of such
minor works can easily exceed that of the major works on which the project
is based. Individual large dams are, of course, conspicuous triumphs of civil
engineering, but it is a great mistake to allow them to have all the publicity.
Take, for example, the large irrigation-drainage-flood-control schemes in
the Indo-Pakistan subcontinent, where, in the long run, the expenditures on
minor works and agricultural ancillaries will greatly exceed the expenditures
for major works. The minor works here involve a formidable interplay of a
large number of variables of a complexity more than great enough to
challenge the ingenuity of the finest technical brainpower.
If minor works are characteristically extensive, they also have another
feature that is important. Their planning requires close contact with local
farmers, whose number will depend on the size of the average farm and area
in the project. In parts of Latin America where farms are large, only a small
number may be involved, but even there land subdivision and settlement
schemes are tending to increase the number. In parts of South Asia, a proj-
ect of 50,000 hectares with avera- landholdings of 1 hectare affects 50,000
families. With such large numbers, the problems of land acquisition and ra-
tional layout of minor works become increasingly complex, not only be-
cause of the physical factors such as topography and property lines but also
because of the need for a suitably timed program in which the minor works
are properly phased with respect to the software elements (such as credit,
extension, marketing, and improved seeds and fer' s , Besides, the en-
tire effort must be properly managed, with adequate 1iicentives provided to
the farmer.
Where will the directors of the project find the people who can handle
such a complex of ancillary works and obtain the cooperation of the
farmers in the process? All experience shows that only local people can deal
on a massive scale with other locals. It would be impracticable (and ex-
cessively costly) to bring in foreigners to the extent required, and even if
they could be brought in, it would take them too long to get acquainted with
local habits and customs. To find local people who already have, or who
can be provided with, the necessary technical training means a great deal of
planning at a very early stage, even before the stage of what is technically
known as project preparation.
Another compelling reason why the major part of the planning effort
must be carried out by local rather than foreign experts concerns the con-
tinuity that is vital to sustained success. Major development schemes in the
world-the valleys of the Mississippi, the Nile, the Rhine and the Rhone,
land reclamation in the Netherlands and Italy-were carried out over many
decades, even generations, by people who made this work their career. It is
in the nature of such devek^)ments that one must live with them for a long



Water Resources Development                             185
time to come to understand the many ramifications of works dealing with
waters, land, and people. Unless a foreigner is prepared to live in the coun-
try or can find some other way of continuously identifying with the par-
ticular development, he or she cannot take primary responsibility but can be
only an adviser on limited aspects of the development.
On the other side of the coin, there will be many fields where, through
lack of previous experience with works or projects of the type and scope con-
templated, the necessary expertise cannot be found in the country. In this
case, foreign experts should be employed. Such experts should be selected
with care, taking into account whether their expertise covers technologies that
are in fact applicable and transferable. For example, experts on water control
in arid-zone agriculture should not be assigned to humid-zone agriculture nor
should water supply experts on advanced treatment methods be assigned to
deal with village water supplies based on groundwater.
Foreigners cannot participate as fully in long-range planning as they can
in project execution. The maximum effective foreign participation is reached
in the phase of detailed design. Large and complicated structures, such as
high dams, major diversion dams, large pumping stations, power stations,
processing plants, and high-voltage transmission lines, require large, so-
phisticated engineering design organizations. In countries with little
previous experience, these can be developed only at high cost and over a
long period of time. Moreover, even though the investment is made to
create an organization to design, say, a high earth-fill dam, such an organi-
zation will most likely be unsuitable for the next dam to be constructed,
which may be one of concrete-gravity or thin-arch type.
It is thus in the detailed design of major works that properly selected
foreign experts are the most valuable. Such works usually can be isolated
from the other works involved so that the problem of coordination with
local factors, so characteristic of minor works, is generally not serious. The
detailed design of major works can thus be performed anywhere, even out-
side the country-for instance, at the home office of a consulting firm
where all the necessary expertise is already assembled.9
Examples of major water resource development with which the World
Bank has been concerned are described briefly in table 11-2. The Bank's
participation has taken the following forms: review of consultants' terms of
reference and reports, advice and monitoring of the effort of national
groups, and direct participation through dialogues with national groups
over an extended time period. The first form is the most common. It is
argued that the second two forms should be used more often; however, the
Bank has limitations with respect to its available manpower, and the Bank
(rightly, in my opinion) does not wish to push its own ideas too hard as
there is a danger that the resulting project(s) will bear a World Bank label
rather than a national label.



186                        Technology, Finance, and Development
Table 11-2
Representative Examples of Major Water Resource Developments Involving the
World Bank
Name of Development          Location         Nature of Development            World Bank Rolea
National Water Plan        Mexico           See text                       Advice and monitoring
Tropical Lowland           Mexico           Drainage and rain-fed          Advice on F, PI, and PP
Development                                 agriculture, carried out by na-
tional team aided by foreign
experts (FAO) paid by UNDP
Nile River Basin           Egypt            Master Plan for Water          Advice and monitoring
Resource Development           on F
and Use, by national team
aided by foreign experts
(UNDP project)
Indus River Basin          Pakistan         Irrigation, drainage,          Assisted in negotiating
flood control, and             treaty with India (1960)
hydroelectric power,           and administering sub-
carried out by national        sequent Indus Basin
agencies aided by foreign      Development Fund
consulting firms
Mekong River Basin         Southeast        Long-range plan for            Advance on F, PI, and
Asia             flood control, irrigation,     PP, including review of
hydroelectric power, and       Basin Plan and develop-
navigation, by interna-        ment priorities at request
tional team financed by        of UN
UNDP
Senegal River Basin        West Africa      Long-range plan by             Advice on F, especially
foreign consulting firms       on possible phasing
Land and Water             Bangladesh       Medium-range and long-         Advice on F, PI, PP,
Development                                 range plans for irriga-        and PO
tion, drainage, and flood con-
trol, carried out by national
agencies aided by local and
foreign consulting firms
Lower Magdalena            Colombia         Flood control, drainage,       Advice and monitoring
River                                       and rain-fed agriculture,      on F and PI
by national team with advice
of foreign experts
Mahaweli Ganga             Sri Lanka        Irrigation, flood control,     Advice and monitoring
and hydroelectric power,       on F, P1, and PP
by national team supported by
foreign experts (UNDP)
Montaro Development        Peru             Hydroelectric power and        Advice on F and P1
(trans-Andean                               water supply for Lima, by
Diversion)                                  foreign consulting firm
Lower Guayas               Ecuador          Flood control, drainage,       Advice and monitoring
River Development                           and rain-fed agriculture,      on F, PI, and PP
by national team supported by
foreign experts
Santiago Region            Chile            Water supply, irrigation,      Advice on F
Development                                 drainage, flood control, and
hydroelectric power, by na-
tional team supported by
foreign experts
Chao Phya Basin           Thailand          Irrigation, power,             Financing of study for
municipal/industrial           future water allocations;
water supply, and flood        advice on consultants'
control                        terms of reference and
review of consultants reports
'Abbreviations are as follows: F, framework planning; PI, project identification; PP, project prepara-
tion; PO, project operation.



Water Resources Development                            187
When the construction phase for the major works has been reached,
foreign experts will be still required to ensure proper execution of the
design. But at this stage, local technicians should play a larger part for
reasons of economy so that they may have sufficient acquaintance with the
works to operate them when the time comes.
The construction of minor works and the operation of all works should
be primarily the responsibility of the local authority set up for the ultimate
operation of the project. The construction of minor works is something
that, if not already within the capacity of local contractors and technicians,
should become so at an early date, since, with any development of conse-
quence, the same kind of minor works are repeated many times. The opera-
tion of the project should be undertaken by local authorities, with only the
occasional guidance of foreign experts as might be found necessary.
Whatever the immediate role of the foreign expert-whether in plan-
ning, design, construction, or operation--his or her contribution will have
little lasting effect unless on-the-job training of local experts for these tasks
is an essential part of the assignment.
Training of Local Manpower
In many countries, the availability of local experts, without whom no major
development effort can succeed, is far short of the need. The difficult task
of creating an adequate corps of such experts in a reasonable time must be
attacked on several fronts. Education at all levels, vocational as well as pro-
fessional, is one means. On-the-job training is another; such training is
another fruitful field for the foreign expert.10
In construction, some spectacular successes have been achieved on such
large concentrated operations as the Mangla Dam in Pakistan and the
Aswan Dam in Egypt. When activities become more dispersed, results are
not usually too good; indeed, up to the present, efforts to train local experts
for planning and management, and for dealing with local inhabitants on a
massive scale, have fallen short of their objectives.
In Bangladesh, for example, there has been some development of local
know-how in project preparation, but in execution and management, as
measured by the needs-admittedly very large-progress so far is disap-
pointing. This is true despite the presence of large numbers of foreign ex-
perts for more than two decades. Fortunately, the authorities in Bangladesh,
in cooperation with foreign aid and foreign financing agencies (including
the World Bank), are now engaged in working out a solution, following
studies of the proper role of foreign experts. These studies have focused on
how such experts can be most effective in carrying out training of local ex-
perts and how to develop and maintain adequate sources of local experts.
Although examples of successful on-the-job training in water resource
projects are disappointingly few, there are some notable successes. The



188                 Technology, Finance, and Development
development of consulting firms in Colombia is one. Educational standards
have always been relatively high in that country. In the late 1940s and early
1950s, several promising young Colombian engineers started their own
firms, after a period of employment with foreign (mostly U.S.) firms. The
Colombian firms are now entirely independent, although some find con-
tinued association with the foreign firms to be advantageous.
Although formal education and on-the-job training are valuable means
of developing local experts, they can succeed only where potential experts
are available, and they are not likely to be available in the absence of an
auspicious climate that will attract the vigorous and intelligent among the
population to follow the pursuits involved. How can this be achieved?
Salary scales are one answer, but possibly more significant is the prestige
connected with working on a project of high national purpose and impor-
tance. Here is where government at its highest level comes in. Government
should first establish prestige by giving the project concerned high priority.
Second, it should establish an organizational framework along with person-
nel policies that will maintain prestige and morale. The Ministry of
Hydraulic Works of Mexico, the Waterstaat of the Netherlands, and the
Tennessee Valley Authority in the United States are examples of world-
famous agencies that have attracted high-caliber people and kept them at
high levels of performance. The rewards offered comprised national recog-
nition and feeling for a job well done rather than monetary compensation,
although it is true that the latter was above generally prevailing rates.
Organizational and Institutional Factors
In the less developed countries the organizational and institutional
framework concerned with water resource development is generally weak-
more so in the agriculture and water supply sectors and less so in the power
sector. The weakness in the case of the agricultural sector stems largely
from the low priority traditionally assigned to agriculture. Although at-
titudes are changing, agriculture still suffers from insufficient funds, lack of
skilled manpower, and economic policies unfavorable to agricultural
development. In the water supply field, institutional as opposed to engineer-
ing improvement is relatively more difficult to achieve, particularly where
services are poor and deteriorating,
Another typical problem in developirng countries is the lack of coordina-
tion between the implementing ministries, on the one hand, and the so-
called core ministries that handle overall national planning and finance, on
the other. Often the only way to proceed is to push actual projects that have
been well prepared even though the plan has not been fully defined.
These institutional problems also prevail in the developed countries,
although the nature of the institutional problem in the developed countries
is different from that in the developing countries."



190                Technology, Finance, and Development
The government designated the Secretaria de Recursos Hidraulicos
(SRH) as the main agency responsible for the study. SRH established a
special Plan Commission to organize and manage various multidisciplinary
planning groups composed of staff from SRH and other concerned agencies
to carry out the work program. The government also established a coordi-
nating committee organized by SRH but including representatives of the
Ministry of Programming and Budgeting (Secretaria de la Presidencia,
SDP), the Ministry of Finance (Secretaria de Hacienda y Credito Publico,
SHCP), the Ministry of Industries and Commerce, the Ministry of Agricul-
ture, and the Department of the Federal District to assist and guide the
work of SRH and ensure full cooperation of all concerned agencies. At the
highest level, a directive council consisting of three Mexicans and three
foreign experts in planning, provided policy guidance.
The deputy minister for planning of SRH was designated to head both
the Plan Commission and the coordinating committee. The planning groups
were composed of about fifty specialists from Mexican consulting firms. A
UNDP project with a grant of about $1.1 miillion was approved to assist in
carrying out the study through the provisic,n of five international experts on
a full-time basis, resident in Mexico, and about tv enty part-time nonresi-
dent experts. The UNDP grant covered the cost of the international experts,
as well as fellowships and visits abroad of Mexican staff, and seminars con-
ducted in Mexico by visiting expatriate university professors and other ex-
perts.
In accordance with a government request, the World Bank acted as ex-
ecuting agency for the UNDP project, and the Bank assigned four profes-
sional staff members to assist in recruiting the international experts and in
monitoring the progress of the study. The corresponding tripartite agree-
ment stated that the National Water Plan emerging from the study "should
provide a reliable frame of reference for future lending programs in the
field of water resources," without, however, interfering with loans already
being processed.
The work of the Plan Commission culminated in the issuance of a docu-
ment in early 1976 entitled "Plan Nacional Hidraulico 1975." The follow-
ing accomplishments of this study deserve to be highlighted:
1. General acceptance, for the first time, of the need for a continuing, in-
stitutionalized planning effort covering the entire project cycle (frame-
work planning, project identification, project preparation, project im-
plementation, and project monitoring).
2. Assessment of the deficiencies and unreliabilities of existing data bases
and determination of the need for more detailed field studies (ground-
water, drainage in humid tropical lowlands, and check of agricultural
statistics through satellite pictures, for example).'2



Water Resources Development                           189
Long-Range Planning: The Case of Mexico
Typically, in most countries, water resources projects (irrigation, water
power, flood control, drainage, water supply, waste disposal, navigation,
soil conservation, and watershed management) are identified, evaluated,
financed, and constructed on a piecemeal basis. To avoid this undesirable
situation, long-range, continuously updated national and/or regional water
plans are necessary, although proceeding with actual projects cannot always
wait for the preparation of such plans. The appropriate timing for proceed-
ing with preparation of national and regional water plans should depend,
first, on a commitment by the government of adequate leadership and tech-
nical manpower resources (usually seriously limited in less developed coun-
tries) and, second, on a determination of how critical the water resource
factor is with respect to national objectives and priorities.
Mexico provides an example of a developing country in which water
availability is a limiting factor and where the government has provided
adequate leadership and manpower, including some international experts,
to carry forward national and regional water planning in an effective man-
ner. Mexico's investment in water projects in the public sector amounted
to $2.7 billion in the 1971-1976 Sexenio (presidential administration). In
addition, the private sector has been investing considerable sums in
groundwater development under government-sponsored credit schemes.
The water resources of Mexico are scarce compared to the needs, and con-
flicts over their uses are becoming serious. In order to develop a sound
water policy for the efficient utilization of available water re6ources, while
taking into account sectoral priorities and the objectives of more equitable
income distribution and regional development, the government proceeded
in September 1972 to carry out a National Water Study. The long-range
objective of this study was to formulate and institute a systematic process
of water resource planning for the rational selection of programs, proj-
ects, and policies concerning water so as to help attain the country's objec-
tives of socioeconomic development. The immediate objectives of the
study were the following:
1. Formulation of policies concerning water development and control,
with recommendations for the institutional measures required.
2. Formulation of alternative water development programs for the short,
medium, and long term, including preliminary identification of proj-
ects.
3. Design of an information system to cover immediate data needs and to
ensure the flow of data needed for systematic planning.
4. Establishment of a systematic training and instruction program cover-
ing the additional staffing needs of all the areas and activities included
in the plans, programs, and projects for water resources development.



Water Resources Development                              191
3. Initiation of studies and evaluations that measure existing and potential
water use inefficiencies, particularly in irrigation, together with an
analysis of potential alternatives to reduce such inefficiencies, including
an analysis of present water pricing practices in agriculture, as well as
other sectors, with proposals for changes in order to bring about
greater efficiency and equity pricing practices.
4. Development of mathematical models for major hydrologic basins as
tools for analyzing alternative regional hydraulic development projects.
5. Identification of present and likely future water use conflicts and
preparation of proposals for solution, including the transfer of avail-
able water from low-value to higher-value uses, conjunctive ground-
water-surface water systems, and new means to deal with the resolution
of such conflicts.13
6. The first systematic attempt to evaluate the implications of the pro-
posed medium- and long-term development programs on the current
and future SRH budgets.
7. Establishment of better liaison with the core ministries (Programming
and Budgeting, and Finance) and with other agencies concerned with
water resources.
8. The first attempt to evaluate skilled manpower needs within and out-
side SRH, including an evaluation of existing educational structures
(and their required changes) to overcome manpower training deficien-
cies.
9. With respect to agriculture, recognition that the vast but hitherto largely
neglected humid-tropical lowlands in the Gulf Coast must now receive
priority attention, that the traditional approach (large-scale irrigation)
is inappropriate for this region, and that, instead, the emphasis should
shift to drainage, flood control, and small-scale supplemental irriga-
tion. 14
10. Growing recognition in several other water-short Latin American coun-
tries with knowledge of the Mexican effort (Chile, Peru and Ecuador)
that the time may soon be ripe to undertake a similar activity.
Framework Planning
Frequently there is a lack of interaction between long-range plans, whether
national or regional, and specific projects. The best way to overcome this
problem is to proceed by successive approximations. The term framework
planning has been used to describe this device, which may be viewed as a
series of approximate, periodically updated, and improved studies of
available data on physical and human resources, socioeconomic conditions,
multiple objectives for a region, and alternative development plans.'5 The



192                Technology, Finance, and Development
concept seems obvious, and it is not at all new; what is surprising is how
often it is not used. There are many examples worldwide of overly perfect
master plans, which are not only excessively rigid but also make use of in-
adequate or erroneous data.'6 The term master plan has, moreover, a sense
of finality that is inappropriate for the evolving, multifaceted activities em-
braced by water resource development.
Long-range plans have a number of other defects. As far as specific
projects are concerned, they often suffer from inadequate downward
linkages with local residents and politicians. In seeking such contacts, selec-
tivity should be practiced so as to identify influential local leaders without
whose support time and effort will be wasted.
Long-range plans often also suffer from inadequate upward linkages-
inadequate contact between the project-implementing agency and the ap-
propriate national planning agency. When goals are poorly defined, thb'
project development agency may not be able to wait for the clarification cf
such goals. On the contrary, by proceeding with the project, a feedback will
take place, and it may, in fact, help to define national goals. Finally, long-
range planning may become quickly obsolescent. Thus, plan updating
should be a continuous process, carried out by a well-qualified multidis-
ciplinary group.
Since framework planning, like all other planning, requires intuition,
imagination, and seasoned judgment, it is a field for neither the narrow-
minded nor the novice. Here again the problem confronting developing
countries is to find the best combination of local and foreign expertise to
carry out both long-range planning (including framework planning) and
project preparation. In most instances, framework planning has been car-
ried out using river basin divides as the problem boundaries. Such boun-
daries, however, are not always appropriate, as shown by several examples
of major water resource developments with which the World Bank has been
concerned.
The Application of New Techniques
Space age techniques have a place in water resource planning in the devel-
oping countries. These techniques include remote sensing and mathematical
models that make use of computers. If intelligently used, these new tech-
niques can save much time during both the reconnaissance phase of plan-
ning and during the operating phase.
Computerized mathematical models of hydraulic systems (for example,
river basins involving several reservoirs or large groundwater aquifers) are
often useful, although their applicability in the developing countries would
be the exception rather than the rule. Moreover, there is a danger inherent
in overcommitment to mathematical models that stems from the fact that



Water Resources Development                            193
reality cannot always be represented by quantifiable factors. Nonquan-
tifiable factors may be even more important in the decision-making process.
Consider, for instance, the risk that farmers must take in anticipating their
markets for commodities by several months, the social instability resulting
from increased unemployment if labor-saving technology is used, or the
fact that poor subsistence farmers will not try out the new high-yielding
varieties of seed because failure can mean starvation. Mathematicians
familiar with the manipulation of models are rarely in a position to identify
such key variables, and since models are often allowed to develop a life of
their own rather than remain a limited tool, there is a tendency not to rely
enough on professionals from other disciplines who cannot provide com-
puterizable statistical information."'
Since planning is an art as well as a science, we must allow scope for in-
tuition, imagination, and judgment, which can never be fitted into mathe-
matical models, categories, and coefficients. We have learned that the level
of professional competence and judgment of an experienced interdisci-
plinary team is crucial and transcends in importance the skills in mathe-
matical modeling.
The term systems analysis has tended to become synonymous with the
use of mathematical models. In my opinion this meaning is incorrect since
all the term signifies is a logical and orderly approach to the analysis of a
system (and there is nothing new in such an approach) while taking into ac-
count all relevant factors, some of which are quantifiable and some of
which are not. Since nonquantifiable factors, according to my definition,
are included, systems analysis transcends and is not synonymous with
mathematical models."8
Notes
1. On this point, see David J. Bates and Graham F. Donaldson,
"Changes in Emphasis in Rural Sector Lending," Finance and Develop-
ment (June 1975); Albert Waterston, "A Viable Model for Rural Develop-
ment," Finance and Development (December 1974); and Arturo Israel,
"Toward Better Project Implementation," Finance and Development
(March 1978, vol. 15, no. 1, p. 27.30).
2. Confusion often arises as to what is meant by detailed design and
how much design is included at the project preparation stage. By detailed
design, I mean construction drawings and specifications for civil works and
equipment, in sufficient detail to solicit tenders leading to contract awards.
The project preparation stage should, in my view, culminate in the form of
a feasibility report; such a report should include enough preliminary design
on which to base reasonably accurate cost estimates of the costs of both
hardware (civil works and equipment) and software (administration, tech-



194                Technology, Finance, and Development
nical assistance, training, and so forth). Decisions on whether the project
should proceed and, if so, how it should be modified should be based on a
review of the feasibility report. Detailed design should then start without
delay.
3. When politicians have pet projects-a not uncommon situation-
planners should be ready with alternatives that weigh the pros and cons in
economic and social terms. The planners must then try to persuade the poli-
ticians regarding the most desirable course of action-a difficult task that is
not always effective.
4. See P.Z. Kirpich and H.P. Dugan, "Province-Wide Irrigation and
Drainage Planning and Development in East Pakistan," paper presented at
the Eighth Congress of the International Commission for Irrigation and
Drainage, Varna, Bulgaria, 1972.
5. For a discussion of the advantages and limitations of economic in-
centives and disincentives, see Sterling Brubaker, To Live on Earth: Man
and His Environment in Perspective (Baltimore and London: Johns
Hopkins University Press, 1972), pp. 172, 186.
6. See Marshall Gysi and Daniel P. Louks, "Some Long Run Effects
of Water Pricing Policies," Water Resources Research (December
1971): 1375.
7. See World Bank Operations-Sectoral Programs and Policies
(Baltimore and London: Johns Hopkins University Press, 1972); Rural
Development-Sector Policy Paper (Washington, D.C.: World Bank,
1975); Village Water Supply-A World Bank Paper (Washington, D.C:
World Bank, 1976), pp. 35-36.
8. That it is not only a neglected question but also an urgent one is the
view of C. Gordon Thether, Financial Times, 26 April 1967, commenting
on P.Z. Kirpich, "Foreign Experts: Their Advantages and Limitations,"
Finance and Development (March 1967).
9. Suggested techniques for the selection and engagement of consul-
tants (including foreign experts) can be found in Guidelines for the Use of
Consultants by the World Bank as Executing Agency (Washington, D.C.:
World Bank, 1981).
10. For a longer discussion of manpower problems, with special refer-
ence to water resource planning and implementation in Mexico, see Gunter
Schramm, "Human Institutional Factors," Natutal Resources Journal 16,
no. 4 (October 1976).
11. For discussions of institutional aspects of water management in de-
veloped countries, see Water Management-Gestion de l'Eau (Paris:
OECD, 1972), and Gilbert F. White, Strategies of American Water Man-
agement (Ann Arbor: University of Michigan Press, 1969).
12. A common fault to be guarded against is to collect an excess of data
that are either irrelevant or premature in that they vill become obsolete
before being used.



Water Resources Development                            195
13. The Lerma River basin in the central plateau is the zone of most in-
ternal conflicts over water use (urban and industrial versus agricultural) and
over pollution. The Lerma basin is adjacent to and provides important
sources of water for Mexico's two largest cities (Mexico City and Guadala-
jara) and contains within its limits eight medium-sized cities, important in-
dustries, and about 200,000 hectares of irrigated land. Water demand has
already outstripped the available supply in dry years, and serious contam-
ination of underground aquifers is occurring.
14. Vast areas with good soils elsewhere in tropical America that are
similarly underutilized-even though they are ecologically similar to the
productive rice areas of South Asia-include the Lower Magdalena basin in
Colombia, the Lower Guayas basin in Ecuador, and the Pantanal (state of
Mato Grosso) in Brazil. See P.Z. Kirpich, "Development of Lowland
Tropical Flood Plains in Latin America" (Paper presented at the Regional
Preparatory Meeting for the World Water Conference, Lima, August 30,
1976), and Kunio Takase and Toshihiro Kano, "Development Strategy of
Irrigation and Drainage," Asian Agricultural Survey, Part VII (Manila:
Asian Development Bank, 1969).
15. According to this description, a framework plan would resemble in
many respects the Level B studies of the Water Resources Council of the
United States. See "Establishment of Principles and Standards for Plan-
ning," Federal Register, September 10, 1973, p. 92.
16. There is a need for flexibility not only in framework planning but
also in project preparation and implementation, especiaLly for new-style
projects with large software components; see Israel, "Toward Better Proj-
ect Implementation."
17. Several writers have warned of the danger of faddism associated
with mathematical models. See John Kenneth Galbraith, Economics, Peace
and Laughter (New York: Houghton Mifflin 1971), p. 43; World Bank Op-
erations-Sectoral Programs and Policies, pp. 428, 453, 455; and Ven Te
Chow and S.J. Kareliotis, Water Resources Research (DIecember 1970):
1580, who note, "A systematic theory for the formulation of a stochastic
system model is unavailable because the formulation of the model requires
practical knowledge of the physical characteristics of the process and the
system that is usually lacking in the mathematician."
18. For further references on the advantages and limitations of systems
analysis as applied to water resources planning, see Myron B. Fiering, "The
Role of Systems Analysis in Water Program Development," Natural Re-
sources Jourtal (October 1976, vol. 16, no. 4), and Gilbert F. White, "In-
troduction-World Trends and Needs," Natural Resources Journal (Oc-
tober 1976, vol. 16, no. 4); Warren A. Hall, Systems Analysis in Irrigation
and Drainage," Journal of the Hydraulics Division, ASCE (April 1973),
and discussion by P.Z. Kirpich; and Asit K. Biswas, ed., Systems Approach
to Water Management (New York: McGraw-Hill, 1976).



Power Generation and
Distribution
Richard H. Sheehan and
S. Ramachandran
The electric power sector is one of the three largest areas of Bank lending
(the other two are transportation and agriculture). By the end of fiscal year
1983, the cumulative lending in the power sector reached $18.6 billion, ac-
counting for almost a fifth of all the Bank Group operations.
In the early 1950s, when the primary focus of the World Bank's opera-
tion was the transfer of resources to the war-devastated countries of
Europe, the power sector offered an especially appropriate channel for a
quick and efficient transfer of resources on the massive scale that was re-
quired. After the setting up of the Marshall Plan, the Bank focused its lend-
ing activity on the developing countries. Power again played an important
role in the lending strategy primarily directed to the industry sector. In re-
cent years, the Bank's philosophy has emphasized rural developmn,!nt and
lending directly to provide for basic needs. Despite this change in policy,
commitments in the power sector have continued to grow. Between 1978
and 1983, power sector loans amounted to $10.1 billion, more than 15 per-
cent of the total Bank lending over the same period.
Although a somewhat smaller proportion than in the past, current levels
represent a greater dollar amount than ever before. The Bank recognizes
that power is necessary not only for the development of the manufacturing
sector but also in agriculture to drive water pumps and for agro-based in-
dustries; it is also required for the general development of the villages
through rural electrification.
Power Sector and Its Development
The growth of the power sector in many developing countries tends to
follow the same general pattern. Three broadly defined stages may be iden-
tified. In the first stage, electricity is introduced to the country, most often
starting in the urban areas. Small scattered plants, often installed to meet
the needs of a particular industry, also generate power for the needs of nearby
consumers. The plants are sometimes privately owned and operated, but
municipalities and city or state governments may be involved. If the World
Bank starts to lend for power in the country at this stage, it tends to be in-
volved with relatively small, isolated projects.
197



198                 Technology, Finance, and Development
The second stage arises as the demand for power grows, the area of
coverage expands, and larger plants are built. The Bank's role at this stage
is not only to finance generating plants, transmission lines, and distribution
facilities but also to help develop an effective organization. Where the
management of the sector is fragmented, resulting in poor planning and in-
efficient operation, the Bank frequently advocates consolidation and some-
times makes its loan conditional on centralization. The government is some-
times urged to pass the needed legislation and clear the way for mergers
where such actions would increase the efficiency of the sector operation.
Often the countries are encouraged to create an electricity authority at
the national level. With the creation of a central authority, the power
system of the country may be planned more efficiently. Sophisticated tech-
niques are introduced to help plan for the growth of power generation
facilities to meet a growing demand. This ensures the most economical ex-
pansion and also helps schedule sufficiently in advance the availability of
financial and human resources needed for the construction of the system.
The third stage is the institutional development of the sector. Although
an electricity authority may have been created, it may take some time before
the organization begins to function effectively. Procedures that were ade-
quate for smaller, fragmented organizations are usually found to be inade-
quate for large-scale operations with widespread interconnections. The
Bank helps with technical assistance in the planning and building up of in-
stitutional capacity. This sometimes requires reinforcement of existing
institutions or advice to the borrowing country on how to create new institu-
tional structures appropriate to the nation's power sector development. Fre-
quently at the Bank's initiative, the expertise is provided by consulting
firms, which are hired to conduct diagnostic studies or offer other kinds of
technical assistance, such as improved management information systems or
better ac counting techniques. Funds are also made available for the train-
ing of personnel in the techniques of management and power sector plann-
ing. Institution building remains one of the primary goals of the Bank in its
power sector lending program.
The Bank's Role in Technology Transfer
In power, as in other sectors, the choice of technology is of great impor-
tance. There are usually several possible ways to produce the desired output.
Some options generally will employ more of the needed inputs to produce a
given result and are therefore inefficient relative to other techniques. Com-
mon sense often rules out some technically inefficient technologies, but
other choices are less obvious. In many cases, there are several different



Power Generation and Distribution                       199
techniques, all technically efficient and each using different amounts of the
various inputs. The choice among these techniques is an economic one and
should take into account the scarcity of the required inputs and the costs
and benefits of the investment. The determination of the least-cost tech-
nology is mandatory in the evaluation of projects in the power sector. The
term least cost means the minimum long-term combined capital and
operating costs of the system (excluding sunk investments), which are dis-
counted at an appropriate interest rate.
The Bank does not have set views on proper sector technology. It does
not suggest the use of large rather than small generating units, or capital-
intensive methods of construction instead of labor-intensive methods, or the
reverse. For example, there are considerable economies of scale in the genera-
tion of power, and when large-size thermal units are chosen, it is a reflection
of scale economies. Similarly, the use of capital-intensive construction tech-
niques may well be the most appropriate, even in labor-abundant developing
countries, if their use results in large savings of money.
In the preliminary assessment of a power project, the demand for power
is first projected in considerable detail, including the magnitude and fre-
quency of peak loads. The various ways of meeting this demand in the ac-
tual country context are then evaluated with as close to the same degree of
reliability as possible. If the project is feasible, the Bank then strives to help
the borrowing country select the most technically and economically efficient
technology in relation to the specific objectives, constraints, and circum-
stances of a project. As a matter of policy, the Bank does not advocate the
installation of prototype facilities or the use of untested technologies in
developing countries. This does not mean that the Bank is opposed to new
techniques, but it does not wish to see scarce development capital used for
experimental purposes. The Bank has, however, financed geothermal plants
and lignite-fired steam plants that were among the first of their kind in the
world.
There have been instances where the Bank has considered, but not
chosen, the most modern technology. In one country, for example, extra
high voltage direct current transmission was studied for a large power proj-
ect, but it was finally decided that the more appropriate choice was alter-
nating current. In another country, a lower voltage transmission system was
preferred to a more sophisticated high voltage system because of the special
circumstances of the project. When the situation is warranted, however, the
Bank does not hesitate to recommend the very latest technology, the leading
edge of the state of the art. This has been true particularly in the case of
transmission systems where transferring large blocks of power over long
distances is necessary.
The Bank has not endeavored to transfer technology in the abstract, nor
has it sought, at least in the power sector, to cultivate new technologies



200                 Technology, Finance, and Development
through its own program of research and development, although in one case
it has partly financed a power research facility. Rather, the role of the Bank
has been that of a catalyst, helping its borrowers identify priority sectors of
development and assisting in the choice of proper facilities and the most ap-
propriate technologies.
"Technology involves a great deal more thar he mechanical processes."'
In addition to the rather obvious engineering aspects of technology, finan-
cial and economic expertise, as well as organizational know-how, are also
transferred. Technology transfer is, however, a slow and complex process.
Beginning with the right questions being posed to the entity seeking the
loan, the transfer of technology proceeds through the various stages of
project appraisal, negotiation, implementation, and operation. Techniques
of system planning and economic appraisal are transmitted in the early
stages of project definition and preparation. Most of the engineering know-
how gets transferred during the actual construction and start-up phases,
and organization skills are developed as operations begin. In most countries
where the Bank has lent for power projects, the relationship has been a con-
tinuing one with a series of lending operations over long periods of time.
While the beneficiary of the loan-the power entity-is the main recipi-
ent of the technology transfer, some know-how spills over to others. Local
suppliers and construction contractors acquire new expertise as the project
is carried out. In order to stimulate such transfers, the Bank encourages
local manufacturers of equipment and local construction firms by using
them where possible. Local equipment suppliers are granted a margin of
preference of up to 15 percent over foreign suppliers; local civil works con-
tractors in very low-income countries are allowed a margin of 7.5 percent.
With few exceptions, the Bank finances the portion of power project
costs that involve foreign exchange. This component tends to be higher for
projects in the power sector than, for instance, in the agricultural sector,
but there are also big differences within the power sector itself. The propor-
tion of foreign costs for a hydroelectric complex may reach only 50 percent
of the total because civil works for hydro projects have a large domestic
content, including labor and locally available materials such as cement and
reinforcing steel. For steam-electric plants, which are much more dependent
on equipment manufactured outside the country, the proportion of foreign
costs can go up to 75 percent. In countries where manufacturing capacity is
limited, the foreign exchange component of transmission and distribution
facilities may be even higher.
The most important element in the implementation of a project is the
arrangement for construction. Delays in completion result in delays in
realizing benefits. A competent and experienced contractor can usually be
relied on to plan the work and mobilize resources to meet the construction
schedule. Because the most experienced firms are often based in the indus-



Power Generation and Distribution                       201
trialized countries, local firms tend to win fewer contracts, and it is difficult
for them to break out of this vicious circle; they do not get the job because
they do not have enough experience, but they cannot get the experience
without the job. One way out of this situation is for local firms to form con-
sortia with foreign firms when bidding for projects. The Bank has en-
couraged this in several instances and has also favored the hiring of local
firms for the construction of auxiliary works, such as access roads, con-
struction camps, maintenance facilities, etc. These components often ac-
count for a substantial portion of a large and complex project and usually
have fewer complications. In recent years, local firms have been widely used
in the construction of power projects in several middle-income developing
countries.
The diffusion of technology among developing countries has attracted
much attention, and the Bank is in a good position to act as a broker in the
technology market, especially in the transfer of technologies from one
developing country to another. But the problem here is a basic one: in many
cases, there is little new technology in the developing countries themselves.
Where the production capability exists in developing countries, the Bank
has encouraged the purchase of such equipment by its borrowers, but
results have been mixed. In some cases, deliveries have been late, or the
equipment did not meet specifications. The effect may well make it even
more difficult for suppliers from developing countries to gain a significant
share of the international market. Greater attention must be given to quality
control and reliability if developing countries are to become major suppliers
or contractors in other countries.
One important aspect of technology transfer is the dissemination of the
cumulative knowledge and experience gained from all Bank projects. The
lessons learned in one country are used to good advantage in other countries
by both the Bank and by various firms involved in the projects. While this
cannot really be thought of as a conscious and deliberate technology transfer,
it does constitute a substantial benefit for borrowing countries and can be
viewed as a kind of transfer of technology between developing countries.
Transfer of Engineering and Organizational
Capabilities
Two general types of technology are transferred in the power sector. The
first comprises technical and engineering capabilities, and the second relates
to organizational and managerial skills. Beginning with the first loan made
for an electric power project-to Chile in 1948 where it financed a high-
head hydroelectric generating plant, which at the time was the highest in the
Western Hemisphere-the World Bank has helped to transfer engineering



202                 Technology, Finance, and Development
know-how. In that same country, it helped to introduce arch dam technol-
ogy when it financed the Rapel hydroelectric project in 1959, and seven
years later, new underground construction methods were introduced at the
El Toro hydroelectric station.
Several of the extra high voltage (EHV) transmission lines financed by
the Bank introduced new technology to the country. Brazil's first 345
kilovolt line was begun in 1958; EHV technology was introduced to Iran
and Yugoslavia in 1972, and in Argentina a 500 kilovolt line was adopted
for the Chocon hydroelectric project transmission system in 1968. Direct
current transmission was employed for the connection between New
Zealand's North and South Islands in 1962. The Bank also helped build
Ireland's first pumped storage facility. Italy's first nuclear power plant, the
Senn nuclear project approved in 1958, was supported as a training facility.
The Bank has had a major role in the transfer of organizational capabil-
ities in the power sector in several countries. Brazil is one of the Bank's
main power borrowers and has a large and rapidly growing power sector.
After financing individual projects for several entities within the country,
the Bank realized the importance of a comprehensive strategy for the
development of Brazil's hydro resources. In the 1960s the Bank acted as the
executing agency for a study financed by the UNDP to evaluate the hydro-
electric potential of the south and southeastern regions. This so-called
CANAMBRA study, completed in 1969, formed the basis for the develop-
ment strategy of the power sector during the 1970s.
The Bank also played a major role in drafting the legislation that has
made the Brazilian power sector financially viable. The power sector
regulatory body in the Ministry of Mines and Energy, the Departamento
Nacional de Agua e Energia Electrica (DNAEE), and ELETROBRAS, the
government holding company, have been assisted by the Bank in carrying
out their tasks, and Brazil is now well advanced toward an integrated plan-
ning and operation of major sector facilities.
In Thailand in 1968, the Bank helped with the formation of the Elec-
tricity Generating Authority of Thailand (EGAT), now largely responsible
for the generation of power in the country. Although it is not the sole
authority in Thailand (the Metropolitan Electricity Authority and the Pro-
vincial Electricity Authority are responsible, respectively, for distribUtion in
Bangkok and the rural areas), EGAT has sufficient authority to plan and
expand power generation effectively.
Panama provides an interesting example of Bank-induced transfer of
organizational know-how. The Instituto de Recursos Hidraulicos y Elec-
trificacion (IRHE) was created in 1961, prior to the Bank's involvement in
the power sector of the country, and was charged with the coordination of
power development in Panama. The first Bank loan to IRHE was made in
1962 to construct a 6 megawatt hydroelectric plant to serve the Central Pro-



Power Generation and Distribution                      203
vinces. It was found, however, that the IRHE operated under considerable
political pressure, which resulted in mismanagement and financial dif-
ficulties.
The more sizable second loan to IRHE in 1970 to finance the 150
megawatt Bayano hydroelectric plant, the 40 megawatt Las Minas steam-
electric plant, and the transmission line to Panama City was not made until
much-needed organizational changes were instituted. New legislation per-
mitted IRHE's operation as an autonomous agency and made the position
of director general a nonpolitical one. The director general was made solely
responsible for day-to-day operations, and the board of directors' role was
limited to policy matters. The Bank loan also provided for the hiring of
management consultants and for the training of IRHE's personnel.
In mid-1972, IRHE's role changed significantly when the Panamanian
government nationalized the Compania Panemena de Fuerza y Luz (FyL)
and transferred its assets to IRHE. FyL had received concessions for the
operation of electricity, telephone, and gas services in Panama City and
Colon. This transfer increased the scope of IRHE's operations several-fold
and imposed a strain on the existing organization. The Bank persuaded
IRHE to appoint a technical director and, together with consultants, helped
IRHE to develop its organization and institute better management and con-
trol systems.
The Bank's third loan in 1973 helped finance diesel generating plants,
transmission, distribution, and load dispatch facilities, but it was found
that further organizational changes were needed if IRHE was to fulfill ef-
fectively its enlarged role. Prior to the approval of the fourth loan (for the
La Fortuna hydroelectric project), the consultants appointed at the Bank's
suggestion undertook a diagnostic study of IRHE's organization to help
identify areas that needed to be strengthened. The Bank has financed the
consultants whom IRHE has since hired to help implement the recommen-
dations.
The Bank played a major role in the development of IRHE's organiza-
tion and in urging the Panamanian government to pass the necessary legisla-
tion. Although it was the management consultants who actually trained
IRHE's personnel and instituted the management information system, it
was the Bank's involvement that aided IRHE's continued development.
The Bank's efforts have not always been successful. In Turkey, for in-
stance, the results have been less than expected. Prior to 1970, four state
organizations, a half-dozen or so private companies, a large number of
private industrial firms, and more than 600 municipalities and villages were
involved in generating, transmitting, and distributing electricity. The four
state organizations included a planning and statistical organization respon-
sible for all planning in the sector, the State Hydraulic Works (DSI) respon-
sible for the development of hydroelectric projects, Etibank, and a State



204                  Technology, Finance, and Development
Economic Enterprise whose power group constructed and operated all ma-
jor thermal plants and transmission lines in Turkey.
Today there are only two state organizations: Tiirkiye Elektrik Kurumu
(TEK) and the DSI. TEK is responsible for the major part of the generation
and transmission of electricity, and DSI is responsible for the planning of
hydropower development. Municipal authorities buy most of the power
from TEK, except for Ankara which still generates part of its requirements.
The largest private utility provides only 9 percent of the energy consumed in
the interconnected system. This institutional framework under Turkish law
is different in several respects from that suggested by the Bank and at least
partly responsible for the inefficient operation of the sector. The Bank,
however, is still trying to assist TEK overcome these difficulties and becorne
an effective electricity authority.
Tariffs and Finance
Perhaps the greatest obstacle to the growth of the power sector is inadequate
finance. Few utilities generate sufficient revenues to finance their expansion
programs completely. The pov-r sector is a voracious consumer of invest-
ment capital and is expensive to operate. To some extent, borrowing in-
variably will be necessary, but tariffs must be set to reflect the costs of supply.
The laws and regulations applicable to power companies often contain
clauses that permit them to earn a fair rate of return. The return is
calculated on net fixed assets, but accounting techniques usually value
assets on the basis of historical costs. Inflation causes this historical value
and the cost of replacement to diverge considerably. When electricity tarii'fs
are set at levels that yield a fair return on the original value of assets, they
fail to generate sufficient funds; and it is unrealistic to look to the govern-
ment for the difference since governments are always hard pressed for funds
to finance other development projects not capable of producing revenues.
The Bank believes that power utilities should be allowed to generate
enough funds to finance a reasonable portion of their own expansion. Public
ownership of the electricity company or authority, either in part or whole,
alleviates the fear of exploitation, but it also tends to make the electricity
authority more susceptible to political pressures than are private companies.
The demand for electricity, within limits, is usually found to be relatively
inelastic with respect to price. While electricity is a major input in certain
electrochemical and electrometallurgical industries, in general it accounts
for less than 3 percent of the total industrial production costs in developing
countries. As a consequence, the welfare loss of higher tariffs is unlikely to
be very large.



Power Generation and Distribution                         205
In most countries, the greater opposition to tariff increases stems from
a fear that such increases will increase inflation. This is rarely the case. In-
creases in the price of electricity generally will have a minimal effect on the
rate of inflation becauise the share of electricity costs in relation to the total
cost of living is r-elatively small. Indeed, it can be argued that failing to raise
tariffs may be inflationary because low tariffs would stimulate too much de-
mand and the consequent dipping into the gov<irnment budget to finance
the expansion of the sector could cause deficits to be larger than otherwise.
Regulating authorities are often reluctant to accept this viewpoint. The
temptation to meet these needs by increasing the money supply may prove
too difficult to resist, thus fueling inflation. In any event, it is common for
some governments to exert pressure on public utilities to hold the price line.
Frequent tariff increases are probably required in most countries to achieve
adequate revenues.
Another area in which the Bank has become involved in recent years is
the structure of tariffs. Ideally the rate-of-return criterion determines the
level of tariffs, and the electricity authority (or -egulating body) has a fair
amount of flexibility to set the tariff structure. In the past, some form of
average accounting cost has been used as the basis for electricity pricing.
The Bank now believes that tariffs should be made to reflect marginal
economic costs insofar as practicable,
The pattern of load demand typically involves one or more daily
peaks, and the system capability must be adequate to meet the maximum
demand. As a result, some of the generating units are used for only a frac-
tion of the time. Providing for peak capacity therefore requires installing
units that can be started up quickly. Hydro plants with sufficient storage
are useful for this purpose and so are gas turbines. The former usually
have high capital costs, while the latter are usually expensive to operate. In
either case, electricity tariffs can be structured to reflect the greater cost of
providing for peak capacity to discourage electricity use during peak
periods and reduce the need for reserves. This conrcept of pe4 load pric-
ing is not new. Great Britain and France have long used tariffs of this
nature and have altered the pattern of electricity demand, thus making the
peak less pronounced. Utilization of generating capacity is likely to im-
prove as a consequence.
Studies have revealed that marginal-cost-based tariffs are often easier to
administer than the maze of existing tariffs. The Bank has initiated courses
and seminars to explain the principles of marginal-cost-based tariffs.
Thailand and several states in India have completed such studies of their
systems. It may be some time before tariffs reflecting economic marginal
costs are actually introduced, however, because of perceived political conse-
quences of raising prices.



206                 Technology, Finance, and Development
System Planning Technology
An adequate and dependable supply of power requires far more than simply
installing new generating units as demand increases. The pattern of de-
mand, the occurrence and duration of peaks, and the reliability of the
system in terms of outages all have an effect on the manner in which power
is generated. Short duration peaks, for instance, would favor the installa-
tion of gas turbines; seasonal variations of river flows and the need for ir-
rigation often determine the operation of hydroelectric plants; and the cost
and availability of fossil faels affect the type of thermal plant used.
The least-cost method of power generation may be determined from
various programming models. Fairly sophisticated models, which take into
account rate of load growth, outages, generating costs, and other such fac-
tors, are now available and enable one to plan the expansion of facilities
while taking into account resource constraints. The Bank has helped in-
troduce these methods in several countries, including Malaysia, Argentina,
Mexico, and, currently, Indonesia.
Transfer of Technology through Training
Although outside help may be necessary to design and construct power pro-
jects, it is the borrower who operates and maintains them. Therefore opera-
tional and maintenance capacity must be developed, a process that almost
always requires the training of personnel.
Projects financed by the Bank often include a specific and sizable train-
ing component. The borrower sends key persons at various levels to courses
in foreign countries, sometimes for extended and specialized training. Firms
are also hired to conduct short courses and seminars in the borrower's coun-
try. Better accounting systems and planning methods are often introduced
in this way.
A considerable portion of the training, however, does not come from
specific courses or education programs but through the implementation of
the project. The borrower is involved at every stage of the design and con-
struction of the project and learns from it. The funds specifically allocated
to training therefore greatly understate the training of personnel that actually
occurs. In addition, engineers and other technicians visit suppliers and learn
directly about the equipment and its use. Participation in the installation of
facilities also provides them with a great deal of knowledge about the equip-
ment. Periodic visits by the supplier's technicians during the initial period
of operation also contribute to the transfer of skills and know-how in the
early stages of production.



Power Generation and Distribution                   207
Evaluation of the Bank's Role
The Bank's contribution to the growth of the power sector in the developing
countries is significant and includes a broad transfer of technology. While
large commercial banks and banking consortia can, and often do, provide
funds on the scale required for power projects, the World Bank is in a uni-
que position to provide a comprehensive package of technical and financial
services in addition to the loan. The value placed on these services by many
countries was demonstrated in one case when Thailand borrowed from the
Bank at an interest rate higher than available elsewhere in order to avail
itself of the Bank's expertise.
A major contribution of the Bank has been the institution building in-
volved in the creation and development of the organizations dealing with
the power sector. The need for developing engineering capacity and the
building of a competent electricity authority are of key importance in power
sector development. It is in this area that the Bank has rendered a major ser-
vice.
In summary, the Bank's role in the transfer of technology for the power
sector development has been that of an active catalyst, and it is probable
that the power sectors of several countries would not have developed as
rapidly or as efficiently as they did without the Bank's involvement. In these
cases, however, the real credit ultimately must rest with the host govern-
ments and their receptivity and willingness to change.
Merely because the borrowing agency has acquired new technology
after the Bank's involvement does not necessarily mean that the Bank was
responsible for it. Nor can the Bank claim credit for technology transfers ef-
fected in projects where its support was mainly financial. In such cases, Ith
transfer of technology undoubtedly would have taken place anyway. The
development of the power sector, or for that matter any other sector in a
country, depends on the enthusiasm, persistence, courage, and dynamism
of the nation's leaders to mobilize resources.
Note
1. Amartya Sen, Employment, Technology and Development (Ox-
ford: Clarendon Press, 1975).



Fertilizer Production
I           Christopher J. Pratt
One of the critical problems facing the developing countries is the need to
increase food production so as to satisfy the basic needs of their expanding
populations and reduce their growing dependence on food imports from a
small number of highly industrialized countries. The provision of fertilizers,
in association with other agricultural inputs (such as water, mechanical
energy, improved seeds, and extension services) is, in this respect, essential.
Although overall fertilizer use in the developing countries is still fairly
small, in the last twenty years it has accounted for around 30 percent of
their total increases in food production and for over half their yield in-
creases in cereal production.' In the next two decades, it is anticipated that
an even larger share of the needed increases in food production in these
countries will have to come from the application of fertilizers. Building up a
fertilizer production capacity is therefore essential.
Excluding the socialist countries, it is estimated that some 70 percent of
the nitrogen and phosphate fertilizer production capacity that will be in-
stalled worldwide until 1990 will be located in the developing countries.
Estimated investment needs, number of new plants, and production capac-
ity for the three main fertilizers-nitrogen, phosphate, and potash-are
shown in table 13-1.
If investments in fertilizer production were to make the developing coun-
tries self-sufficient in food, the additional capital needs for nitrogen plants
alone probably would have to be 50 percent higher than the figures shown.
Increased requirements for phosphate and potash being roughly of the same
order means that the projected cumulative investment needs for the
1980-1990 period would have to be raised from the present $26.5 billion to
nearly $40 billion. This does not take into account additional needs for plant
replacement and for new investments in the fertilizer industries of the devel-
oped countries, which could approach an additional $20 billion by 1990.
The Role of the World Bank
The World Bank has assisted with the financing of fertilizer projects in
numerous developing countries and has played the leading part of all lend-
ing institutions in helping these countries to plan, finance, and install new fer-
tilizer production units. It is estimated that in the 1980s, around 30 percent
209



210                    Technology, Finance, and Development
Table 13-1
Developing-Country Fertilizer Plant Investment Requirements, 1983-1993
(1980 U.S. dollars)
1980-1985            1986-1993
Nitrogen
New nitrogen capacity (million tons)           9.8                  11.7
New plants required                            43                  52
Investment requirement ($ billion)             11.3                13.6
Phosphate
New phosphate capacity (million tons)          6.7                  7.7
New plants required                           22                   26
Investment required ($ billion)                7.7                 10.7
Potash
New potash capacity (million tons)              1.5                 1.5
New plants required                             1                   1
Investment requirement ($ billion)             0.7                  0.7
Total investment required ($ billion)            19.7                25.00
Source: W.F. Sheldrick, "The Changing Structure of the International Fertilizer Industry,"
paper presented to the Fertilizer Society, London, March 17, 1983.
Note: These figures exclude the centrally planned socialist countries.
of all new nitrogen projects, 20 percent of all new phosphate projects, and
possibly some potash projects will be financed with the assistance of the
World Bank. A list of typical fertilizer projects financed in part by the Bank
between 1968 and 1983 is given in table 13-2.
To an increasing degree, project planners in the public sectors of
developing countries periodically study the need for fertilizers, and when a
forthcoming demand for a new or expanded fertilizer plant appears suffi-
ciently large, a report is prepared and submitted for government considera-
tion in the country concerned. If the report is favorable, it may be passed to
the Bank Group for review. Alternatively, a feasibility study may be pre-
pared by the private sector in a developing country and sent to the IFC for
study and possible financing. In other cases, Bank staff may identify the
likely need for a fertilizer plant during an economic mission.
If the potential for a fertilizer project appears favorable, a preappraisal
team visits the country to make an initial survey of the envisaged project
and to collect information. Typically, such a team might consist of
specialis$s in marketing, fertilizer technology, and economics or finance.
Meetings with government officials, industrialists, and others are held,
which form the basis of a prefeasibility study. If this study is favorable, the
prospective project is eventually examined in considerably greater detail,
and several more visits may be made to obtain accurate data and to refine
existing information.



Fertilizer Production                                   211
A feasibility study is then prepared that defines the role of the Bank and
other lenders in financing the project, as well as the amount of engineering,
staffing, foreign exchange, domestic costs, and benefits likely to result. At a
time appropriate with the availability of funds, the project is presented to
the Loan Committee for study and comment. If it is favorably received, it is
subsequently sent to the Executive Committee for review and discussion
before ultimate approval by the president of the Bank of the loan or credit
desired. This is normally expressed in U.S. dollars, while domestic currency
requirements are financed by local banks and other investors.
Invariably the processes and products have been well defined before-
hand, together with intended outputs, and a short list of experienced
engineering designers has been proposed. In many cases, these have been
U.S., European, or Japanese firms, and this can be expected to continue for
some time to come. After a project has been approved by the Bank and the
domestic government, the most suitable engineering firm or group is ap-
pointed and promptly commences detailed design and procurement, ~s well
as site preparation studies. The project is then constructed, together with
housing and other offsites, by approved foreign and local contractors. Ex-
perienced engineers and others are sent to the site to supervise project erec-
tion, which may take at least three years. Much civil work is normally
undertaken by experienced local firms, which helps to reduce the project's
foreign exchange costs. Meanwhile, a fertilizer seeding program may have
been started with advice from the Bank, and this, together with the main
project, will need periodic supervision visits by the project officer, who
reports his or her findings to the Bank in detail for comment, followed by
action if necessary. Small teams of erectors and specialists eventually visit
the site to supervise installations of major equipment, excellent oppor-
tunities for technology transfer. Eventually the project is completed and
brought on stream, each section being subjected to its performance
guarantee run prior to acceptance. A period of gradually increasing addi-
tional output then often follows, which may take many months, during
which the plant is brought up to full sustained capacity and the project can
be considered completed. Expatriate staff, by then usually few in number,
eventually return home.
All of the fertilizer projects in which the World Bank has participated
have involved a substantial transfer of operating technology to the borrow-
ing country. The type of technology thus transferred and the effects of such
transfers on the economy of the borrower have been rather different from
country to country, and it may be useful to describe three typical situations.
The first is that of a country with a fairly small domestic market whose fer-
tilizer requirements can be met primarily through imports. The second is
that of a country whose large domestic market or abundant supply of
natural resources (phosphate rock or natural gas, for instance) warrants the



Table 13-2
Fertilizer Projects Financed by the Bank Group from 1968 to 1983
Amount                                      Year       IBRD, IDA,       1\
Region or Country                Project                 (U.S. Million)        End Product          Approved         or IFC
East Asia
Indonesia           Pusri II                               30.0         Ammonia/urea                 1970         IDA
Pusri II (supplemental)                  5.0        Ammonia/urea                 1973          IDA
Pusri III                              115.0        Ammonia/urea                 1975          IBRD
Pusri distribution                      68.0        Distribution                 1975          IBRD
Pusri IV                                70.0        Ammonia/urea                 1976          IBRD
Subtotal                               288.0
0
Europe, Middle East,                                                                                                               0
and North Africa
Egypt               Talkha                                 20.0         Ammonia/urea                 1974         IDA            0
New Valley Phosphates                   11.0        Technical assistance         1979          IBRD          (a
Jordan              Fertilizer Industry                     3.1         Phosphoric acid/DAP          1975         IFC
(Engineering Credit)                                                                                          --
Arab Potash (Engineering Credit)         1.0        Potash engineering           1975         IDA
Fertilizer Industry                     70.0        Phosphoric acid              1978          IFC
0
Arab Potash                             35.0        Potash                       1978          IBRD           CD
Morocco             Maroc Phosphore I                      50.0         Phosphoric acid/MAP          1974         IBRD           X
Maroc Phosphore I, expansion            50.0        Phosphoric acid              1978          IBRD
0.
Portugal            Quimigal                               58.0         Ammonia/ammonium             1979         IBRD           0
Nitrite                                                  CD
Rumania             Bacau                                  60.0         Ammonia/urea                 1974         IBRD           CD
0
Senegal             Industrie Chimique du Senegal          25.0         Phosphate fertilizers        1981         IFC            V
SEFICS                                  19.3        Fertilizer transport         1981          IBRD           3
PHOSUALOR                                7.7        Phosphate engineering        1983         IDA             CD
Togo                Dagbati phosphates                      5.7         Phosphate engineering        1981         IDA
Tunisia             Gafsa                                  23.3         Phosphate rock               1974          IBRD



Turkey              Igsas                                    24.0         Ammonia/urea                  1973          IBRD
Igsas (Supplementary)                    18.0         Ammonia/urea                  1975          IBRD           -n
Fertilizer industry                     110.0         Various debottlenecking       1981          IBRD           CD
Fertilizer industry                      44.1         Rehabilitation                1982          IBRD           .
Fertilizer industry                       4.0         Phosphate engineering         1982          IDA
CD
Subtotal                                639.2
-a
Latin America                                                                                                                          0
Brazil              Araucaria                                50.0         Ammonia/urea                  1976          IBRD           c
Sergipe                                  64.0         Ammonia/urea                  1977          IBRD
Valefertil                               82.0         MAP/TSP                       1977          IBRD           o
Sotave                                   16.0         Mixed fertilizers             1980          IFC
Fosfatados                               45.0         Phosphate rock                1982          IFC
Mexico              Fertimex I                               50.0         Urea/pesticides               1975          IBRD
Fertimex II                              80.0         AN/DAP/NPK                    1979          IBRD
Peru                Bayover phosphates                        7.5         Phosphate engineering         1980          IBRD
Subtotal                                394.5
South Asia
Bangladesh          Ashuganj                                 33.0         Ammonia/urea                  1975          IDA
Industry credit                          29.0         Various debottlenecking       1980          IDA
Fertilizer transport                     25.0         Rail and storage              1981          IDA
Chittagong fertilizers                   15.0         Ammonia/urea                  1982          IDA
India               Cochin II                                20.0         NPK                           1971          IDA
Gorakhpur                                10.0         Urea                          1972          IDA
Nangal                                   58.0         Ammonia/urea                  1973          IDA
Trombay IV                               50.0         NPK                           1974          IDA
Sindri                                   91.0         Ammonia/urea                  1974          IDA
IFFCO                                   109.0         Ammonia/urea                  1975          IBRD
Industry Credit                         105.0         Various debottlenecking      1975           IDA
Hazira                                  400.0         Ammonia/urea                  1980          IDA



N,
Table 13-2 (continued)
Amount                                      Year       IBRD, IDA,
Region or Country                Project                (U.S. Million)         End Product          Approved         or IFC
Pakistan            Dawood Hercules                         34.9        Ammonia/urea                 1968         IBRD/IFC
Multan                                   35.0       Ammonia/NP/CAN               1974          IBRD
Fauji                                    55.0       Ammonia/urea                 1978          IDA
Imports credit                          50.0        Purchase of fertilizers      1980         IDA            (D
Fertilizer industry                     38.5        Rehabilitation               1982         IBRD
Thailand            Potash project                           8.9        Potash engineering           1981         IBRD
Suibtotal                             1,167.3                                                                C
Total Bank Group                      2,489.0                                                                 n
p)
Source: W.F. Sheldrick, "The World Bank and Its Role in the International Fertilizer Business," Fertilizer International no. 171, September 1983.  :
Note: Abbreviations:                                                                                                               CD
MAP: Monoammonium phosphate
TSP: Triple superphosphate
AN: Ammonium nitrate
DAP: Diammonium phosphate                                                                                                        0
NPK: Nitrogen, phosphate, potassium                                                                                              <
CAN: Calcium ammonium nitrate                                                                                                    O
0
'0
3F



Fertilizer Production                                    215
establishment of a fertilizer plant. The third is that of a country that, in ad-
dition to the erection of fertilizer plants, may also be in a position to
develop a local equipment manufacturing industry to make, and possibly
export, the machinery used in fertilizer plants.
Technology Transfer Based on Fertilizer Imports
The first and simplest case we shall consider here-and the one most typical
of a developing country with limited experience-is the importation and use
of bagged fertilizers. This can be done effectively only after careful tests by
agronomists and cooperating farmers have shown a repeated need for
specific fertilizer materials. Frequently the soil is deficient in nitrogen (or
soon will be), as well as in phosphates and potash, and perhaps also in sec-
ondary elements such as sulfur and magnesium. After careful years of crop-
ping, even virgin lands may develop increasing shortages of certain
micronutrients such as iron, copper, or manganese. These must be applied
periodically and precisely to avoid toxicity to plants and animals.
In such cases, the process of technology transfer can start with the pur-
chasing of recommended grades of fertilizer in bags, which, after initial
storage at the importing site or close to it, are transported to the points of
use. The training of unskilled people in the correct methods of storage and
handling of bagged materials is essential; otherwise much of it may be lost
by burst bagging, spoilage due to weather, and pilferage. These fertilizers
often are applied by hand to specific crops before and after planting under
the guidance of local extension and service people who have received train-
ing from experienced agronomists. In this way and by use of the ap-
propriate technology transfer mechanism, farmers with little or no prior
knowledge of fertilizer use can rapidly be taught how and when to apply the
proper fertilizer to the soil, how to buy, transport, and apply it, and subse-
quently how to profit from its correct use. Simultaneously, they will learn
how to prevent burst bags plus other wastage and can quickly be taught the
need for judicious applications of water, compost, lime, and related
materials to their crops at appropriate times. Typical high-grade fertilizers
that may thus be imported include nitrogen, phosphorus, and potassium
compounds, such as urea, diammonium phosphate, triple superphosphate,
and potash. Some low-analysis fertilizers, such as single superphosphate,
have largely disappeared from the export market, although they continue to
be produced for local consumption in several developing countries.
When fertilizer sales have grown to several thousand tons annually, im-
portation of raw materials or semifinished goods in bulk, followed by mix-
ing and bagging near the port, may become practical. The process of dry
mixing is simple, but it presents to a developing country the basics of manu-



216                Technology, Finance, and Development
facture, such as receipt and proper storage of bulk raw materials and inter-
mediates, conveying, weighing, rotary mixing, screening, and crushing of
oversize for reuse, as well as bagging, storage, and dispatch to dealers and
farmers. With a simple process and a few bulk materials such as diam-
monium phosphate, urea, potash, and perhaps one or two intermediate
products, a wide range of fertilizer mixed goods becomes possible. This also
considerably increases the versatility of manufacture and allows an astute
producer to take advantage of seasonal price reductions on imported
materials as they arise, providing sufficient working capital is available
from local sources.
At the same time, a considerable increase in technology transfer takes
place. Operators must learn how to handle and store imported bulk
materials, how to convey, weigh, and mix them, and how to bag them prop-
erly for sale to dealers and farmers. They must also be taught how to keep
the machinery clean and in good repair. Eventually large farmers will begin
to use tractors and fertilizer spreaders, which will require additional
technology transfer by people trained in the skills of using and maintaining
such machines. Simultaneously the need for experienced soil testers and
agronomists will expand, as will requirements for seasonal financing, fer-
tilizer, seed and crop storage, and sales. Thus, an entire new industry will be
created in which technology transfer, as well as experience in financing,
demonstrations, and fertilizer sales, are essential components.
Generally the storage and mixing plant is built to the designs of an ex-
perienced company by a local contractor who may import much of the
mechanical and electrical equipment needed. A few skilled people on the
designer's staff may be resident at the site during construction to supervise
erection and start-up. This is an opportunity for local people in various
fields to participate in technology transfer, in both erection and operation
of the mixing plant. Sometimes granulation is also undertaken in conjunc-
tion with mixing, producing fertilizers in the form of granules, say 2 to 4
millimeters in diameter, by combining two or more materials under the ac-
tion of moisture, rolling, and heat. A rotary granulator or pugmill is used
in conjunction with a drier, and sometimes a cooler and coating drum are
added. The material in process is normally recycled and screened to
remove undersized and oversized granules before being sent to storage and
bagging. Crushing oversized material invariably produces dust, which
must be removed in scrubbers, thereby increasing the complexity of the
process.
The financing required for simple mixing and granulating plants is rela-
tively small, and the World Bank does not normally take part in such proj-
ects except for occasional small loans or credits for fertilizers and other
agricultural materials that may be granted under special circumstances.



Fertilizer Production                                   217
The Building of Fertilizer Plants
The second and considerably more complex case of technology transfer is
the building of a fertilizer manufacturing plant. When the demand for fer-
tilizers in a developing country steadily increases, the possibilities of local
production instead of imports may be considered. These may include the
manufacture of ammonia and its derivatives from natural gas, naphtha or
other refinery products, the production of phosphate from phosphate rock,
as well as the production of sulfur and possibly potassium salts in some
commercial form. Alternatively, although local demand might be small, as
in some Middle Eastern countries, the export potential may be an attractive
consideration.
With few exceptions, investments in basic fertilizer plants are large and
involve sophisticated technology. Normally the minimum economic size of
an ammonia or a phosphoric acid plant, especially if required for export
purposes, is 600 tons per day. In the last decade, the customary size of an
ammonia plant has been 910 tons per day, and such plants are often built in
conjunction with a urea plant producing at least 1,400 tons per day, since
this effectively uses otherwise surplus carbon dioxide.
Alternatively the plant can be designed to produce ammonium nitrate,
usually made in solid form or perhaps in conjunction with calcium nitrate to
make a calcium ammonium nitrate product containing 25 to 30 percent
nitrogen, as in Pakistan. Larger plants based on 1,350 to 1,500 tons of am-
monia per day and designed to produce 2,000 tons or more of urea per day
will be built in India and elsewhere.
Such large plants making ammonia and its derivatives under high
pressures and temperatures can be hazardous to start up and operate unless
the staff has received adequate training and experience. Therefore it is vital
to ensure that technology transfer has been thoroughly built into the system
as an essential and continuous operation of its own. Otherwise the dangers
of explosions and fires, plus lengthy shutdowns, will increase tremendously,
as accidents in recent years have demonstrated even though large sums were
spent on training staff and labor. One effective way of providing good
training and technology transfer for a new project is to send the key
operators to a similar plant elsewhere for several months of rigorous, prac-
tical learning and experience, in conjunction with frequent written and oral
testing. On their return, they are able to put into practice what they have
learned and are also able to train other people.
If the installation of an ammonia plant, plus appropriate offsites, a
power plant, and a downstream urea or ammonium nitrate unit are con-
sidered justified on the basis of careful feedstock and market studies, its op-
timum location and required financing can be sought with confidence.



218                Technology, Finance, and Development
When required funds have been obtained from agencies such as the World
Bank and/or other sources, the project can be designed and constructed
within the lenders' rules and guidelines. Thorough training usually must be
given to most or all of the new sLaff and labor well in advance of project
start-up. Many of these steps are critical to the safety and performance of
the plant, which operates at high temperatures and pressures in several sec-
tions. Therefore key trainees are usually taught by lectures and hands-on
shift experience in a similar plant of a cooperating producer. This training
may last from three to twelve months and forms a major part of the
technology transfer accorded to senior plant operators and staff in large,
modern, complex projects. On their return, they are expected to train junior
personnel and maintain their own expertise through plant commissioning
and afterward by frequent meetings plus simulated shutdowns and emer-
gencies, as well as smooth starting-up procedures.
Modern ammonia, urea, and other plants operate on a control room
basis where complex instrument integration makes continuous production
virtually automatic. Early-warning visual signals of a minor upset are given,
which are followed by audible warnings of an increasing problem. If the
problem cannot be promptly corrected within a given time, the affected sec-
tion or perhaps the entire plant may then be automatically shut down.
Associated power generation, boiler feed water, water cooling, and other
units operate similarly. Therefore plant operators must be trained to re-
spond quickly to imminent or sudden upsets and take appropriate corrective
action at once. In case the action is ineffective, they must also be trained to
assist the plant to shut down in an orderly manner, as well as to start their
section again, after a fault has been diagnosed and corrected. Operators of
large, modern ammonia and urea plants thus have great responsibilities.
Usually they are few in number per shift yet virtually in charge of complexes
costing $250 million or more. Therefore the technology transfer they have
received, which increases with experience, must be up to date, precise, and
instantly effective in emergencies. Furthermore, restarting a large plant may
be much more difficult than shutting it down.
Similar conditions exist for operators producing urea, nitric acid, and
nitrates and also for those in charge of boiler and power plants, water treat-
ment, and effluent units. Urea and ammonium nitrate are usually prilled in
tall towers from which the solid products are conveyed and sent to storage
for later shipment in bagged form. Frequently bagging is undertaken on a
day or a two-shift basis, which means temporary halts in bagging and
transportation; however, these do not create problems compared to stop-
pages in producing ammonia or its derivatives. The technology transfer re-
quired for product handling and bagging is straightforward and normally
imparted as part of on-the-job training. All operators should be experienced
in emergency fire drills, accident prevention, and avoidance of plant



Fertilizer Production                                 219
spillages. The best way to maintain this technology transfer is by realistic
demonstrations, unscheduled to the extent possible, after training has been
given. Similar precautions, though of a different nature, apply to ammonia
and nitric acid handling, transfer, and safety procedures, which can be prop-
erly learned through periodic demonstrations in which everyone concerned
takes part. First-aid training and firefighting are also essential items of good
emergency plant procedures, and their practice should be encouraged by
management.
The majority of Bank-assisted fertilizer projects to date have been nitro-
gen-based, such as ammonia and urea. It has also participated in financing
phosphate and sulfuric acid plants, where the same principles of technology
transfer apply. In one plant in Morocco, sulfuric acid is made from im-
ported sulfur and used to attack phosphate rock obtained from domestic
sources. The phosphoric acid-gypsum slurry is filtered, and the recovered
acid is concentrated and exported, as well as used at the plant to produce
solid phosphate fertilizers. Power is also generated for internal use by waste
heat from the sulfuric acid unit. Although phosphoric acid production was
not new to Morocco, extensive technology transfer from experienced
operators to new employees took place before and during plant commis-
sioning. This was successful, as indicated by the ordering of a second large
plant.
In Pakistan, the first Bank-financed nitrophosphate plant has recently
been commissioned. This is designed to produce 1,000 metric tons per day
of NPK fertilizer (nitrogen, phosphate, and potassium) plus 1,500 tons per
day of calcium ammonium nitrate containing 26 percent nitrogen. The
transferred technology is considerable; the complex includes a new, large
natural gas-based ammonia plant, plus two nitric acid units of 600 tons per
day each, as well as the fertilizer units, plus power and steam generation and
all offsites. Some 200 tons per day of urea from an existing plant are also
made. Additional problems included the shutting down of several old units
and phasing out nearly 1,000 operators. In this case, a direct technology
transfer from old units to new ones was insufficient. Accordingly, key
operators were sent overseas for retraining and were then given oppor-
tunities to train their colleagues by imparting the necessary technology to
operate the new units as they reached completion. Managers and super-
visory staff were also given appropriate instruction in modern plant ad-
ministration and operation.
The Bank participated in the pilot production of potash by the govern-
ment of Jordan from Dead Sea brine, and results were sufficiently en-
couraging to justify full-scale production of at least 1 million tons per year.
The project has been financed and is making good progress. Although based
largely on established technology, some modified methods will be used,
such as the continuous recovery on a large scale of precipitated carnallite by



220                Technology, Finance, and Development
semisubmerged machines. After conversion to potash, the finished product
will be transported daily by road to Aqaba port for shipment overseas. For
this project, new or applied techniques for dike and solar pond construction
were developed and were proved satisfactory before the full-scale project
could be considered. This has meant straightforward training and tech-
nology transfer could not be used because these techniques had to be first
invented and approved after demonstration. An appreciable proportion of
the total technology eventually employed will probably be developed and
used in this way. Accordingly, this unusual project will offer numerous op-
portunities for technology transfer at many levels of operation and supervi-
sion in both existing and new techniques. The Bank, as a leader in the project,
has participated in a thorough search for organizations and individuals who
can ensure greatest possibilities of success for this large undertaking.
Some operations now being developed for subsequent technology trans-
fer to others on this project include selecting optimum present and future
locations for input brine pumps in the Dead Sea, building self-sustaining
dikes on weak marls and quicksands, constructing solar ponds of sufficient
size, laying adequate salt bottoms in the pans, building stable dikes with
long lives, providing reliable carnallite harvesting methods, producing
products of acceptable grade and purity, ensuring reliable bulk transporta-
tion from the plant to the storage and shipping terminal, providing ade-
quate power, water, and housing in a remote area, and providing adequate,
trouble-free effluents disposal. These are prime responsibilities of the
designers and constructors; however, the Bank is very much involved di-
rectly and indirectly with the successful transfer of technology in all cases.
For example, it proposed the names of acceptable major consulting and
contracting organizations who were considered experienced for specific pur-
poses. It took part in meeting advisers and consultants, accountants and
auditors who, after selection by Arab Potash Co. (APC), would be respon-
sible for working on the project. It also reviewed many specifications
prepared by the engineering consultants for major critical items of equip-
ment and gave its comments and advice to APC.
As the project proceeds, the Bank will continue to receive regular reports
from the company and its consultants and to give its advice until full produc-
tion and sales have been attained. It is anticipated that senior operating staff
will be sent overseas for on-the-job training and technology transfer. On their
return, they will impart this knowledge and experience to others.
Development of Indigenous Equipment
Manufacturing Capabilities
All of the Bank-financed fertilizer projects discussed and summarized in
table 13-2 have used foreign technical assistance in conjunction with local



Fertilizer Production                                   221
technological capabilities to a greater or lesser extent, depending on ex-
perience. The size and complexity of an ammonia plant in the 1,000 ton per
day category, for instance, usually makes such help essential in all phases of
the project, from design through equipment fabrication to field erection.
This is true of most other types of fertilizer plants.
In the case of a developing country with a large internal market and a
substantial industrial infrastructure, the transfer of technology in the form
of turn-key fertilizer plants can gradually lead to the local design and pro-
duction of equipment for such plants. India and Brazil, for instance, are
typical examples of major developing nations increasingly able to design
and construct much of the fertilizer equipment and plants they need. The
production of such equipment in developing countries arises from a simul-
taneous desire to reduce the foreign exchange costs of such projects and to
achieve some form of industrial and technological independence, and it may
ultimately lead, as the case of India shows, to the export of competitive
equipment and design services.
One of the first steps in the building up of such an equipment design and
manufacturing capability is to select an approved foreign manufac-
turer-U.S., European, or Japanese in most cases-that is willing to have
its machinery manufactured abroad under license by a well-established local
company. As a rule, this requires several months of training at the manufac-
turer's plant in which skilled operators and managers from the developing
country are taught the necessary technology. They then return to their own
plant and set up domestic manufacture, perhaps with the initial guidance of
experienced people from the overseas licensor. In turn, new operators and
staff are trained, and the transfer of appropriate technology continues.
Many manufacturing organizations in developing countries have achieved
total independence in this way and are able to compete with their former
associates in supplying equipinent and plants, as well as machinery, drugs,
and chemicals for numeroluG industries.
The building up of st!ch a design and equipment-producing capability
generally 'akes a long time, requires a strong industrial base as well as
substantial efforts int research and development, and entails significant
direct and indirect costs. For several developing countries, technological
self-sufficiency in fertilizer plants and equipment may be several decades
away, primarily because of the relatively small size of the market for equip-
ment such as large centrifugal compressors, reformers, reactors, and on-line
computers.
Investments in fertilizer plants are considerable, but once a major plant
has been built with foreign assistance and financing from the World Ba 1k,
it may be sufficient to meet domestic market requirements for many years.
From this perspective, it may not be worthwhile to develop an indigenous
design and equipment-manufacturing capability unless, as the case of Mex-



222                  Technology, Finance, and Development
ico seems to suggest, the availability of major natural resources (oil, gas,
and phosphates), coupled with a strong chemical engineering background,
can serve as a major incentive for the development of an export-oriented
design and equipment industry.
The availability of natural resources, the size of the internal market,
and the sophistication of the existing industrial infrastructure thus appear
to be determinant in the development of an indigenous design and equip-
ment-manufacturing capability. The erection of fertilizer plants with
foreign assistance, which involves a substantial volume of technology
transfer and is probably a necessary first step in the development of such a
capability, does not thus necessarily lead to the growth of such a capability.
In this sense, the technology transfer accompanying a new fertilizer plant
remains in many cases a one-of-a-kind type of transfer.
The Process of Technology Transfer
The process of technology transfer in the fertilizer industry differs widely
from country to country. The simplest process of transfer is through the im-
portation of bagged materials, which are either used directly or are mixed
by shovel, rebagged, and broadcast by hand on the field requiring fertilizer
addition. Verbal instructions should suffice. The use of imported bulk
materials followed by hand bagging and distribution should also need only
simple verbal instructions and one or two demonstrations in application.
Producing granulated mixed fertilizers from bulk materials requires
considerably more training and experience. The bulk materials must be
unloaded and conveyed to storage, then withdrawn, weighed, mixed, and
granulated before screening and also drying in some cases. To a con-
siderable extent, good granulation is still an art in which teaching and ex-
perience are necessary to support knowledge gained during technology
transfer courses. This also applies to crushing and returning oversized and
undersized product for regranulation and dust removal, to give maximum
use of plant, operators, and raw materials.
The production of ammonia and related compounds such as urea and
ammonium nitrate from natural gas requires highly sophisticated technol-
ogies, which must be designed and used by groups of skilled specialists. For
example, plant designers require several years of college training, followed
by several more years in a design office and in the field before being compe-
tent to assume responsibility for a large project. The required background
for plants designed to operate on other fuels such as naptha, heavy oil, or
coal may be even greater and also necessitates years of experience and
technology transfer on actual plants from others thoroughly familiar with
this work.



Fertilizer Production                                                223
Table 13-3
Basic Fertilizer Teehnology Required in Developing Countries
Raw Materials Availability                                  Method
Initially only bagged, mixed               Import and store mixed fertilizers in form
bagged fertilizers used                    to agronomist's specifications; trans-
port to cultivated area and apply by hand
Initially only bulk, mixed                 Import and store mixed fertilizers in bulk
fertilizers used                           to agronomist's specifications; bag and
transport to cultivated area and apply by
hand; later by tractor-spreader when
justified by quantity
Bulk importation of basic                  Produce mixed and granulated
materials such as diammonium               fertilizers to suit agronomist's bag and
phosphate, urea, potash, and               transport specifications to cultivated
compounds                                  areas; apply by hand and/or tractor-
spreader, as justified
Natural gas                                Convert to ammonia and related com-
pounds such as urea, ammonium nitrate
for domestic use, and/or export sales; or
pipeline the gas to a more developed region
or country for conversion to ammonia and
related products
Naphtha and other refinery                 Convert to ammonia or related compounds
products; coal                             for domestic use and/or export sales; or
pipeline or bulk transport the raw material
to a more developed region or country for
conversion to ammonia and related prod-
ucts; coal is also used to make ammonia in
some cases (for example, in India, South
Africa, and probably the United States)
Phosphate rock                             Mine, beneficiate, and sell the rock to a
more developed country for fertilizer use;
or mine, beneficiate, convert to phosphoric
acid or a phosphate fertilizer for domestic,
and/or export use
Potash                                     Mine, beneficiate, purify, sell potash for
domestic and/or export use
Sulfur                                     Mine, purify, sell for domestic and/or ex-
port use for producing sulfuric acid for
fertilizer and other purposes; also recover
from sour oil and gas
Hydropower                                 Used in a few cases, such as in Nangal,
India, to produce hydrogen by electrolysis;
mostly used for electrical power generation
Transportation                             Pipelines and ships, plus railroad cars, are
used, respectively, for natural gas and
naphtha, other liquid fuels, ammonia, and
nitrogen fertilizers; solid fertilizers are
shipped in bulk and bagged form; sulfur is
also transported as a molten liquid.



224                 Technology, Finance, and Development
Similar situations exist in designing, constructing, and operating large
phosphoric acid, phosphate, and potash plants. The operations manuals of
these installations, like those for producing ammonia and its derivatives,
normally comprise several volumes and cover basic theory, start-up, opera-
tion, shutdown, and equipment problems in considerable detail. For skilled
operators, acquiring this level of technology requires months of daily ex-
perience, punctuated with frequent tests and simulated plant corrections.
After meeting the required training standards, they return to the nearly com-
pleted project and assist in training their subordinates. This continues down to
the semiskilled or unskilled labor force, which may be able to receive only
verbal instructions. Effective technology transfer, by instruction manuals and
on-the-job training, plus subsequent experience and supervision, have thus
become essential for safe and productive factory operation.
The type of technology transfer in fertilizer projects is determined to a
large extent by the nature of the raw materials available, and it may be
useful here to try to illustrate this by summarizing the various technology
transfer options open to developing countries for each of the different raw
materials that may be available to them (see table 13-3).
Appropriate and Alternative Technologies
A large number of fertilizer plants in the developing countries have been
built with the assistance of the World Bank Group. This raises a number of
important questions about the appropriateness of the technologies thus
transferred and the availability or nonavailability of alternative
technologies that allow the use of smaller sizes of plants or of resources
other than oil or natural gas.
Most of these plants are very large and require heavy investments-
although normally about half of the investment is required to provide the
infrastructural facilities. Typically, ammonia plants have been in the 1,000
tons per day category, based on natural gas, naphtha or fuel oil. However,
recently some large-scale gas-based plants in India, supported by the Bank,
have achieved a production capacity of 1,350 tons per day of ammonia.
Based on 330 days per year operation, this amounts to an annual produc-
,ion capacity of 450,000 tons of ammonia.
However, for many developifig countries where the internal market and
the annual consumption of fertilizers are considerably smaller than in either
India or Brazil, a fertilizer plant with a daily capacity of 300 to 400 tons per
day would be needed to meet domestic needs. Sometimes where there is
cheap natural gas available for a country, it is then economic to build a
large plant and export the remaining product after meeting domestic needs.



Fertilizer Production                                   225
Although there has been considerable interest in the application of
small plants to meet the specific domestic fertilizer needs of developing
countries, it is only in special circumstances that such plants can be justi-
fied economically. The benefits that arise from going to large-scale units in
reducing total production cost per ton can be very significant.
In the last twenty years, the major change in ammonia plant technology
has been the transition from reciprocating compressors to centrifugal com-
pressors. Because this technique particularly favors large plants, it is one of
the factors that encouraged the rapid development of large plants in recent
years. Another development that has become increasingly important in am-
monia plant technology is the improvement of energy usage, and new plants
are specifically designed to achieve this. The Bank has been very active in
the last few years in assisting developing countries to retrofit their old am-
monia plants to achieve energy conservation.
Although most of the ammonia plants in operation today use natural
gas or petroleum derivatives, there are alternative technologies, sometimes
based on obsolete technologies, that may become competitive, given suffi-
cient investments in research and the likely increases in the cost of
petroleum derivatives and natural gas. In India, for example, lignite has
been the principal raw material used at the Nyeveli plant, water electrolysis
is still undertaken at Nangal, and until a few years ago, coal was used in
Pakistan. The government-owned plant in South Africa makes ammonia
from coal on a large and growing scale, while in the United States and In-
dia, the existence of extensive coal reserves, plus improved technologies for
beneficiation, gasification, and waste disposal, have prompted a new in-
terest in this hydrocarbon. Recently, India has brought on stream two large
coal-based fertilizer plants at Talcher and Ramagundam, and the Tennessee
Valley Authority in the United States has constructed a 250 ton per day coal-
based ammonia demonstration plant at Muscle Shoals in Alabama.
Several large U.S. companies and organizations are also building small
demonstration or semiworks plants to produce pipeline gas, liquid fuels,
and chemicals from coal. Such plants will be based on high-technology pro-
cesses that are expected to be the forerunners of large future projects. These
will increase steadily in number, as the supplies of natural gas in the United
States and elsewhere diminish and because solid fuels are expected to outlast
liquid and gaseous hydrocarbons by several centuries.
These few examples indicate that a vigorous search is in progress for
alternative technologies in the fertilizer industry. It will take some time
before these alternative methods reach the international market, but several
developing countries with a significant fertilizer equipment manufacturing
industry may become the future technological leaders in some of these new
areas.



226                Technology, Finance, and Development
Note
1. World Fertilizer Review and Fertilizer Requirements of Developing
Countries 1979 (Washington, D.C.: World Bank 1979) quoting original
figures from James P. Grant, Overseas Development Council, International
Superphosphate Manufacturers Association Meeting, Paris, France,
December 1977.



* The International
4        Finance Corporation
H. Geoffrey Hilton
The International Finance Corporation (IFC) was established in 1956 as an
affiliate to the World Bank, and its member countries are limited to those of
the Bank itself. Its objectives, as described by article 1 of its Articles of
Agreement, are
to further economic development by encouraging the growth of productive
private enterprise in member countries, particularly in the less developed
areas, thus supplementing the activities of the International Bank for Re-
construction and Development.... In carrying out this purpose, the Cor-
poration shall (i) in association with private investors, assist in financing
the establishment, improvement and expansion of productive private enter-
prises which would contribute to the development of its member countries by
making investments, without guarantee of repayment by the member
government concerned, in cases where sufficient private capital is not
available on reasonable terms, (ii) seek to bring together investment op-
portunities, domestic and foreign capital, and experienced management;
and (iii) seek to stimulate, and to help create conditions conducive to the
flow of private capital, domestic and foreign, into productive investments
in member countries.
IFC's operations, summarized in table 14-1, show that between 1957
and 1983, 76 percent of the total value of commitments was made in the
manufacturing industries. The corporation finances roughly 17 percent of
the projects in which it invests, which means that during this period, it has
been associated with manufacturing investments amounting to around $13
billion.
The IFC's interest in technology transfer arises from its constitution; it is
first and foremost a development agency, and this role implies that it must
seek to do things that are new and likely to have a developmental impact. It
would not, for example, be content to assist in the financing of a fourth or
fifth textile mill in a particular country. It would have to be satisfied that
something new was being achieved in addition to the flow of resources, and it
might consider participating in the development of a synthetic fiber plant in a
region where textile plants already exist and that proposed to supply new
materials for use in the existing plants.
As a financial institution that is required to bring together investment
opportunities and domestic and foreign private capital, the IFC must attach
considerable importance to the preparation of a project's financial projec-
227



228                    Technology, Finance, and Development
Table 14-1
Facts about the International Finance Corporation, June 1983
Purposesfor Which Investments, Standby
and Underwriting Commitments
Have Been Made                                             U.S.$ Million
Development finance companies                                             $249
Money and capital market institutions                                      191
Industry
Manufacturing
Cement and construction materials                844
Iron and steel                                   358
Chemical and petrochemical products              420
Pulp and paper products                           372
Textiles and fibers                              263
Food and food processing                         241
Motor vehicles and accessories                    217
Fertilizer                                       217
Nonferrous metals                                 47
Machinery                                         33
General manufacturing                            427
$3,442a
Nonmanufacturing
Mining                                          $467
Tourism                                           121
Utilities                                         36
Others                                            41
$665a               $4,104a
Grand total                                                             $4,548a
aThere may be discrepancies in these totals because the figures have been rounded per million
dollars.
tions, since it is on the basis of these that funds can be expected to flow,
both from the corporation and from other financial institutions. These pro-
jections must be based on a careful analysis of the costs of establishing a
project and its expected operating performance during the time when pro-
duction operations are being established. On the basis of these projections,
economic justifications can be prepared and a reliable assessment made of
the extent to which the project is economically desirable for the host coun-
try. Determination of the expectations for both the construction and the
operating period requires considerable technological skills, and it is impor-
tant that in both cases these skills be identified and their availability at the
site and at the time be carefully evaluated.
An assessment of the developmental impact of a project also requires a
considered appreciation of the technological circumstances. In the initial
stages, it is important that those working on a project be aware of the limi-



The International Finance Corporation                229
tations that existing technology may place on its feasibility. It is not pos-
sible, for instance, to produce high-strength paper such as multiwall sacking
paper from indigenous raw materials derived from cellulosic sources of in-
herently short fiber. No technology exists that can produce such an im-
provement in natural properties. The opposite situation can also occur: the
technology may be available, but its application could be economically
unattractive. It would be possible, for instance, to take an indigenous iron
ore with a relatively low iron content (somewhere about 30 to 35 percent), to
beneficiate the product, and by using local noncoking coals to operate a
direct reduction process to produce sponge iron. This could be used in arc
furnaces to produce steel. There is nothing technologically infeasible in this
process, but it is very likely that the result would be economically unattrac-
tive, even if a substantial demand existed. Considerable operating costs
would be incurred at all stages, and unless existing price structures were to
change drastically, the protection needed to keep the company viable would
probably be regarded as economically unattractive.
The initial assessment of a project's feasibility demands a certain fa-
miliarity with the capabilities of technology. This may not always be avail-
able in developing countries but can be supplied to some extent by members
of the Bank Group working on preappraisal missions and on project pro-
motion. ' It is also possible to increase the awareness of technology and tech-
nological potentials in developing countries through the activities of the
World Bank's Economic Development Institute (EDI), and other specialized
agencies, such as the UN Industrial Development Organization (UNIDO)
and the UNDP, are funded and staffed to develop this awareness of the
potentials and limitations of technology.
The fact that the preliminary exploration of a project's technological
possibilities has been completed does not mean that the project as first
presented to the IFC can always be accepted as a basis for an investment.
Considerable emphasis is now placed on what is termed appropriate tech-
nology. This is somewhat of a coded phrase since it is almost axiomatic that
anyone proposing a project based on some particular technology must
believe it to be appropriate. In this sense, the development and specification
of the most appropriate technology can become a retrospective rather than
a prospective activity. The IFC has accumulated considerable experience of
industrial operations in developing countries and makes use of it in deter-
mining the acceptability of the technologies that new projects expect to
employ. The examination of alternatives in employment of labor or capital
is particularly important and is routinely included in the work of appraisal.
The technological feasibility of a proposed project must always be con-
sidered as a necessary but not a sufficient condition. The technology adopted
must also be appropriate when judged by the criteria adopted by the Bank
Group. These are not technological but economic, and the technological



230                 Technology, Finance, and Development
input is concerned with the exploration of feasible alternatives. The deter-
mination of appropriateness involves certain assumptions about capital
costs and operating costs, and these are the essential inputs into the finan-
cial and economic analysis on which the IFC's investments and those made
by others associated with it are based. The technological problems thus
focus on two main areas of concern: that the project can reasonably be ex-
pected to be constructed in the time that has been assumed in the projec-
tions and for a capital cost substantially in line with that on which the finan-
cial and economic forecasts have been based, and that it can be operated at
the levels of efficiency anticipated in the financial forecasts.
Technology Transfer in the Construction Phase
Developing economies generally have no highly experienced construction
companies, but a project can always be regarded as an opportunity to im-
prove the experience of those that do exist. It is therefore necessary during
the appraisal phase to ascertain what local engineering resources are avail-
able and to what extent they need to be improved and how such an improve-
ment may best be fostered. The work of institution-building and increasing
the pool of knowledge in the host country can never be overlooked. This is
of particular importance in industries such as chemicals, which involve high
pressures, high temperatures and corrosion resistance, and which may
therefore require erection and welding techniques new to the country. It is
then necessary to determine what technological skills are locally available
and the extent to which expatriate assistance is required to supplement
them. It must never be forgotten that practical applications and demon-
strations are produced by people who are experienced practitioners of the
technology that is to be transferred. The Bank and the IFC's experience
clearly indicate that the preparation of manuals cannot serve as an adequate
substitute for the availability of experienced people.
Should a transfer of technology be necessary, local organizations must
be associated with the work so as to provide them a learning experience and
develop a domestic technological capability. One illustration of this can be
found in the field of welding technology. Special welds are needed for the
field assembly of such project components as cement kilns. Because kilns
cannot be shipped in a fully completed state, welds must be performed on
the spot. This is a special technique that must be developed by the supplier
of equipment. The situation is more acute in the case of large chemical
plants, where high pressures are encountered. Corrosion-resistant steels that
need special welding techniques are commonly employed, and the process
must be performed to high standards by certified welders before the plant
can be considered safe. In such a case, the certification standards may be



The International Finance Corporation                    231
transferred from outside the host country-for instance, by API, Lloyds, or
Bureau Veritas.
In the more industrialized developing countries, a substantial propor-
tion of the goods and services required for the implementation of a project
will be supplied by local resources. It is always necessary to ensure that if
particular services are required, maximum use is made of appropriate local
institutions and that if goods are to be supplied, they are checked for
suitability by the project engineers. The capital goods manufacturing in-
dustry of a developing country is likely to be operating close to its level of
capacity, and delay problems and quality control problems are common.
Therefore it is necessary to make sure that the project has available special-
ists in the fields of project control and of equipment expediting. The pro-
gressing and expediting efforts required for projects in the more industri-
alized developing countries are generally appreciable. Successful projects
built to a timetable and without appreciable budget overruns invariably re-
quire such controls. The staffing of the project must therefore make it
possible for the customer to provide to the suppliers advice that would not
be required in a mature industrialized economy.
During its developmental stages, a project is a bridge between what is
available and what is desired, and the determination of what is available is
made by using specialized technologies. Mineral resources, for instance,
have to be sampled to determine their quality and their properties and how
these properties are likely to change as the deposits on which the project is
based are exhausted. This phase of work can give rise to problems in tech-
nology, and in some cases, it may not be possible to transfer the technology
in its entirety. For example, there are only a limited number of places where
wood pulping trials can be carried out to determine pulp characteristics, and
few of these are in developing countries. Similarly, ore dressing experiments
are unlikely to be carried out in the host country unless there already is a
substantial and well-established mining industry. If a project is concerned
with the financing of a new mine in a country where mining is just begin-
ning, it is almost axiomatic that this particular technology will not have
been established there. The properties so determined are, however, of
limited utility unless they are carefully linked with the resource from which
the samples were taken; that is, the locations in an ore body from which the
samples have been taken must be carefully specified. Similarly, wood sam-
ples taken for pulping must be associated with species counts on the ground
and possibly with aerographic surveys. These types of activities must be per-
formed in the host country and are likely to require some importation of
technical skills. If counterpart personnel from the host country are associ-
ated with the work, a worthwhile transfer of technology can occur during
this phase of project preparation.



232                  Technology, Finance, and Development
During the development phase of the project, it is also essential to get an
idea of what the market will require. This is fairly straightforward in the
case of a commodity such as cement, which is normally required in one or
two qualities only. But when a project is concerned with consumer goods,
such as cotton textiles, an accurate determination of market preferences is
critical. If such a project has a developmental nature, it is likely to be
replacing imports. These may well be very diverse since they come from a
large number of exporting countries, and local consumers would be accus-
tomed to having a wide range of choice. A local textile mill may not be well
suited to produce such a wide range of products, and the determination of
what could be an acceptable range to the customer and of what would be
sufficiently restricted to be feasible to manufacture is extremely important.
The determination of consumer buying characteristics is always difficult
in a developed economy since fashion and individual choice play an impor-
tant part. It is equally, if not more, important in a developing economy,
where consumer preference can be quite volatile and severe financial prob-
lems can result if a textile mill is designed to supply a particular range of
fabrics and comes into production just as changes in fashion initiated out-
side the country occur. For instance, it is difficult for a textile mill originally
designed to produce bleached and piece-dyed cotton shirtings to succeed in
a market where a change in fashion suddenly requires striped shirtings. The
mill will have neither the yarn dyeing capacity nor the preparation equip-
ment required to make the striped warps.
If the available resources have been properly determined and the product
range and market requirements correctly assessed, the appropriate equipment
can be specified and the project launched on the basis of its expected perfor-
mance. The skills transferred in this phase are not of permanent concern to
the project, but they are necessary to ensure that it does not carry for the rest
of its life an unacceptable cost burden. This type of technology transfer
primarily benefits consulting firms and construction contractors, both of
which are external to the project. These transfers, however, occur regularly,
and many small businesses have started as subcontractors in the implementa-
tion of a larger industrial project. Not all enterprises, of course, are of equal
importance for the external development of such capabilities. Some projects
may involve only light buildings and nothing more than the installation of
relatively straightforward machinery. Others may introduce new skills in
heavy machinery erection or foundation work, but as far as the particular
project is concerned, these transfer benefits are a by-product of successful im-
plementation and should not take precedence over it. No one could justify a
cement project solely as a means of transferring the technology of heavy
machinery erection or of field welding of heavy plate. Yet both technologies
must be transferred if the equipment is to be erected, and both will have to
have been demonstrated and passed on to local specialists.



The International Finance Corporation                 233
An examination of the projects in which the IFC has been involved
points to two general principles concerning the technologies that are used
and have to be transferred to the operating phase. The first is that few proj-
ects are operating on the basis of proprietary technology. Most of them
employ technologies that are well established and widely understood and
about which journals and proceedings are continually reporting. Second,
and possibly more important, the success of a project is rarely determined
by the transfer of a single technology. It is often found that while the core
technology can be adequately transferred, the important problems of the
operating enterprise are found in the peripheral technologies-that is, in
the maintenance of the equipment, the testing of raw materials, and the ad-
justments of the manufactuiring process to market requirements. These are
separate but associated technologies, and they must also be transferred if
the project is to be successf~il.
Technology Transfer in the Operating Phase:
The Case of Iron and Steel
The problems of technology transfer in the operating phase perhaps can
best be illustrated by looking at a number of industrial sectors in which the
IFC has been involved. The first industry, in terms of value of commit-
ments, is iron and steel. This is a very basic industry, which has been well
known and successfully transferred internationally for well over a century.
Historically, the transfer of iron-making and steel-making technology from
Europe to North America was accomplished for the most part through
migration. Skilled workers and technicians (at the time, the two were virtu-
ally indistinguishable) emigrated to the United States, where they estab-
lished iron and, later, steel plants. A similar pattern had also operated within
Europe. To a lesser extent, expatriate advice was used in the formative years
of the development of the Japanese steel industry at the beginning of this
century.
The use of oxygen converter steel making in the developing countries to-
day testifies to the importance of local conditions on the success or failure
of process transfer. The oxygen converter, working on liquid hot metal
from a blast furnace, must be able to operate on the basis of analyses pro-
vided by local resources. Cases have been encountered where the phos-
phorus content of the ore, which is inevitably reduced and so is found in the
hot metal, made a single slag operation in the oxygen converter infeasible
and the task of transferring the alternative technology (the double slag
method of working) is appreciably greater, not so much from purely metal-
lurgical considerations but from process control problems. An adverse ef-
fect on investment return is also quite possible.



234                 Technology, Finance, and Development
The use of the basic oxygen path points to an important issue: the in-
terdependence of applied technologies. The successful operation of a con-
verter is highly dependent on a regular analysis of the hot metal under treat-
ment-i.e., that its composition remains unchanged in day-to-day opera-
tions-and this, because the blast furnace is limited in the modifications in
analysis that it can produce, depends primarily on the regularity of the raw
materials fed into it. To ensure such regularity requires a careful planning
of the mining operations and of the exploration of iron ore deposits so that
mining can be carried out in a manner that regularizes the analysis of the
raw materials received by the steel works.
The linkage with mining is also essential to the process of direct reduc-
tion, the most recent development in steel production. This process, which
takes iron ore directly and reduces it in the gaseous phase by suitable reduc-
tants, is dependent on the characteristics of the raw material. A high iron
content in the raw material must be achieved, not so much because it could
not be reduced if it were lower but because the reduced product must be
passed to the succeeding process, and high process costs are associated with
high gauge contents. Although the raw material costs may be reduced
through the use of screened and sized ore, plant production rates can be
adversely affected by decrepitation, and only operating trials can determine
the ore's susceptibility. Any technology that is to be introduced for direct
reduction work therefore must be well suited to the raw materials that are to
be used. This again implies a backward linkage since it is extremely impor-
tant to determine both the characteristics of the raw material and the pros-
pects for maintaining the expected characteristics of the deposit throughout
the operating life of the steel plant.
There are a number of technologies now available that differ as far as
the reductants are concerned. The majority of current installations employ
the reforming of hydrocarbons to provide the reducing gases. These are
chemical operations, which can frequently pose a new learning task for an
established and experienced steel company. Here a new technology would
have to be transferred to a company that has extensive experience with the
other types of technology.
The mini-steelworks route to steel, normally made up of a scrap-based
furnace, continuous casting, and a rod mill producing reinforcing bars, can
be particularly vulnerable in developing countries. Local supplies of scrap
may be scarce and not of prime quality. Nonferrous contaminations are not
entirely removable in the process of arc furnace steel making, and the re-
sidual elements may adversely affect the continuous casting operation; the
problems may also persist in the subsequent rolling operations. Continuous
casting, therefore, may be inappropriate in the early years of operation of a
new plant based on scrap, buit it could be introduced at a later stage when
the collection of scrap and its sorting and control had become better or-



The International Finance Corporation                   235
ganized. It could also be introduced if local scrap can be used to provide a
smaller proportion of the charge in the furnaces and if the residual, or tramp,
elements can be diluted by the relatively pure iron of reduced iron sponge
produced by a direct reduction process.
The rolling operations in a mini-steel plant can also involve the transfer
of associated technologies. Earlier rolling mills, which were relatively crude,
did not pose considerable maintenance problems, but the mills now used for
the production of reinforcing bars require considerable expertise in control
technology for the electrical drives, in mechanical technology for the main-
tenance of the mill itself, and in machine shop skills for the machining of
the rolls and for the maintenance of the guides and bearings used in the roll-
ing mill. These technology transfers do not normally present insurmount-
able problems but do point to the fact that the establishment of a steel works
requires the transfer not only of metallurgical technologies but also of many
others, notably in equipment maintenance and refractory development. The
transfer problems can be reduced if labor-intensive rolling technologies are
used, but other problems may then arise. Working conditions are difficult
in hot and humid locations, and double or triple mill crews may be required
when rolling flats by labor-intensive methods in high ambient temperatures.
Textiles and Fibers
The textile industry uses a wide range of technologies, most of them well
established. The spinning of cotton yarn (primarily ringframe spinning), for
instance, has changed little in its essentials in the past hundred years. There
have been detail improvements in machinery, which have simplified the pro-
duction processes, and these improvements have produced better interme-
diate materials, which in turn have facilitated the improvement or devel-
opment of subsequent processes.
Currently two major technological innovations are available in the tex-
tile industry: open-end spinning in yarn production and shuttleless weaving
machines, the latter used instead of the loom in the weaving operations and
the production of fabric. These two new technologies frequently are intro-
duced by personnel provided by the machinery suppliers, but it is necessary
to be satisfied that both the raw materials and the way the products are used
are appropriate. The characteristics of the yarn are different now because of
the different arrangement for the fibers produced by the open-end spinning
process, and the fabrics produced by shuttleless weaving machines differ in
some respects from those produced by the conventional loom.
The technologies used in the textile industry are governed to a large ex-
tent by consumer demand for the end product. One exception, often con-
sidered attractive by many textile mills simply because it is an exception, is



236                  Technology, Finance, and Development
the production of military uniforms, which can be made without worrying
too much about changes in consumer preferences. Textiles represent fashion,
and fashion can never be overlooked in considering technologies in this in-
dustry. It is also an industry where the issue of capital and labor intensity
frequently arises. At first sight, there may appear to be little connection be-
tween fashion and capital-labor substitution. There is, however, a consid-
erable interaction between them. It arises from the fact that in both spin-
ning and weaving, human intervention is required because of discontinuities
in the production process. A spinning machine will continue to spin
uniform yarn without any intervention until the yarn breaks or the supply
package in the creel is exhausted. Then the spinner must piece the package,
and a discontinuity is apparent in the yarn thus produced. Similarly, when a
loom is weaving fabric with the automatic weft replenishment, it will not
stop and will not require the attention of a worker until a thread breaks or
until there is a failure to replenish the weft. In both cases, a discernible fault
can easily be produced in the fabric.
At one pole of the textile industry are hand spinning and hand weaving,
where the nonuniformity of the fabric can be regarded as one of its attrac-
tions. At the other extreme is the production of fabric for low-cost, ready-
made garments where uniform quality and low fault incidence are required.
When cheap ready-made garments, such as shirts and slacks, supplant more
traditional dresses, the local textile industry must respond to this change in
market. A labor-intensive technology may not be entirely suited to this new
market, and a technology designed to satisfy a particular market demand
may be inherently machine oriented and therefore capital intensive rather
than labor intensive.
The finishing activities of a textile mill are the sectors where there is the
greatest interaction between technology and the wishes of the consumer.
Some interaction does take place in the weaving and spinning processes, but
in the modern textile industry, the greatest impact is generally in finishing,
the phase in which colors or prints are added to fabrics. In parts of the
world where a traditional dress or color is known, a highly specialized tech-
nology may be necessary to produce exactly the shade of color desired in the
fabric. In other countries, prints are worn, and it is then necessary to as-
similate both the technology of actual printing and the art of designing
prints that will appeal to consumers. This has always been a very specialized
activity, and it is not always easy to transfer, although it might well be sup-
posed that local artists are best able to design fabrics that will appeal to
local consumers. This is an extremely important technology; textile mills
can frequently produce fabrics that are quite satisfactory from the technical
point of view but have the inherent disadvantage of being difficult to sell-
at any price-in the market for which they were intended.



The International Finance Corporation                  237
The textile industry can use either natural or synthetic fibers. In the past,
IFC's activities have not been much concerned with synthetic fibers, and it
seems unlikely that they will form a substantial part of its activities in the
future. Synthetic fibers can, however, confer additional and useful properties
to fabrics and have been important in the corporation's activities in the more
industrialized developing countries. T;,. tiechnologies in this area are rela-
tively new, although easily available cormimercially, and in general no mo-
nopoly exists in the supply of technology for either polyamide or polyester.
Regardless of the type of technology employed, synthetic fiber plants are
high-technology, capital-intensive units. They involve chemical operations,
which require careful controls and precise high-speed machinery of con-
siderable strength for the processing of yarns and fibers. Maintenance prob-
lems at the higher ends of technology are important, and the transfer of
these peripheral technologies may have a greater bearing on the success of
an enterprise than the transfer of the core technology itself. The implica-
tions for backward integration and for cross-linkages with the petroleum
and associated petrochemical industries are very important. Some form of
technological anticipation may be required in the selection of the ap-
propriate process technology, and the probable developments in the
petroleum refining and petrochemical sectors of the host country must be
taken into account.
Construction Materials
By far the greatest part of the IFC's experience in the construction sector
has been with the production of cement. The raw materials are frequently,
but not always, available in developing countries, and the technology is
mature and well established. Efforts are being made, however, to scale
down this technology and to develop smaller regional plants. The IFC has
had no direct involvement with any of these efforts, but developments in
this area are being kept under close review. The considerable importance at-
tached to technology and technology transfer in the IFC's operations re-
quires a wide knowledge of potential technological alternatives, which may
be suitable in particular projects.
Although cement technology is well developed and widely understood,
it is raw-material sensitive (as in the case of the reduction operations in iron
and steel), and technology selection must take this factor into considera-
tion. Some years ago, the choice between wet and dry processes was not
always clear, but now the problem has become straightforward. As
technology progresses and as energy costs change, new technologies are in-
troduced to economize fuel consumption in the burning process of cement
manufacture. Therefore it is necessary to consider the raw material and fuel



238                 Technology, Finance, and Development
characteristics more closely and to take a critical look at such problems as
the use of air suspension preheaters on the cement kiln.
The cement industry involves considerable heavy erection during the
construction period, but the equipment suppliers are well able to supply the
specialized field erection staff. The transfer of operating technologies is not
particularly difficult, but the maintenance requirements remain important.
Other important building materials are clay products. Here also there
have been few changes in technology for a very long period, but detail im-
provements in equipment and minor technologies are constantly taking
place. The suitability and availability of raw materials must also be taken
into consideration, and the possibility of variation as deposits are worked
must always be kept in mind. The transfer of quality control technologies to
ensure consistency of the constituents is essential.
Involvement in new construction materials is likely to require the trans-
fer of both production technologies and utilization technologies. In
developing economies, building techniques are often traditional. Labor-
intensive methods are usually prevalent and dependent on the use of local
raw materials. Newly developed materials can be suggested as substitutes
for these traditional materials, but one must not overlook the impact of
such innovations on the existing construction industry. In the same way,
careful consideration must be given to the impact of novel materials on the
industry that would produce them and on the industry that will have to use
them.
Pulp and Paper
Technology transfer problems in the pulp and paper industry are more
acute than in many other sectors. This is not so much because of novelties in
equipment (paper machines are reasonably standardized and differ chiefly
in terms of their end products) but because the raw materials out of which
paper can be produced are varied. This is the same problem as with cotton.
But whereas cotton is a warm climate product, which has been long exported
and has benefited from production technologies developed in the equipment-
exporting countries, cellulosic raw materials are rarely exported, and the
development of pulping technologies has suffered in consequence.
The properties of the pulp depend on the characteristics of the species
from which it is produced, and technology can do nothing to lengthen the
inherent fiber length of the cellulose; however, an inappropriately selected
technology can result in reducing fiber length. In the tropical or subtropical
developing countries, the naturally occurring specis of trees rarely provide
the long fiber cellulose necessary for the production of high-strength
papers. Natural forests, moreover, contain many different species, and



The International Finance Corporation                   239
selective cutting is rarely economical. The operations of a pulp mill running
on a mixture of tropical hardwoods are thus difficult to control, and the
quality of the end product is generally not as high as might be desired.
Sources of cellulose other than trees are available, however. Two in par-
ticular, bagasse and bamboo, can produce a satisfactory pulp with short to
medium fiber lengths, but both can pose problems in the operations of a
pulp mill's chemical recovery system. This system is needed not only for
economy in the use of chemicals but also for environmental protection.
Here there is a real need for development programs. Equipment suppliers
are generally located in the developed countries, and the pulping industries
in those countries are not dependent on the use of tropical raw materials.
On the other hand, a number of developing countries have taken the tech-
nology of pulping such materials as bagasse and bamboo further. In this in-
dustry, there is a real opportunity to extend the sources from which tech-
nology may be transferred.
These difficulties with naturally occurring cellulose sources or other
readily available sources have prompted the establishment of plantations of
exotic tree species on which a paper industry can be established, which gives
rise to questions as to the suitable technologies for arboriculture. Pulp and
paper-making operations must be located close to the source of cellulose
and close to sources of process water. Like other continuously operating in-
dustries, the operations of a pulp and paper mill pose considerable main-
tenance problems. The operation and maintenance of the chemical recovery
system also demands a high degree of expertise. It is not uncomnmon in de-
veloping countries to find that available local personnel with the necessary
technical skills may be unwilling to relocate themselves and their families to
the new plant, which is often remote and may lack such amenities as schools,
shops, and entertainment. This problem is more acute today now that the
convenience of urban life is better appreciated.
Technology Transfer Mechanisms
Almost all transfers of technology depend to some extent on written instruc-
tions. It is a common requirement that new equipment be supplied with the
necessary documentation, which includes handbooks, drawings, and lists of
parts. This widely applied principle can be effective under suitable condi-
tions, but in everyday life, such written transfers frequently fail, even in the
case of activities less complicated than industrial operations. Too often the
instruction pamphlets and handbooks supplied with automobiles and
cameras, for instance, are not adequately studied by the purchasers, and the
inability of purchasers to assemble knocked-down items according to the in-
structions is notorious. In contrast, some companies are able to sell kits of



240                 Technology, Finance, and Development
electronic components, which are then assembled by purchasers who have
little or no electronic knowledge, and the results are generally satisfactory.
Correspondence schools have managed to teach a number of disciplines suc-
cessfully, and both technical instruction and academic teaching are now
able to augment the written instructions with audiovisual presentations.
Equipment suppliers do not always pay enough attention to the devel-
opment of training manuals and training aids, and the use of unfamiliar
languages poses particular problems. Those familiar with a technology and
who are best equipped to determine what has to be transferred are not
always lucid writers. Conversely, able writers are frequently unfamiliar with
technology and with technological usage, even in their native language. If a
translation is required, difficulties are compounded, and the checking of the
foreign-language version by the technological originator is likely to be inef-
fective.
Technology transfers concerned with the procurement by an existing
enterprise of improved machines to increase its production capacity often
rely entirely on such documentation. It should never be forgotten, however,
that some technology transfers must reach organizational levels in the host
country where familiarity with a foreign language is rare. Even if language
difficulties do not exist or have been overcome, the dissemination of tech-
nology to the organizational level, where it can be used effectively, is
sometimes defective. It is not unknown, for example, for maintenance
workers doing their best to adjust a machine to be unaware of a carefully
prepared manual that specifies the exact procedures but is kept in the man-
ager's office.
Written and audiovisual presentations are an important part of tech-
nology transfer, but they are limited in scope and frequently need to be sup-
plemented. All such supplements involve personnel training, and this can
take place at the source of the technology or at the point of employment, or
at both. Both formal instruction and exposure to opportunities for learning
by experience are used. Although there is frequent use of such terms as tech-
nology package and the unbundling of technology, this jargon should not
obscure the fundamental reality that effective transfers require that some
people acquire knowledge and skills that they previously lacked. The prob-
lems and methods of transfer can be greatly simplified if this is kept con-
stantly in mind.
For technology to be transferred within industrialized countries, both
training and documentation are required. Training can be carried out in the
equipment supplier's plant or, occasionally, in another plant where similar
equipment is in daily use. There can be problems of confidentiality here, but
in general the method is effective, particularly when the supplier of tech-
nology has established specialized training facilities and developed a full-
time training staff.



The International Finance Corporation                   241
In developing countries, the two most obvious obstacles are language
and expense. Personnel trained for a development project are unlikely to
have had extensive industrial experience, and learning cannot be as rapid as
with people from industrialized countries with a more extensive exposure to
industrial operations.
Trained personnel do not always remain with the company that origi-
nally arranged for their training. Their attractiveness to other employers
and their own ambitions are likely to increase. If they have been trained in
the peripheral support technologies, other local enterprises may hire them
away, and, occasionally, when their language skills are particularly useful,
they can be hired by organizations in the developed countries.
A weakness of both the instruction manual and the formalized training
approaches to technology transfer is that they can deal effectively only with
determinate matters. They must be based on the conventional wisdom
familiar to the writers and lecturers, and the comprehensiveness of this will
depend on the existence of effective feedback from established operations. A
transfer must serve as a basis for an extension of the technological principles
into a novel environment. Problems are likely to arise that are not easily an.
ticipated, and solutions must be devised during the process of transfer.
What is not always realized by those not directly involved in them is that
industrial operations contnuously present a succession of problems. There
tend to be a smaller number of large problems and a larger number of small
problems, and the success of an enterprise depends on the extent to which
the incidence of such problems can be reduced.
The elimination of problems require a knowledge of their causes and the
feedback from established operations, which makes it possible to include
such knowledge in the formalized transfer of technology. By contrast, when
problems develop as operations proceed and must be solved as novelties
when they arise, something beyond formal transfer is required. Examples of
problems that are not easily anticipated are variations in ore bodies encoun-
tered as extraction proceeds, changes in consumer preferences in the textile
industry, and, common to virtually all industries, changes in the operating
characteristics of the installed equipment produced by wear and tear. These
factors, coupled with restrictions imposed by cost and the short duration of
training, places a limit on the transfer capabilities of the written and the
source-located training procedures. Therefore it is frequently necessary for an
additional transfer capability to be provided. This can be regarded as a
form of on-the-job training coupled with some evolutionary capability for
extending and adjusting established technology to comply with particular
conditions. This commonly involves the employment at the site of expatri-
ate staff with long experience in the required technologies. Their task is to
train local successors and to develop solutions to operational problems just
as they would if they were working in a developed economy.



242                Technology, Finance, and Development
Such employment is common in the construction and start-up phases of
projects. The erection of the more complex pieces of equipment is normally
supervised by specialists from the suppliers, and they usually remain on site
until the equipment has been put into operation. Similarly, technical staff
from process vendors can be employed during the project development
phase. These are short-term assignments, but they are effective in supplying
the guidance needed. They are likely to be quite adequate when the new
technology is supplied to an existing plant where the required supporting
technologies are well established.
In developmental industrial projects, the transfer of peripheral and sup-
porting technologies is frequently of equal or greater importance than the
transfer of the core technology. Shorter-term appointments cannot deal so
effectively with activities that, unlike erection and start-up, persist and, not
infrequently, grow in importance throughout the life of the investment.
Equipment maintenance, production planning, and management accounting
are examples. The technological content of these activities varies. Ex-
perience, however, indicates that successful operations are markedly influ-
enced by them; serious shortfalls in capacity utilization, which in turn cause
financial problems, nearly always result from deficiencies in this area.
These activities are not only essential but permanent, and they must be
transferred. One solution is to employ staff from similar industries in the
country or from similar plants in other countries if local sources are inade-
quate.
The technologies of equipment maintenance are of special importance
and pose particular problems in a developing economy. In developed
countries, specialized assistance is available since the volume of work per-
mits specialization, skilled workers can be hired away from equipment
producers, and delivery times of spares can be short and inventories conse-
quently small. Furthermore, since labor is expensive and spares cheap,
maintenance practices involving replacement rather than repair are feasi-
ble. Developing economies can provide few, if any, of these advantages.
Maintenance by replacement is likely to be less attractive, and there is a
frequent tendency to recondition, using available local resources as a
substitute for replacement. But with many types of repair, reconditioning
needs special skills and quality controls if downtime is to remain low, and
the loss in productive time of the main investments must be taken into
consideration when reconditioning is being considered. There are thus con-
siderable opportunities for local initiative in the development of ap-
propriate technologies and procedures for maintenance. It is, however,
very much a practically oriented activity and does not seem to have received
the attention it deserves. Greater consideration of maintenance practices
and related technologies would not only improve the performance of cur-
rent industrial investments but would also assist in building up indigenous
technological capabilities.



The International Finance Corporation                     243
Sources and Costs of Transferred Technology
The analytical work leading to an investment decision includes the deter-
mination of a project's technological requirements and the means required
for the transfer of technology. These transfer requirements fall into two
separate but closely related categories: those associated with the design and
construction phases of the project and those associated with its subsequent
operation. Although there is some overlapping between the two, they are very
different, and practitioners generally cannot be assumed to be freely inter-
changeable. In industrialized countries, companies whose main business lies
in operations are unlikely to possess in-house capabilities for the design and
construction of new facilities unless they are iarge and so successful that they
can contemplate a more or less continuous program of expansion. They
must, of course, have extensive internal resources of operational technolo-
gies. At the other end of the technological resource spectrum, organizations
that specialize in design and construction activities are unlikely to be fully ex-
perienced sources of operational technologies.
If a project is to operate successfully-and it must be stressed that
operation is the pay-off since all the benefits expected to flow from it are
conditional on its satisfactory operation-then the plans on which it is to be
built must be endorsed by responsible representatives of those who will have
to operate it and who will be responsible for its success. A plant that has
been constructed according to proposals drawn up by design institutions
and equipment suppliers and where the inputs of the operations technolo-
gies have been postponed until production is almost due to start is likely to
encounter unnecessary problems and rectification expenses. The difficulties
are exacerbated if, as is frequently the case when a project has a develop-
mental context, the top management of the new enterprise is not familiar
with the day-to-day practical operating problems. If the new enterprise to
be established is associated with an existing industrial company, it is possi-
ble to give experienced staff the opportunity to study similar activities
abroad and to entrust them with the responsibility for endorsing the design
proposals, fully aware that they will also be responsible for the ultimate suc-
cess of the new investment. Such a strategy can be very successful but is
feasible only in the more industrialized developing countries.
If a project is to be carried out by a completely new entity, staff must be
recruited and similar opportunities for acquiring experience arranged for
them, but the links of responsibility in this case are likely to be more
tenuous. For large and complex projects aimed at establishing a new in-
dustry (and that usually means the establishment of a new corporate entity),
something more is required. The fundamental problem is that worthwhile
experience of production operations exists only within the enterprises in
that industry. This means that for a developmental project, this experience
is likely to exist only outside the host country.



244                  Technology, Finance, and Development
A newly established company can advertise and recruit the required ex-
patriates on its own account, but such an attempt might easily fail to attract
good personnel from their present employment. Experience also suggests
that such collections of expatriates do not readily work as a team and that
success is then very dependent on the coordinating talents of the top man-
agement of the new enterprise.
For all these reasons, it may be preferable to obtain the operating advice
from a foreign firm that has practical experience of the activity under con-
sideration. Such firms may not, and indeed for their own best interests
ought not to, have appropriate staff immediately available, and the ultimate
staffing, if not also the initial staffing, is likely to require some measures of
promotion and recruitment. With a single source of personnel and a central
responsibility for performance, coordination is much easier and the opera-
tion of the project is likely to be more satisfactory. It does, however, raise
special problems as far as payment and performance incentives are coIn-
cerned.
Simpler arrangements do not pose such problems. Expatriates can be re-
cruited either directly or through an agent, and the expenses are straight-
forward. Depending on the attractiveness of conditions in the host country
and the going rates in the countries where recruitment is undertaken, some
sort of proposal can be developed, and the responses to it provide a justifi-
cation for the ultimate costs.
If projects are large and sufficiently important, such competitive prin-
ciples can be used to select an operating company to provide the operating
advice required by the new enterprise. The most suitable pattern of reward
for such services might be a fee related to the performance of the enterprise to
be established. The development of a suitable incentive basis for such a fee
is not, however, as easy as it might seem. Great care is needed to avoid
suboptimizations, and the big weakness in such a system is that it is difficult
to introduce negative fees for substandard achievement.
These difficulties suggest that a technical partner that has a real invest-
ment in the newly established enterprise, that profits by it only as and when
other investors also prosper, and that sees the value of its investments
decrease just as they also do when the outcome of operations is unattrac-
tive, is likely to provide the appropriate practical operating advice for as
long as it is required.
This need for a technical partner with an associated investment can be
justified on the following grounds: there is a need for experience in operat-
ing technology, this experience must be obtained from similar industrial
operations, and there are major difficulties in designing simple and effective
incentive payments for a company that undertakes to provide such
operating assistance. The effectiveness of such an approach is lessened if the
equity investment is, in effect, a deferred payment of the profits resulting
from the supply of goods and services to the project.



The International Finance Corporation                 245
The circumstances of a particular investment determine the technology
transfers required for its successful implementation and operation. Require-
ments are variable even within a sector, and, consequently, useful quanti-
tative generalizations as to transfer costs cannot be made. The justification
of an expense by comparison with other projects can be meaningful only if
both their scope and costs are known. Costs can be quite easily and com-
pactly described, but what is included cannot be expressed so readily.
Without adequate specifications, two transactions whose cost appear iden-
tical may be considered to be in line, but a knowledge of what has indeed
been included in them often suggests that they are really different.
The acceptable level of technology transfer costs can be determined only
once the type of services supplied, the method of supply, its timing, and its
duration have been specified. Once the amount of man-years of work has
been reliably estimated and quotations of cost per man-year obtained, an
informed appreciation of a large part of the costs of technology transfer can
be made.
The costs should always be compared with the benefits received.
Estimates that compare the cost of purchasing proprietary know-how with
that of developilng a new alteriiative are encountered infrequently, if at all.
The great majority of transfers are concerned with technologies that facili-
tate or improve construction, start-up, and operation. All are important,
and the benefits of improvement generally can be expressed in financial
terms. Financial and overhead expenses depend on time, either in the con-
struction phase or in the time from start-up to breakeven, and estimates of
time, savings, and associated benefits can be compared with the estimated
costs of attaining them through other means.
Of far greater importance in most cases are the additional costs that can
be incurred and the earnings forgone by failures to transfer adequately the
technologies of plant maintenance, production planning, and cost control.
These deficiencies are encountered in virtually all sectors and all too fre-
quently are characteristic of industrial operations in developing economies.
Greater emphasis on internal technology transfers and on the development
of local capabilities is likely to produce very worthwhile improvements. Yet
suggestions to stimulate research to extend technology are more frequently
encountered than suggestions to improve the ability to employ effectively
the technologies that already exist. If seed falls on stony ground, plant
breeding experiments are not the best answer. Removal of the stones offers
a better prospect and might provide more employment for the lesser
qualified.
Note
1. The Bank Group comprises the World Bank, IDA, and IFC.



The Engineering
.7-         Industries
Frederick T. Moore
A number of activities have been undertaken to raise the technological
capabilities, and hence the competitive position, of industry in several
developing countries; the primary emphasis in this chapter is on the
engineering or capital goods industries.' These are primarily the machine-
building industries and include three large groups of electrical and nonelec-
trical machinery and transport equipment. Their typical product lines in-
clude agricultural machinery, engines and turbines, metal-working and
woodworking machinery (including machine tools), shipbuilding and rail-
road equipment, motor vehicles, and scientific equipment.
Many characteristics of engineering products make them attractive in
development. First, many such products can be produced reasonably effi-
ciently on a small scale. This category includes products that are typically
produced in small batches or in a "one off" fashion and where the produc-
tion processes are simple and standard and havte a relatively few machine
operations. Under such circumstances, the amount of fixed investment is
modest, which means that many of the enterprises would fall in the
classification of medium-scale or smaller firms. In other cases, however,
large-scale production is required because of the interdependent nature of
complex production processes, and the size of the investmcnt in plant and
equipment is substantial. We do not have good empirical estimates of the
minimum efficient scale of output for the heterogeneous engineering prod-
ucts or information on whether the cost curve is relatively flat bottomed
over a range of output.
A second characteristic of these industries is that they tend to be labor
intensive and hence offer opportunities for absorption of labor. Offsetting
this is the fact they also tend to be skill intensive. Although their potential
for labor absorption is attractive to countries concerned with employment
creation, a shortage of skilled technicians and engineers can be a major im-
pediment to their development.
Third, the technology employed in these industries is, in large part, well
known and often has been in use for many years. Within the past fifteen
years, there has been a virtual explosion in the art of metalworking as more
complex jobs are undertaken in a single operation (such as working on
several axes at the same time), but the dimensional accuracy required in
much of the work has not changed greatly. Many products are still made in
much the same way now as before. This means that the ability to master the
247



248                 Technology, Finance, and Development
basic technology is not impaired by rapidly changing methods across a wide
spectrum of products. The lack of a flow of information on technical pro-
cesses down to the operator level may, however, be an impediment.
Fourth, the external economies among the engineering industries are
typically extensive; that is, there are strong linkages both backward and for-
ward among the products so that it is possible to find families of products
that are mutually supportive. In order to take advantage of this, however,
development programs must be planned as an integral and interdependent
whole.
Fifth, the engineering industries tend to be the carriers of technological
change, and there are numerous opportunities to borrow the ideas, to copy,
and to make changes that have effects beyond the confines of the engineer-
ing industries themselves. This may be a means of stimulating domestic
research, development, and engineering programs in a country as well, and
the spillover effects throughout industry are usually substantial.
Finally, there are a number of products (parts, components, and sub-
assemblies but also some end items) that developing countries can success-
fully export. International subcontracting of parts also can be a significant
stimulus for export, particularly in the case of products where labor costs in
industrialized countries are high. Many of these export markets are dif-
ferentiated because of the product characteristics, and exports do not run
into the same problems of quotas and controls that frequently face tradi-
tional goods.
These characteristics are strong arguments in favor of a more rapid
development of the engineering industries in the developing countries.
Although there are a number of specific obstacles and problems, the
favorable aspects offer a strong rationale for the expansion of this par-
ticular industrial sector.
The Rate of Growth of Engineering Industries
Substantial research has been done on the typical or normal patterns of
growth of major sectors in the economy (agriculture, industry, and services)
and of specific groups within the industrial sector (such as food, textiles,
metals, and machinery). On the basis of this research, it is possible to obtain
some comparative guidelines on the typical pattern of growth of the
engineering industries, given different levels of development (measured here
in terms of per capita GNP) and their relative importance in the manufac-
turing sector.2
Table 15-1 shows that the typical share of GNP originating in manufac-
turing varies from 17 percent at a per capita income level of $330 to 27 per-
cent when per capita income reaches $1,285. The engineering industries'



Trhe Engineering Industries                                 249
Table 15-1
Relative Size of the Manufacturing and Engineering Industries
Per Capita              Share of            Share of
GNP at               MVanufacturing       Engineering          Share of
1978 Price              Industries         Industries       Engineering in
Equivalent              in GNP              in GNP          Manufacturing
$ 330                     17%                 3%                18%o
1,285                   27                   8                 30
5,000                    30                 11                 37
Source: V. Prakash and S. Robinson, "A Cross-Country Analysis of Patterns of Industrial
Growth," draft World Bank Paper (Washington, D.C.: World Bank, 1979).
Note: Income has been adjusted from a 1970 to a 1978 base. The data present a time series and
cross section sample of countries around the world.
share in GNP is only 3 percent when per capita income is $330 but almost
triples at an income level of $1,285.
Engineering industries typically grow much more rapidly than the
manufacturing sector as a whole. At a per capita income level of $330, the
growth elasticity for all manufacturing (the percentage increase in manufac-
turing value added per 1 percent increase in real GNP) is about 1.6, but the
growth elasticity for engineering industries is typically over 2.3 and is higher
than for any other industrial group. These are the dynamic growth in-
dustries even at this relatively low level of per capita income, and the same is
true as per capita income increases. Clearly this is an important reason for
concentrating development policies on the engineering incustries.
Measuring the Efficiency of the
Engineering Industries
Bearing in mind the importance of the engineering industries in the process
of economic growth and industrial development, the World Bank has tried
to evaluate the technological level of these industries in selected countries
and, on this basis, to prescribe the elements of a development program, in-
cluding preparation of feasibility studies for specific projects aimed at im-
proving technological capabilities in the engineering sector of two countries,
South Korea and Thailand. None of the projects described here has yet been
carried through the complete cycle, and the conclusions that can be drawn
from them are therefore tentative. This story does, however, show the ways
in which the World Bank acts as a technological institution and how action-
oriented research provides the basis for broad development policies and for
specific industrial projects aimed at promoting the growth of indigenous
technological capabilities in the developing countries.



250                 Technology, Finance, and Development
The measurement and evaluation of current technological capabilities in
the engineering industries was based on visits by Bank staff to a sample of
individual plants covering a wide variety of product lines in the two coun-
tries concerned. Technological capabilities were first addressed in terms of
the efficiency of current operations using existing equipment and labor (that
is, X-efficiency, to use the technical term). In the second phase, an attempt
was made to determine those product lines in which the country had some
comparative advantage or could readily acquire such a position with addi-
tional investment in equipment, training of labor, and reorganization of
production methods.
The sample of plants to be visited was chosen in conjunction with
knowledgeable people in industry and government. The visits were made by
engineers with extensive experience in production and plant management.
After each visit, an individual analysis and assessment of the facility or of
individual product lines was made. In order to arrive at an accurate and
uniform analysis, the engineers making the evaluation were asked to con-
sider specifically seven major factors and to award points or to score each
of them.3 The seven factors assessed were the following:
1. Plant layout and flow of work: This includes the layout of machinery
and equipment to permit the optimum flow of material and the min-
imum amount of handling in processing the product from receipt of the
raw material to the finished product. Factors considered were flow of
work, storage, material-handling facilities in plant, and other logistical
arrangements.
2. Operating practices: These cover principally the application of produc-
tion engineering techniques to the manufacturing processes, including the
processing of materials, preplanning methods for producing the compo-
nent, work measurement, tooling setups on the machines, jigs and fix-
tures, assignment of tasks to the machines, the use of metal-cutting and
metal-forming tools, as well as safety procedures and practices.
3. Maintenance of plant and equipment and conditions of machines: This
includes how the production machinery, ancillary plant, and service
equipment are maintained in order to avoid shutdowns of the manufac-
turing processes, the procedures such as planned preventive mainten-
ance schemes that may be carried out to keep the operating plant in
good condition, and the age and accuracy of the maclhines and equip-
ment in the plant.
4. Labor use and productivity: This factor covers the manner in which
management employs its labor force, which, in a larger context, may
dictate how effective or productive the labor force is in the operations.
It will also include such activities as on-the-job-training or specific train-
ing for production or machine operations.



The Engineering Industries                             251
5. Quality of product: In this context, product quality refers primar-
ily to the product's acceptability in the international markets and to
the in-plant systems for setting, monitoring, and maintaining product
quality.
6. Engineering design, testing, research and development: This factor
refers to the existence of in-plant facilities and capabilities to design,
redesign, and retool or otherwise adapt or modify existing product lines
to meet changing demands or conditions in the plant.
7. Management systems: This includes the normal business controls such
as costing, marketing, and sales, as well as controls of production pro-
cesses such as inventory control, production control, and labor and
output statistics for planning and control.
For each of the seven factors to be evaluated, a score was awarded on a
scale ranging from 60 to 100. There was a minimum differential of five
points between each evaluation (60, 65, 70, 75, and so on) so as not to impose
too exact a measurement on the engineer. A figure of 90 to 95 corresponds to
efficient production processes, comparable to those of industrialized coun-
tries, and a score below 75 indicates deficiencies in production and manage-
ment systems that, if not corrected, probably would lead to the failure of
the firm. An intermediate score of 80 to 85 indicates acceptable practices for
expansion within local markets, and a score of 85 to 90 suggests that the ex-
ports are possible to less developed countries but not to the more sophisti-
cated markets of the industrialized countries.
Clearly there is always some injustice in trying to portray the overall
capabilities of an industry in such a way. An industry is made up of a large
number of individual firms, and the potential of each may vary quite con-
siderably. This is particularly the case of Korea, where the machinery in-
dustry is rather dualistic in nature. The new generation plants built in
Changwon after 1975 are much more advanced than those built earlier (and
were the only ones covered in this survey). Although the same elements of
comparison, with one exception, were used in both Korea and Thailand, the
average scores (shown in table 15-2) cannot be compared for the two coun-
tries. There is general agreement that the enterprises in Korea are more ad-
vanced than those in Thailand.
In Thailand, it very quickly became apparent that there are significant
differences among the sample group of firms and that they should actually
be subdivided into three distinct groups. The first group of Thai companies,
financed by domestic entrepreneurs, have no significant engineering or
technological capability in the management and do not appear to have
ready access to technological information. Consequently these companies
generally displayed poor use or understanding of technology, which was
frequently accompanied by obsolete and inefficient equipment. About half



252                  Technology, Finance, and Development
Table 15-2
Summary of Scores from Plant Visits in Korea and Thailand
Korean Firms                Thai Firms
Without    With    Joint Venture  Weights
Engineers  Engineers  or Foreign   (%)
Plant layout          70-75      72         78         82          8
Operating practices     70       65         83         88         18
Maintenance             75       65         80         86          8
Labor use and
productivity          75        75        85         84         17
Product quality      80-85        77        87         89         20
Engineering design   75-80       76         81         80         18
Management systems     n.a.       69        69         78         11
Weighted average       n.a.       72.0     81.6        84.3      100.0
of the companies visited by the mission fell into this category. The second
group are indigenous Thai companies, where day-to-day management deci-
sions are in the hands of engineers or technically trained personnel. Generally
these companies were profitable, they were frequently expanding fairly
rapidly, and they seemed to provide a good foundation for the development
of an indigenous Thai industry. These companies, however, appear to be in
a distinct minority. The third group of companies comprises joint ventures
and foreign firms; their technology and equipment have usually been im-
ported, and their products are often comparable in quality with those made
abroad. Managerment is usually in the hands of foreigners. The majority of
these enterprises have been established in Thailand only over the past seven
or eight years, and some are still in the process of adjusting their operations
to the market.
The summary of the point scores is given in table 15-2 for both the
Korean and Thai firms, the latter subdivided into the three groups. In
Thailand, the seven factors identified in this survey have been weighted ac-
cording to their relative importance so as to arrive at an average score for
each group of firms. This weighting system was derived by the eng.neers
carrying out the survey and is based on their judgment and experience as to
the relative importance of each of these factors in the successful operation
of a factory. Four factors (operating practices, labor use, product quality,
and engineering design) account for approximately 75 percent of the total
weight.
The average score for all factors provides a rough measure of the extent
of inefficiencies in management of resources, but of greater operational
significance are the conclusions and recommendations for each of the fac-
tors taken separately.4 One of the most significant conclusions emerging



The Engineering Industries                              253
from this analysis is that in many cases it is possible to improve operations
significantly with little or no increase in investment. In Korea, for instance,
it appeared that increases in productivity of around 10 to 20 percent were
readily attainable through the relocation of machinery to improve the flow
of work and through improvements in operating practices. In a standard
gear-cutting operation, the idle time on the machine could have been
decreased by over 50 percent by the use of a simple jig. In both countries,
the production practices in removal of metal were judged seriously defi-
cient, with adverse effects on costs and product quality.
The examples drawn from the individual plant evaluations can be used
to show the extent and characteristics of the inefficiencies in present opera-
tions. Each instance of a technical inefficiency can be translated into an ef-
fect on costs of production and an impairment in competitiveness, but it is
not easy to make this kind of calculation with any precision when there are
numerous technical inefficiencies. Accurate cost records are jealously
guarded by management, and in many cases such records do not even exist
for many of the plants visited. It was, however, feasible to form an opinion
as to the kind of technical assistance required to correct the major deficien-
cies, and that type of calculation has provided the first element of a
development program for the industry in both Korea and Thailand.
Local Technological Capabilities and Their
Linkage with National Policies
Plans for expanding output of engineering goods and increasing the variety
of products must take into account the ability of domestic firms to produce
at costs and qualities competitive with imports. An analysis of existing or
potential comparative advantage is, however, difficult in situations where
the market conditions are changing, the available information is unreliable,
and the policy environment has already created differences in treatment
among firms.
A number of criteria were taken into account to help determine
whether, in a dynamic growth situation, a comparative advantage was likely
to exist or could readily be achieved. These criteria included the conditions
of the domestic and export markets, the relative composition of material in-
puts and labor costs, and the existence of strong linkages within a group of
product lines, which may make it possible to take advantage of external
economies through joint development of the group. In some cases, there are
possibilities of economies in small-scale operations or batch production,
and in other cases certain product lines may be unique!y suited to a specific
regional location.



254                  Technology, Finance, and Development
In Korea the development of the engineering industries is being under-
taken under the pressure to expand exports. Between 1976 and 1991, the
output of the most important machinery products is expected to grow at a
rate about 50 percent higher than manufacturing output as a whole, and
over half of all exports are expected to originate in these industries. In these
circumstances, it was necessary to try to identify some specific items where
there is likely to be a window in the international market and to identify
other less specific product groupings where the general conditions for
development appeared favorable.
In Thailand some general principles for choosing priorities for develop-
ment were derived from the plant visits and a survey of local financial and
economic conditions. These principles included an emphasis on labor-
intensive products (but with a need to raise efficiency wages through labor
training), an initial priority on domestic market needs, the avoidance of
highly complex items or those requiring a high level of precision in machin-
ing, an emphasis on products involving sheet and plate work in fabrication
and simple standardized machinery and assembly, and the avoidance of
products that require high volumes of output in order to achieve low pro-
duction costs. These principles are very pragmatic and have been made
deliberately so since we do not think that at this point in the elaboration of a
development plan for the engineering industries it would be prudent to try
to derive fine specifications on product possibilities. Some basis for an ini-
tial rough cut is required, however, and at a later point specific investment
projects will be evaluated in terms of their economic, financial, and tech-
nical feasibility. As a beginning point, these general principles nevertheless
are adequate.
Based on a listing of factors reflecting demand, cost, and existing
market structure, the analytic team of economists and engineers then pooled
their information and in lengthy sessions talked through a long list of prod-
ucts, evaluating each element in turn, using the available qualitative and
quantitative information. This resulted in a fairly extensive list of products
for which the various factors in Thailand seemed favorable. This list included
hand tools and cutlery, selected small agricultural equipment, small industrial
engines, certain types of pumps and valves, architectural and construction
hardware, shipbuilding and repair (coastal and fishing boats), certain stan-
dard machine tools (center lathes, hacksaw machines, bench drills), small
transformers and switchgear, and some automotive parts. Other products
were recommended for deferral until later.
At this point, an economist might point to the fact that a better way to
derive a priority list would be simply to compute the effective rate of pro-
tection of the products or the domestic resource costs and use this as a basis
for determining policy choices. A special study of effective rates of protec-
tion for the engineering industries was in fact carried out in Thailand, but



The Engineering Industries                                255
such data, while extremely useful, do not use all the information available
and have the drawback of being rather static. Furthermore, they are subject
to substantial variations when there are slight changes in basic conditions
and do not incorporate such factors as the potential for price decreases
brought about by technical assistance, the extent of differentiation in inter-
national markets, or the knowledge that a change in product mix can make
the difference between profit and loss.
A comparison between the conclusions derived from the study of effec-
tive rates of protection and those achieved on the basis of the judgment of
the team of experts showed that the structure of protection (tariffs and
taxes) discriminated against the production of many engineering goods,
which, on technical and other grounds (such as the degree of labor productiv-
ity), probably should be favored, and gave high protection to products such
as motor vehicles that were likely to be produced inefficiently and at high
cost. The study of effective rates of protection led, in fact, to recommenda-
tions for a revision of the tariff structure of protection and served as a check
on the list of promising product lines established by the team of experts.
This selection of product lines was meant to be the starting point for a
development program, and individual investment projects will have to be
subjected to careful analysis. The designation of products to be given
preference is primarily a way of signaling to the private sector those areas
that are likely to be attractive and to receive incentives in a government pro-
gram. The analyses derived from the plant visits and the preliminary list of
product groups can serve as a basis for the design of a program to assist
enterprises in improving their technological capabilities.
Development Projects for the
Engineering Industries
The projects being developed on the basis of these surveys of the engineer-
ing industries in Korea and Thailand will have four major components:
technical assistance, funds to support new investment, training of the labor
force and management, and reform of the government incentive system. At
this point it may be useful to focus on each of these project components so
as to show the ways in which they can contribute, directly or indirectly, to
the development of local technological capabilities in the borrowing coun-
tries. At a more general level, this description of project components shows
some of the ways in which the World Bank is acting as a technological in-
stitution in the projects it finances.
The first of these project components is technical assistance, channeled
through experienced production engineers and management personnel who
are to work with the owners and managers of the local enterprises and help



256                Technology, Finance, and Development
them raise the level of efficiency of current operations. This may result in
changes in the layout of machinery in the plant, the number and output
levels of products, operating and maintenance practices, the use of labor,
and management practices. Through this effort, a diagnosis of the problems
will be made, and prescriptions for correction will be agreed on and carried
out. In many cases, such changes can be accomplished in a relatively short
period, and experts should be able to demonstrate to the owners' satisfac-
tion that the changes will improve their capabilities.
Experience tends to indicate that the expectations about the effec-
tiveness of technical assistance can be realized. In one country, following a
World Bank industrial mission, the government contracted with a private
group of consulting engineers and about fifteen specialists who spent one
month working with a selected group of some thirty enterprises. They
brought with them a variety of scientific equipment and key production
items. They were able to make some changes on the spot, gave demonstra-
tions of how to use equipment more efficiently, left sketches of how to
make other changes, and provided information on tooling and equipment
that was not known to the local firms. Other information was sent after the
visit. This technical assistance operation uncovered problems that will take
time to iron out and some difficulties were encountered (for example,
frustrations over the inability to supply instant solutions), but the overall
assessment is that this type of arrangement can be effective.
The technical assistance component of these projects in Thailand and
Korea will also produce plans for future investment in facilities and equip-
ment. These plans should emerge directly from the diagnosis of current
operations and will include the replacement of obsolete equipment, the pur-
chase of new machines to break bottlenecks in processing, as well as more
extensive plans for expansion of capacity that are justified by market and
technical conditions. The plans are expected to be of a sufficient quality and
thoroughness to justify the approval and support of new investments.
The second project component is the provision of funds for new invest-
ment. It is anticipated that technical assistance efforts probably will identify
opportunities for a larger volume of investment than can be supported with
the available funds and that these engineering industry projects will attract
funds from sources other than those provided in the projects themselves,
notably from commercial banks and other financial intermediaries. One of
the side effects of the projects will thus be to broaden both the financial
system and the source of support to the engineering industries.
Project funds will be committed only on the basis of detailed investment
plans prepared during the technical assistance phase. It will not be possible
for an enterprise simply to apply for financial support without vetting of its
plans prior to application. For a financial institution, this is a way of reduc-
ing risk, and it is also a means of helping to channel investment into areas



The Engineering Industries                             257
that are critically important to the industrial development of the country.
This procedure may not, at first sight, seem very different from normal
lending operations, but it shifts the emphasis of project preparation to the
technical assistance stage. This may help overcome one frequent problem:
the fact that it is not a shortage of funds that limits industrial development,
though that may be a contributing factor, but rather a shortage of viable
high-priority projects.
The third project component is the support for the training of the labor
force and management. As the plant surveys clearly showed, the lack of
skill and knowledge in the operation of the machinery often resulted in low
levels of performance. Management systems, which include such items as
production scheduling, inventory management, and cost control, received
about the lowest scores, and most of the plants visited considered the short-
age of skilled personnel and technical manpower one of the major obstacles
to their operations. These industries are labor intensive, but they are also
skill intensive. Yet the statistics on the composition of the typical labor
force in the enterprises show a preponderance of unskilled labor and a
shortage of managerial and technical personnel. In Thailand, the share of
unskilled workers in the labor force exceeded 50 percent in twenty-five firms
out of thirty-eight, and only five had less than 20 percent of unskilled
workers. Similarly, only two firms out of forty-one had more than 20 per-
cent of their labor force composed of managerial and technical personnel,
while twenty-nine had less than 10 percent.
Although wages are low, this advantage is offset by the fact that
physical productivity is also low, so that in many product lines efficiency
wages are low, and there are no cost advantages compared to countries
where wages are high but productivity is proportionately higher.
Training will raise both productivity and wages, althoim h in some cases
the owners or managers may be in a position to appropriate for themselves
the productivity gains because of the poor bargaining position of labor.
Much depends on whether the wage is based on a daily rate or a piecework
rate. Because of the shortage of skilled labor, the labor force in these in-
dustries also tends to be rather mobile and does not seem to have too much
trouble moving where opportunities are better.
In the projects, it is proposed to include a program and funds for training
of labor in those firms that are receiving technical assistance and investment
funds. This is envisaged as a package program since success can be reasonably
assured only through a multiple attack on all of the main problems.
It is also planned that most of the training will be on the job within the
plants. Entrepreneurs do not like to release labor for outside training
because it reduces the available labor, and in some sense it appears lost to
the enterprise. They are much more willing to have training in the plant,
even though it may disrupt operations temporarily. It also has the advantage



258                 Technology, Finance, and Development
that the training is directly related to the job that the worker is doing, and
the payoff is more immediate and more visible. In this type of training, the
operator does not become a craftsman capable of performing on a wide
variety of machines-he or she learns how to operate a specific machine to
do well-defined jobs-but the benefits can still be substantial, and it is a
great deal easier to sell such a program to the managers. For both labor and
management, the training is learning by doing in the best sense, and this can
help each of them to view labor training as a normal part of plant operations.
The fourth and final component of these engineering industry projects
involves a reform of the incentive system (such as tariffs, taxes, subsidies,
and licensing practices and other arrangements). In most developing coun-
tries, the incentive system has been built up piece by piece, with little
systematic reflection on overall development objectives. Since governments
typically derive much of their income from customs duties, tariffs are often
set in a way to increase revenues rather than to serve development purposes,
and policy instruments could more readily be replaced by more effective
tools that have fewer unintended side effects.
The infant industry argument to provide some extra incentives or pro-
tection to selected product groups can be applied, though this should nor-
mally be done on a limited basis and should gradually decline. Encouraging
the growth of industries that can survive only in the long run behind a high
wall of protection is not in a country's interests.
It is also better to undertake a reform of the incentive system across the
board rather than to do it separately for the engineering industries since this
may create other types of inefficiencies. In cases of gross discrimination,
some temporary relief may be warranted. For present project plans, a
reform of incentives is highly desirable but not essential prior to the projects.
Importance of the Institutional Framework
One of the keys to success or failure of a program to increase technological
capabilities lies in the institutional arrangements for direction and control,
including the recruitment and scheduling of technical assistance, the negoti-
ation of arrangements with participating enterprises, the preparation and
review of proposals for new investment, and the monitoring of training and
coordination.
These functions cannot readily be assumed by a group of foreign ex-
perts, though their assistance will almost certainly be required. The manage-
ment functions must be exercised by an institutional group in the country if
the program is to become an integral part of the development effort. There-
fore it is necessary to find, modify, or create an institution that will have the
vision, the competence, and the authority to direct the activities. This is the
most difficult part of the program.



The Engineering Industries                              259
In our limited experience, my colleagues and I have not found a single
case of an existing institution that had the mandate, the personnel, and the
philosophy to assume immediately such a management role. Perhaps sur-
prisingly, it is just as rare to find existing institutions that can be strengthened
and redirected; they are usually too involved in other tasks that require dif-
ferent skills and are aimed at different objectives. To change them to focus
on technological development is extremely difficult. The alternative is to
create a new institution with the proper focus and responsibility, but the
planning horizon for achieving significant progress in the program is at least
five years.
The organization of such a new institution poses a number of problems.
The government must supply some leadership and have some management
responsibilities. But if the program is regarded as a purely governmental
undertaking, it is unlikely to evoke complete enthusiasm among private
enterprises. It should ideally be perceived as a joint affair between govern-
ment and industry. This may be achieved by ensuring that both private in-
dustry and the government are represented on the board of directors and
within the managerial structure.
Another problem is the selection of participating firms. It is impossible
to include, in an initial effort, all the firms in the engineering industries. In
any country, they are counted in the hundreds or even thousands. The
greatest need for support is among the medium- and smaller-scale firms that
produce parts, components, and the simpler end items of products. The
large firms usually can obtain technical assistance or investment funds on
their own.
It is estimated that in a typical project, around 100 firms can be accom-
modated in an initial program. How are they to be selected? The list of
product lines to be given priority treatment helps to narrow the range, but it
can be expected that the participating firms will, to a large extent, be self-
selected. The brightest and the best of the entrepreneurs will most quickly
perceive the potential advantages of the program; many others will reserve
judgment and hold back.
Notes
1. Although capital goods is somewhat more inclusive than engineer-
ing industries, the overlap is extensive. The engineering industries are
technically classified in the International Standard Industrial Classification
category 3800 and also include a few others, notably foundries and forging
operations.
2. V. Prakash and S. Robinson, "A Cross-Country Analysis of Pat-
terns of Industrial Growth," draft World Bank Staff Paper (Washington,



260               Technology, Finance, and Development
D.C.: World Bank, 1979); Engineering Industry, UNIDO Monographs on
Industrial Development, no. 4 (Vienna: United Nations Industrial Develop-
ment Organization, 1969).
3. This system of evaluation was first developed and used in a study of
machinery industries in Korea. See Korea: Development of the AMachinery
Industries-A Case Study in Strategy and Tactics, World Bank Report
2130-KO (Washington, D.C.: World Bank, 1979). In the Korea study, only
the first six factors were considered; the seventh was added to the study car-
ried out in Thailand. See Development of the Engineering Industries in
Thailand, World Bank Report 2647-TH (Washington, D.C.: World Bank,
1980).
4. The conclusions and recommendations emerging from these surveys
have been presented in detailed World Bank reports.



Part IV
Global International
Research Systems
An increasing number of scientific and technological problems confronting
the developing world require research too large in scale and scope for any
single country to fund or carry out and therefore demand some form of
coordinated international action. Problem areas in this category include re-
search on food crop production, human reproduction, tropical diseases,
weather forecasting in tropical areas, and commodities such as cotton,
wool, and rubber. These areas are natural subjects for the union of money
and technological ideas.
The three chapters in this part describe a new institutional device, the
global integrated research network, that has enabled several organizations
of the UN system to respond to the needs for research in these areas. The
World Bank has played a key role in several of these networks-in some
cases as a financial contributor, in others as a coordinator, but most im-
portantly as a mobilizer of funds from other sources, and notably from bi-
lateral aid agencies.
The three international research networks examined are those in which
the Bank has been most closely involved: the Consultative Group on In-
ternational Agricultural Research (CGIAR), presented in chapter 16 by J.
Coulter; the Special Program for Research and Training in Tropical Dis-
eases, jointly sponsored by the UNDP, the World Bank, and the World
Health Organization (WHO), which is described in chapter 17 by A. Lucas;
and the Cotton Development International (CDI), a proposal that was
jointly sponsored by UNDP, the Bank, and the Rockefeller Foundation,
and whose history is presented in chapter 18 by W. Lepkowski and C. Weiss.
These three programs or networks share a number of common charac-
teristics. The most conspicuous of these is the very wide scope of the prob-
lems each of them is attempting to handle. To give an idea of this, it may be
worth noting here that the thirteen international agricultural research pro-
grams sponsored by the CGIAR are doing research on crops that represent
some 75 percent of total agricultural production in the developing nations
and provide a livelihood for more than 1.5 billion farmers. As for the six
tropical diseases tackled by the Special Program, their victims number in
the hundreds of millions. Compared to these figures, the number of people
living off the cultivation of cotton is much smaller, around 125 million (to
which should be added some 45 million in the cotton textile industries), but
these are still very large figures.
Another common characteristic of these three networks is that they all
involve effective and genuine cooperation among researchers, institutions,
261



262                Technology, Finance, and Development
policymakers, and funding agencies in both developing and industrialized
countries. At a time when developing nations are seeking to promote tech-
nical cooperation with one another, these international programs are
among the largest and possibly among the most successful examples of sci-
entific and technological cooperation among developing nations.
The three networks also testify to an important, yet largely unnoticed,
phenomenon: the emergence of what might be called an international or
worldwide science and technology policy that is aimed at bringing the power
of modern science and technology to bear on some of the developing
world's major social and economic problems and in the formulation of
which developing countries are fully represented. In a sense, these networks
might be viewed as one of the building blocks of a new international tech-
nological order.
The development and day-to-day operations of these international
research networks raise a number of important questions. How does one
identify major fields for international cooperative research? How can such
networks be most effectively financed? What is the role of institutional en-
trepreneurship in their development? How can the research results be most
effectively disseminated to their users? What are the elements that make an
international program a success or a failure?
In chapter 16, devoted to an analysis of the CGIAR, Coulter provides a
number of answers to these important questions, and his presentation might
be seen as a major lesson in the art of managing international research pro-
grams. While clearly pointing out that agricultural research is one of the
most profitable investments that can be made from both a social and eco-
nomic point of view and that it can make an important contribution to the
building up of indigenous technological capabilities in the developing coun-
tries, he also raises a number of important strategic issues that remain to be
solved. One is the tendency of the research system to focus on subject areas
that are economically important, such as irrigated rice or wheat, rather than
on those that might be viewed as socially more desirable, such as subsistence
crops for poor farmers. Another issue is the difficulty and vital importance
of linking research with the agricultural extension system and with credit
mechanisms and price structure. A third is the difficulty of expanding re-
search fast enough to meet growing needs. Much more research could be
dore, but to translate the possible into the workable is far from easy, even
if, as Coulter clearly demonstrates, we already have the political and sci-
entific skills to do so.
All of the agricultural research programs sponsored by the CGIAR are
carried out in international research institutions. Some of these institu-
tions-the International Rice Research Institute, for instance-are very
large, and their origins antedate the creation of the CGIAR. Others are
much smaller and younger and are, in effect, a creation of the CGIAR;



Global International Research Systems                  263
this is the case of the Nairobi-based International Laboratory for Research
on Animal Diseases.
These examples, important as they are, should not lead readers to be-
lieve that international research institutions coordinating their activities in
the framework of a consultative group such as the CGIAR constitute the
only mechanism for carrying out research on problems of worldwide im-
portance. The Special Program for Research and Training in Tropical Dis-
eases (TDR), examined in chapter 17 by A.O. Lucas, shows that another ap-
proach, based on national rather than international research centers, can be
equally effective. TDR is one of the most interesting illustrations of the
ways in which existing knowledge available in the developing nations can be
mobilized for the benefit of all.
This concerted attack on six major tropical diseases coordinated by the
TDR suggests that research alone is not enough, even though it may be very
important in certain specific cases (we do not yet have any operational vac-
cines against malaria or bilharzia, for instance). What is critical is the ef-
fective mobilization of existing knowledge and new knowledge. Lucas
shows that the knowledge required is not only medical or scientific but
organizational, social, and economic. He also shows the major importance
of training and health planning, and he demonstrates that the success of an
international network of this type lies more in the software than in the hard-
ware.
Chapter 18 by W. Lepkowski and C. Weiss describes the conception
and evolution of a proposed international research network, the CDI, that
ultimately failed to win political approval. The CDI proposal addressed it-
self to a major problem of developing nations-the declining competitive-
ness of cotton relative to synthetic fibers-and rightly recognized that much
more research is needed on all aspects of cotton, from the development of
better plant varieties to the blending of cotton fibers with synthetics. The
need for international action rested on the fact that most cotton-growing
countries are too small or too poor to carry out the needed research, and all
would stand to benefit from an internationally shared and funded research
effort. In examining the rationale for the establishment and organization of
CDI and the history of the now defunct proposal, the authors show some of
the difficulties of institution building in an international environment.






The Consultative Group
on International
Agricultural Research
John K. Coulter
The developing countries and the agencies concerned with them are giving
high priority to increasing food production as a means of improving the lot
of the rural poor. The gains from increased food production accrue not only
to those who produce food but also to those who consume it. Low-income
consumers typically may spend more than 80 percent of their income on
food, and any reduction in food cost benefits them directly.
Historically, increasing the cultivated areas has played the major role in
raising food production. This has been done both through expansion into
new lands and through intensifying production under shifting cultivation by
shortening the fallow period (a short-term gain but probably a long-term
loss). In the past couple of decades, growing pressure on land has meant
that around two-thirds of the increased production in Asia, the Middle
East, and North Africa has come from increases in output per unit area.
A recent World Bank report estimates that only about 57 percent of the
world's potentialiy arable land is cultivated, but much of the better land is
already in use. Many of the 1.4 billion hectares of unused arable land pre-
sent serious biological and physical constraints to cultivation and are often
inaccessible to both farmers and markets. Furthermore, there is very little
unused land in regions where food needs are the greatest; in Asia, North
Africa, and the Middle East, for instance, more than 80 percent of the
potentially arable land is already under cultivation.
The additional food production capacity required in the developing
countries to meet their growing needs has been calculated at 450 million tons
of cereal equivalent per annum by the year 2000. To achieve this goal,
production would have to increase by about 4 percent a year, compared
with an actual average of around 2.7 percent between 1960 and 1975. A
growth rate of 4 percent per annum has not been achieved anywhere on a
sustained basis. If progress is to be made toward this goal, it will require not
only the cultivation of more land but the provision of a much larger quantity
of such inputs as labor, water, fertilizers, power, and improved seeds, as
well as better infrastructure like roads and markets to supply these inputs.
The unique role of agricultural research is to generate the new technologies
that will make these inputs more efficient.
The development of improved agricultural technology in the tropical
areas is not new. It has been underway for much of this century on such
265



266                 Technology, Finance, and Development
crops as tea, sugar, rubber, and oil palm, and application of this technology
has led to spectacular yield increases in the farmers' fields. The picture,
however, is very different for most food crops, with the exception of rice
and wheat, which have witnessed substantial yield increases, mainly in the
more favorable areas where irrigation has been available.
The poor record of yield improvement in food crops in the tropics is
often attributed to the lack of investment in agricultural research on these
crops. This view is probably correct, although the quality of the research on
cash crops has usually bee-i better because of its more stable long-term fund-
ing and because the producers have often constituted a more articulate
group, which has insisted that research funds be used effectively.
The poor record of yield improvement in food crops led to another
deduction by those involved in agricultural development: that the primary
need in food crop production was not so much one for agricultural research
as it was one for adequate extension services to diffuse the technology
already in existence to the farmers. Many recent experiences, however, have
indicated that this view is not correct. Rather, the lack of impact of research
on production is often due to its failure to provide the right kind of tech-
nology package.
The Emergence of an International
Agricultural Research System
The disappointing record in yield improvement of food crops and the ap-
parent ineffectiveness of much of the existing research led to the creation of
the first international agricultural research center, the International Rice
Research Institute (IRRI), set up in the Philippines in 1960 by the Ford and
Rockefeller foundations. This was followed in 1966 by the creation,
through the evolution of earlier Rockefeller programs, of the International
Maize and Wheat Improvement Center (CIMMYT) in Mexico. These two
centers had a narrow focus on'specific crops of critical importance to world
food supply, and this paid off handsomely. Within six years of its creation,
IRRI had developed the. first tropical ecotype of fertilizer-responsive dwarf
variety of rice; the Rockefeller program, the predecessor of CIMMYT, had
earlier developed similarly successful dwarf varieties of wheat.
The foundations then decided on the creation of two more institutes,
the International Institute of Tropical Agriculture (IITA) in Nigeria and the
International Center for Tropical Agriculture (CIAT) in Colombia. The
decision to establish these two centers was taken in 1967, though construc-
tion was completed some time later.
These international institutes had several unique attributes. They re-
cruited widely for their international staff, were devoted to the solution of



The CGIAR                                              267
practical problems, established partnerships with their host countries, were
governed by an independent board of trustees, were designed to encourage
the work of first-class scientists, and were assured of long-term financial
support.
As the cost of funding them increased, the two foundations sought
other help, and individual national agencies came to their assistance. It was
always understood, however, that one of the cornerstones of agricultural
research was long-term funding, and the international community was
therefore asked to devise a mechanism for this support. The result was an
organization unique in the history of international cooperation: the Con-
sultative Group on International Agricultural Research.
The Role of the CGIAR
The CGIAR was organized at the initiative of the World Bank in May 1971
to broaden the support for international programs of research and training
aimed at increasing the quantity and improving the quality of food produc-
tion in the developing countries. It was established as an association of in-
ternational and regional organizations, national governments, public and
private foundations, and representatives of developing countries. Currently
the CGIAR is supporting programs of research and training that encompass
crops and animals accounting for three-quarters of the food supply of the
developing countries. Over 5,000 people, including 500 senior scientists, are
working at the centers supported by the CGIAR. Virtually all of the support
scientists come from the host countries of the centers, but the senior staff
members, about a third of whom are from the developing countries, belong
to more than forty different nationalities.
The CGIAR is jointly sponsored by the Food and Agriculture Organi-
zation of the United Nations (FAO), the UNDP, and the World Bank. The
Bank provides the chairman and the executive secretariat. The CGIAR is
advised by a panel of experts, the Technical Advisory Committee (TAC),
whose secretariat is provided by FAO. The CGIAR has grown from twenty-
three to thirty-seven members, the international centers and activities it sup-
ports from four to thirteen, and the contributions from $20 million in 1972
to approximately $145 million in 1982 (in current dollars).
Early in its existence, the TAC reviewed the needs for international
agricultural research and training and identified the most serious gaps and
shortcomings in terms of both food crops requiring attention and ecological
zones in the developing world on which farming systems research was needed.
As a result, the CGIAR sponsored the establishment of several new inter-
national centers and programs, and members are currently supporting thir-
teen international agricultural research centers, each governed by an inter-
national board and each with an international staff. These are:



268                 Technology, Finance, and Development
1. International Center for Tropical Agriculture (CIAT), based in Colom-
bia, which deals with cassava, field beans, maize, and rice, as well as
production systems for cattle and swine.
2. International Maize and Wheat Improvement Center (CIMMYT),
located in Mexico, which, in addition to its main research on breeding
improved varieties of maize and wheat, conducts some research on
barley, triticale (a cross between wheat and rye), and sorghum.
3. International Potato Center (CIP), based in Peru, which serves potato-
growing regions throughout the developing world.
4. International Center for Agricultural Research in the Dry Areas
(ICARDA), with a principal station in Syria, which deals with crop im-
provement (barley, broad beans, lentils and durum w1heat), soil and
water management, and farming systems (including slhteep husbandry)
for dry, winter-precipitation areas.
5. International Crops Research Institute for the Semi-Arid Tropics
(ICRISAT), based in India, which deals with the development of farm-
ing systems in semiarid zones and with the development of improved
varieties of groundnut, sorghum, millet, chick-pea, and pigeon pea.
6. International Institute of Tropical Agriculture (IITA), based in Ni-
geria, which is concerned with the development of farming systems for
the humid tropics, as well as with cassava, cowpea, soybean, and local
adaptations of internationally and nationally developed strains of
maize and rice.
7. International Livestock Center for Africa (ILCA), located in Ethiopia,
which deals with systems of livestock production, particularly cattle.
8. International Laboratory for Research on Animal Diseases (ILRAD),
based in Kenya, which studies two major protozoan diseases of cattle in
parts of Africa, trypanosomiasis and theileriasis (East Coast fever).
9. International Rice Research Institute (IRRI), based in the Philippines,
which has worldwide responsibility for the development of improved
varieties of rice and related farming systems.
10. West Africa Rice Development Association (WARDA), established in
Liberia, which deals with rice research and development in fifteen west
African countries.
11. International Board for Plant Genetic Resources (IBPGR), with head-
quarters in Rome, which seeks to stimulate and coordinate the collec-
tion, preservation, evaluation, and exchange of a wide range of genetic
materials of many species of potential interest to plant breeders in the
developing countries.
12. International Service for National Agricultural Research (ISNAR),
with headquarters in the Netherlands, provides assistance to the
developing countries to plan, organize, and manage research more ef-
fectively.



The CGIAR                                            269
13. International Food Policy Research Institute (IFPRI), based in Wash-
ington, D.C., which works on analysis of world food problems to de-
termine those actions and policies that could be adopted by govern-
ments and international agencies to increase the supply of food.
Financial Growth of the System
The rapid increase in the size and scope of this international system of ag-
ricultural research centers required equally substantial increases in human
and financial resources. Between 1972 and 1983, total operating expendi-
tures of the centers increased from $47.5 million to $164.7 million (mea-
sured in constant 1983 dollars). (For 1983 estimated amounts are included
in the totals.) Over the period 1972 to 1983, real growth in total expen-
ditures annually was at a compound rate of almost 12 percent, and growth
in operations was over 5 percent annually. These figures fail to show a
tapering in recent years, however. Between 1979 and 1980, growth in
operations was about 10 percent. Between 1980 and 1981, it was only
about 0.2 percent, between 1981 and 1982 it amounted to about 5 percent,
and between 1982 and 1983 it looks as if growth in operations will be
about 6 percent.
Between 1972 and 1983, total donors' contributions to the thirteen
centers supported by the CGIAR amounted to $1.3 billion in constant U.S.
dollars, resulting in a real rate of growth of over 15 percent for this period.
The rate of growth in donors' contributions has diminished over the years
as old donors, because of various budgetary constraints, have increased
their contribution in real terms more slowly, if at all, and fewer new donors
have joined each year.
The work of the centers is generating multiple benefits for millions of
people in the major ecological zones of the developing world. New rice va-
rieties developed by IRRI have the potential to double and triple yields in
comparison with yields of the varieties previously available to many rice
farmers in developing countries. For such work IRRI has recently been
awarded the Third World Prize. The new varieties are now grown on 40 per-
cent of the total rice areas of those countries, generating about $1.5 billion a
year in increased rice production. Other centers, through their research and
training activities, have also made significant contributions toward increas-
ing food production in developing countries. Besides more food, the adop-
tion of new crop varieties of rice, wheat, sorghum, millet, barley, cassava,
and other root crops and of new farming systems has meant increased job
opportunities, less drudgery, and a higher standard of living for millions of
people in the developing countries.



270                Technology, Finance, and Development
The Mandates of the Centers
Each center or program is an independent organization governed by an in-
dependent board. The members of the CGIAR contribute to one or several
centers of their choice and not to the group itself. The World Bank, as the
residual donor, tries to fill any remaining gaps in funding to ensure that the
needs for the centers are met. The research programs of the centers are gov-
erned by their mandate. Some centers have a commodity mandate (they
work on one or several crops or livestock), and others have both a com-
modity mandate and an ecological area mandate (for example, humid
tropics, semiarid tropics).
Although the mandates differ from center to center, the crop-based in-
stitutes have the following in common:
1. Collection, evaluation, maintenance, manipulation, and distribution of
germ plasm and of improved plant materials for use in breeding, im-
provement, and production program at the regional and national level.
2. Publication and dissemination of research results.
3. Organization of periodic conferences and seminars.
4. Training of scientists for research and production programs.
5. Establishment and operation of an information center.
6. Assisting national and regional research programs through cooperation
and support.
Several centers also have the mandate to develop farming systems that will
help to increase and stabilize agricultural production and improve the use of
natural and human resources and to identify socioeconomic and other con-
straints to agricultural development and evaluate ways to alleviate them.
In summary, the objective of the system is to develop technologies that
will improve production, especially by small, resource-poor farmers in the
less developed countries. The system is concentrating on food supply since
an improvement in quantity and quality will improve human welfare in both
rural and urban communities and raise their living standards.
The Research Programs of the Centers
The general mandate of the system broadly defines the goals of these in-
ternational agricultural research centers, but the strategy for reaching these
goals has changed over time in each institution and is different from one
center to the other. The original mandate of IRRI, for instance, was to
carry out basic and applied research on the rice plant to develop high-yield-
ing, nonlodging varieties that respond to high rates of fertilizer application.



The CGIAR                                            271
CIMMYT had commodity mandates for wheat, maize, triticale, and later
barley. Although it is located outside the major wheat-growing areas of the
developing world, it had a very well-established research foundation on which
to build and an ecological elivironment in northern Mexico similar to that of
the major irrigated wheat-growing regions of Asia. Mexico is also a region
where maize is a major food crop. Wheat, maize, and rice had already been
the object of a large amount of research in the developed countries.
The mandates of the more recently established centers include both
ecological regions and commodities. CIAT works on livestock forage, as
well as on several different food crops, and IITA works both on crops and
farming systems. The crops for which these centers have worldwide man-
dates-tropical root crops and grain legumes-are usually those grown by
poor subsistence farmers, who often cultivate the poorest soils. Because
they are vegetatively propagated, root crops present additional hazards of
disease spread. They also suffer from other handicaps. Since they are the
dominant crops in only very few of the developing countries, national
governments have given them low priority in their research programs. And
unlike rice and wheat, they are seldom grown as sole crops and are usually
part of a complicated mixed cropping system. In its work on the potato,
CIP is concerned with a crop that has an excellent potential but is highly
susceptible to diseases and requires a well-organized seed production system
to achieve this potential. Increases in yields of grain legumes through plant
breeding have proved more difficult than with cereals.
The mandate of ICRISAT is the improvement of agriculture and crops
(such as sorghum and millet) in a harsh environment where rainfall fluctu-
ations between and within seasons lead to major difficulties in stabilizing
production. Such an environment will usually set a limit on the average rate
of yield increase. ICARDA will also concentrate on the harsher environ-
ments, and its systems research component will include livestock, with the
attendant sociological problems where livestock and land are controlled by
different groups of people.
The two livestock centers have very different mandates. ILRAD has a dif-
ficult technical problem in its research on trypanosomiasis and theileriasis,
and ILCA has to concern itself with socioeconomic as well as technical con-
straints. ILCA's research program is, in fact, centered on systems research.
Although the goals of the older international agricultural research cen-
ters are generally the same, some of those of the more recently established
institutes may be more difficult to attain. Furthermore, reaching them will
require a longer time span and may have less impact on total food produc-
tion. On the other hand, reaching these goals will benefit the poorer farmers
more directly.
Research strategies change over time. The early strategies of IRRI and
CIMMYT were to produce new types of rice and wheat that would be very



272                 Technology, Finance, and Development
responsive to improved fertility, insensitive to day length, and resistant to
some of the most serious diseases. The scientists working on wheat and rice
were highly successful in producing short-strawed, nitrogen-responsive,
day-length neutral varieties that spread rapidly in certain parts of the world.
Such varieties were, in fact, bred for relatively well-defined ecological zones
(essentially the irrigated areas), though some of the modern wheat varieties
have done well in rain-fed areas of the Middle East. The modern rice vari-
eties have about the same yield levels as the traditional varieties under con-
ditions of poor water supply so the farmer without access to this input has
been unable to benefit.
This lack of impact has been increasingly recognized by the centers. IRRI
has pointed out that less than 20 percent of the ricelands of the world are ir-
rigated and has defined its major task in the future as that of developing
varieties that will give better and more stable yields over the wide range of
rain-fed conditions under which rice is grown. This is a task with a virtually
unlimited time horizon. Irrigation undoubtedly will reach much additional
land over the next few decades, but at the same time a number of countries
(Indonesia is one) are expanding their areas of rain-fed rice. Breeding for
pest and disease resistance is also a continuing battle to keep one step ahead
of constantly changing strains of pests and diseases. The latest IRRI rice
varieties are resistant to at least seven pests and diseases that are common in
Asia, whereas the first IRRI varieties were resistant to only one or two. To
achieve this, the center has progressively widened its germ plasm base. In
fact, most centers have now established world germ plasm collections for
their particular crops, and this program has given them some unique advan-
tages.
In a national program, the emphasis is usually on breeding varieties for
relatively well-defined ecological conditions, but an international center has
to provide materials for a wide range of environmental, pest, and disease
situations. Thus, the more recent approach of the centers is directed toward
aggregating genes essential for widely varying adverse situations such as
acidity, salinity, drought, low fertility, and a wide range of pests and dis-
eases. It is also often directed at providing a plant type that is day-length
neutral and with a favorable grain-to-straw ratio. This pyramiding of de-
sirable genes is being done by testing large numbers of crosses in many loca-
tions, thus increasing the probability that some of the crosses, at some of
the sites, will be subjected to intense disease, pest, or environmental pres-
sures. This approach also exploits the unique advantages of the centers,
their wide germ plasm base, the resources to make large numbers of crosses,
and the opportunities to test segregating materials worldwide. Wide adapt-
ability is a highly desirable characteristic since a genotype with a high degree
of adaptability across locations will also have a high degree of stability over
time at a given location.



The CGIAR                                              273
Mechanization, Farming Systems, and
Technology Transfer
Although the ultimate goal of agricultural research is the same in developed
and developing countries (more efficient production in the farmers' fields),
two somewhat different philosophies are being followed. In the developed
countries, the approach has been to remove as many of the constraints as
possible by other than biological means; for example, acidity is corrected by
liming, low fertility by adding fertilizers, salinity by drainage, drought by ir-
rigation, and pests by pesticides. A corollary has been the strong emphasis
of research on methods of making these inputs more efficient. The interna-
tional centers of the CGIAR, in their philosophy of developing a low-risk,
inexpensive technology, now are attempting to circumvent these constraints
by biological means.
Farmers, however, can achieve substantially better yields only by im-
proving the overall level of their farming practices. Genetic improvements
can help to stabilize yields at low input levels and can make the crop more
adaptable to erratic rainfall and more resistant to pest and disease pressures,
but the potential for increased yields can be realized only through farming
systems that increase the availability of water and nutrients. Thus, the em-
phasis of the research programs is on maximizing the benefits of such inputs
used as sparingly as possible.
Although the centers work mainly on producing better plant types, one
factor-oriented program in which several of them are involved is the design
of farm implements that can be constructed locally at the village level.
Although many developing countries have surplus rural population, labor
may be short at critical times of the year, and the adoption of new tech-
nology may require an additional energy input, either through mechanical
or animal power. Some of the centers have thus become involved in
mechanization programs using motorized power, the most advanced of
which is that at IRRI. Other centers are developing animal-drawn equip-
ment and better hand tools.
Commodity improvement is a common aim of both international and
national agricultural research programs, but another area in which the in-
ternational centers have developed a particularly strong program is that of
farming systems research. Most national centers have some elements of this
in their research programs, but very few of the national programs (mainly
those in the largest countries) are giving a major emphasis to this type of
research.
Farming systems research aims at understanding the physical and so-
cioeconomic resources within which agricultural production takes place. It
attempts to evaluate existing farming systems and to improve the research
workers' understanding of why farmers behave as they do. It helps in



274                 Technology, Finance, and Development
problem identification and assists research organizations in deciding on
priority issues, thus leading to research on them. Finally, it can evaluate
new or improved practices in major production areas and can assess the
benefits and impacts of new technology.
Farming systems research is of a long-term nature and deals with a com-
plex subject. Methodology has to be developed, and it is likely that the im-
pact on production will be evolutionary. Nevertheless, the potential long-
term impact of this research seems to warrant the continuation of support.
Within the farming systems research work, several centers have specific
aims. IITA, for example, is developing techniques for eliminating the bush
fallow resting period and for intensifying the use of the better watered
valley bottom land. It has been calculated that between 1900 and 1965,
about half the forest area in developing countries was cleared for agricul-
ture and that if shifting cultivation expands at the present rate, most of the
remaining forest may be destroyed in the next forty years.
ICRISAT's farming systems research is directed to the conservation and
better use of water and that of IRRI to intensifying production on the rice-
lands where the new technologies, such as shorter-season varieties and
direct seeding of the crop, would allow additional crops. CIMMYT's work
has been directed to the more productive use of the fallows between the
wheat crops and CIAT's to increasing the productivity on poor soil through
production of a high-value cash output, beef.
The third area in which the centers are operating is the transfer of their
technology to the farmers. The two aspects of this activity are the validation
of their technology in the real world of the farmer and the improvement of
the ability of national programs to convey their technology to the farmer, in
either its present or a modified form. The latter aspect of the centers' work
involves technical assistance in the form of training, short-term advisory
visits to national programs, raising the awareness of national program deci-
sion makers, and the supply of long-term advisers.
CGIAR centers have thus followed many of the paths of traditional ag-
ricultural research but have also pioneered new approaches. No national
programs have attempted to use such a wide germ plasm base or tested their
materials over such wide ecological conditions. Nor have any national pro-
grams been so specific about working under and for low input conditions of
the poorest farmers. The farming systems programs of the centers are more
comprehensive than any of those at the national level, and their training
programs seek to give the trainees a thorough understanding of every aspect
of the commodity in which they are doing research.
The Outputs of the System
The output from a research system comprises information, intellectual ca-
pacity building, and influence. Information may be in the form of new



The CGIAR                                                 275
knowledge or new technology that can be embodied, for instance, in higher-
yielding varieties. Although some of the centers suggest that their achieve-
ments be measured by the uptake of new technology by farmers and its
value thus demonstrated by increased yields, most centers take the view that
there are many steps in this process over which they have no control. They
consider their function to be that of delivering a technology that is demon-
strably better than that currently available to farmers, but they also con-
sider that their direct clients are the national systems rather than the
farmers.
Most research organizations devote some effort to building an institu-
tional capacity-that is, the development of their intellectual resources.
This means some diversion of resources from the production of informa-
tion or materials for immediate use, but these centers have given high
priority to the training programs for nationals of developing countries. No
figures are available on the number of agricultural scientists the develop-
ing countries will need from now until the beginning of the next century;
however, in view of the rapid growth of population and the need for
research and for the education of farmers in the use of improved systems
of agriculture, there will certainly be a requirement for tens if not hun-
dreds of thousands of such scientists and technicians. The centers are
training both production agronomists and research scientists, but the total
is probably fewer than 500 per year so that their major impact is likely to
be on the training of trainers.
The Impact of Research on Production
Since new technology is a major output of this research system, its uptake
by farmers can be used as a measure of the quality of that technology and of
the return on investment in research. So far, the uptake and impact on
production can be assessed for two crops only, wheat and rice. Table 16-1
shows the uptake of the modern varieties of wheat and rice developed by the
CGIAR centers in the four major developing regions of the world.
Table 16-1
Percentage of Total Area of Wheat and Rice Sown to Modern Varieties,
1976-1977
Wheat                        Rice
Asia                                 72                           30
Near East                            17                            4
Africa                               23                            3
Latin America                        41                           13
Source: World Bank, 1980.



276                  Technology, Finance, and Development
One of the salient features of the diffusion of modern varieties of wheat
and rice is the rapidity of the innovation process. This comes out clearly
from the figures in table 16-2, which show the share of the total wheat
growing area devoted to new varieties of wheat in five typical countries.
The impact of these modern varieties must be measured not only in
terms of increased areas planted to them but also in terms of increased
yields per unit area. The magnitude of these increases varies greatly from
country to country and from one area to another within a country. Table
16-3 shows the yield increases that have occurred in the Philippines, where
the modern rice varieties have been most widely adopted.
Overall, the modern varieties averaged about 13 percent more output
per hectare than the traditional varieties in the irrigated areas and 9 percent
in the rain-fed areas. Even such modest increases have a major effect on
total production, but the impact of modern varieties of wheat on yields has
been more spectacular, as can be seen from the case of India summarized in
table 16-4. Much of the wheat belt in India, however, has a large degree of
agroclimatic uniformity and a better infrastructure, especially as far as ir-
rigation is concerned, than wheat-growing areas in other countries.
These figures suggest that the return to investment on research on rice
and wheat has been very high. It has been calculated that the increase in rice
production due to investment in rice research has been 1.5 percent per an-
num between 1972 and 1975. Attributing one-third to IRRI would produce
an annual benefit flow of approximately $280 million and an internal rate
of return on investment on this research of about 80 percent.
The impact of new technology is not confined to improved crop yields.
It has wide social and economic impacts in terms of employment, agricul-
tural wages, income distribution, and other factors. Much has been written
about the green revolution. The information available does not substantiate
Table 16-2
Rate of Adoption of New Varieties of Wheat
(percentage of total area under wheat)
Year          Afghanistan     India     Nepal      Pakistan      Tunisia
1966-1967                       4          5           2
1967-1968          1           20         13          16
1968-1969          4           30         26          38           2
1969-1970          5           30         34          43           7
1970-1971          9           36         43          52          11
1971-1972         10           41         52          57           6
1972-1973         15           51         66          56           9
1973-1974         16           57         76          59           6
1974-1975         17           62         85          63           6
Source: World Bank, 1978.



The CGIAR                                                         277
Table 16-3
Paddy Yields in the Philippines
(kilos per hectare)
Irrigated Areas               Rain-fed (Lowland) Areas
Area Sown                          Area Sown
Modern      Other    to Modern     Modern      Other    to Moderni
Varieties  Varieties  Varieties (N/o)  Varieties  Varieties  Varieties (%o)
1967-1968     1,967      1,613        34         1,307      1,239        17
1968-1969     1,778      1,617        62         1,125      1,089        31
1969-1970     2,155      1,886        61         1,487      1,527        39
1970-1971     2,023      1,930        67         1,614      1,580        45
1971-1972     2,053      1,723        73         1,443      1,350        55
1972-1973     1,950      1,741        70         1,276      1,110        60
1973-1974     2,051      1,887        80         1,531      1,525        64
1974-1975     2,222      1,879        79         1,430      1,179        64
Source: Bureau of Agricultural Economics, Department of Agriculture of the Philippines.
the view that the modern varieties are inherently suitable only for larger
farmers. Where varieties have fitted the ecological conditions, large and
small farmers, whether landowners or tenants, have had about the same
rate of adoption.
While the size of the farm has apparently made little difference in per-
centage terms, it has obviously enlarged the difference in gross income. The
new varieties have resulted in some additional use per hectare. This increased
demand seems to have had little effect on wvages, but real values of land
have tended to rise; however, the extra income generated by the new pro-
duction has had an important secondary impact on employment. Another
positive factor has been the benefit to consumers. In Colombia, it has been
calculated that the lowest income quartile of the population captured 28
percent of the benefits of increased rice production.
Table 16-4
Wheat Yields in India, (1964-1965 to 1971-1972)
Area                       Yield            Annual Compound
(thousands of hectares)   (kilograms per hectare)     Growth Rate
1964-1965    1971-1972    1964-1965     1971-1975      in Yield (%)
Bihar                 636.3       1,397.4        636         1,785           14.45%
Gujarat               444.1        574.5         937        1,562             8.13
Haryana               722.4       1,172.0      1,274        2,043             8.29
Madhya Pradesh       3,157.9      3,509.0        627          868             6.80
Punjab               1,563.0      2,320.0      1,510        2,413             9.32
Rajasthan            1,183.4      1,524.4        932         1,249            5.14
Uttar Pradesh        3,965.4      6,045.8      1,058         1,249            4.45
All India           13,422.1     19,162.5        913         1,382            7.63
Source: Directorate of Economics and Statistics, Ministry of Agriculture, Government of India.



278                  Technology, Finance, and Development
On the negative side, the modern varieties of rice and wheat have in-
creased regional disparities because these varieties were adapted only to cer-
tain ecological regions. This negative effect is particularly obvious in those
regions where the larger farmers tend to own the better land and the smaller
farmers tend to live on the poorer soils and/or in more extreme climatic
zones.
This survey of the impact of research conducted by the international
centers demonstrates the positive benefits of this reseaich and the large
payoff that has been obtained. Although this research has been directed
primarily toward improving agriculture in the developing countries, there
have been and will continue to be benefits to agriculture throughout the
world. The germ plasm collections of such crops as potatoes, rice, maize,
and sorghum are of value to rich as well as poor countries, and the increases
in production have helped alleviate the burden on developed-country pro-
ducers and lowered food prices for consumers in these countries.
The Potential Long-Term Impact of Research
Maize is the only other crop on whlch research at an international center has
been in progress for a substantial period. CIMMYT is working on both
quality and yield improvement, and notably on providing better-quality
protein by improving Lhe amino acid balance in the grain. The value of this
work has already been dernonstrated in both human and animal ,nutrition,
and the high-quality protein will be particularly important for those people
living primarily ,An a diet of maize. The work on high-lysine maize promises
to have a major impact on maize production throughout the developing na-
tions during the next decade. Maize varieties from IITA with tolerance to
maize streak virus, a serious disease in Africa, are now being distributed
through the government of Nigeria's accelerated food production program.
Sorghum and millet are the two other cereals with major research pro-
grams. ICRISAT is working not only on producing varieties that will have
high yields in favorable conditions but also in breeding varieties that will
give stable yields in hostile environments. The semiarid tropics, with which
ICRISAT is concerned, are characterizerl by irregular rainfall within and
between seasons. In such areas, farmers try to spread their risks by planting a
relatively large area of the crop, but as population pressures mount, this
becomes more difficult. Varieties that will guarantee the farmer some yield
even in bad seasons are thus a major goal-hence the emphasis in ICRISAT's
program on varieties with drought-tolerance or drought-escape mechanisms.
Progress in this area is likely to be quite slow, but the breeding programs
for resistance to important diseasec<. and pests, such as downy mildew, shoot



The CGIAR                                               279
fly and the parasitic weed Striga on sorghum, and downy mildew and ergot
in millets, are making good progress. Resistant varieties from these pro-
grams should be available in the not-too-distant future.
Work on tropical root crops, particularly cassava, is designed to im-
prove these crops in two major areas, Africa and South America. Work at
CIAT has shown that yields can be doubled when simple and cheap im-
proved cultural practices are used to grow the best local lines. Selections
from superior germ plasm increased these yields substantially. IITA has
produced cassava material with resistance to cassava blight and cassava
mosaic, both serious diseases in Africa that can cause yield losses as high as
80 percent. Some of these resistant materials are being distributed to na-
tional programs, and a technique for rapid multiplication of this vegeta-
tively reproduced plant has been developed. These improved varieties will,
however, require a much longer time to reach large numbers of farmers
than the high-yielding rice and wheat varieties.
Several of the centers have prograrns on grain legume improvement.
CIAT, working on field beans, a staple in the diet in Latin America, has
been testing varieties through the International Bean Yield and Adaption
Nursery; the best of these have shown yield increases on the order of 30 per-
cent over the best local varieties. These trials and the work on improving
yields of nonblack beans indicate that some improved materials should be
available fairly soon for distribution by national programs.
Pests cause serious damage on cowpea, particularly in the humid
tropics, and IITA has had a major program aimed at reducing these losses
by breeding resistant varieties, combined with minimal insecticide treat-
ment, techniques referred to as integrated pest management.
In several areas of noncommodity-oriented research, the;.e has been suf-
ficient progress to indicate that the technology can. be iio/v1 in' ahe
farmers' fields in the fairly near future. The water managercunt techniques
developed at ICRISAT promise some early developments in the intensified
use of the black soils in India, which at present are often fallowed during
the rains. Work at CIAT has shown that the medium- and low-activity rock
phosphates, common in South America, have considerable potential as a
cheap source of phosphates for pasture on the highly phosphate-deficient
soils of the llanos.
The work on nitrogen fixation in rice fields at IRRI, in the root system
of sorghum and millets at ICRISAT, and on grain legumes at IITA and
CIAT is a promising line of research, and some of the results should be ap-
plicable fairly soon. Multiple cropping at IRRI is another program where
some elements are being taken up by farmers. Direct seeding of modern
varieties of rice, for example, has enabled Philippine farmers to grow two
crops of rain-fed rice where they grew only one crop previously.



280                 Technology, Finance, and Development
Another aspect of factor-oriented research is the mechanization pro-
grams. The first IRRI power tiller designs were made available in 1972 and
between then and 1976, about 10,000 units had been built. The IRRI port-
able thresher gained rapid acceptance. and over 800 units were made in the
first year of production. The impacts of factor-oriented research cannot be
measured in terms of area or yield of crops, but their contribution to in-
creased production is considerable and likely to grow.
The Future Development of the CGIAR
Research System
Analyses of some successful research projects show the very high rate of
return to investment and imply that more investment in research would be
generally profitable. Indeed, some calculations have shown that the CGIAR
system might invest two or three times the present amount and still obtain a
very good return. But even these amounts would not cover all of the
research gaps that exist in the agriculture of the developing world. Several
important food and cash crops, such as cotton, coconuts, and bananas
receive no research support from CGIAR. There are areas like Southeast
Asia where the main attention is given to rice yet where several other crops
are also very important; livestock in Latin America is a major component of
farming systems but receives only scant attention. Finally, there are the in-
put factors like fertilizer use, water, and soil management on which only a
limited amount of CGIAR-sponsored research is carried out.
The problem thus facing the CGIAR is to decide on priorities, notably
those concerning its future range of activities. It can invest additional
resources in ongoing activities, take up new activities, or direct research to
the least favored areas and to the poorest people whose needs are greatest,
but the payoff of this research in terms of increased production is likely to
be smaller. These areas constitute some of the major research gaps because
national programs, often very short of staff and funds, have tended to con-
centrate on the more favored areas or on cash crops where the potential
payoff is greater.
Managing ongoing research programs is also difficult; it is easy to start
new projects if funds are available but extremely difficult to run down
ongoing programs. Their momentum ensures that some interesting infor-
mation is always forthcoming, thus supporting the belief that just a few
more years of work may produce a breakthrough.
Until now the CGIAR's centers and programs have grown in a some-
what uncoordinated manner because their individual budgets have been
funded by the group without reference to any priorities among the ongoing
activities of the different centers. This can result in distortions over time,



*  The CGIAR                                                281
and there is a responsibility on the system to ensure that its resources are not
too widely dispersed and that opportunities for effective use of international
agricultural research funding are not being missed. Clearly managing the
growth of the system over the next decade will provide many challenges.
One measure of the success of this unique system are the attempts to
emulate it by setting up other consultative groups. Its achievements in mo-
bilizing international funding, in bringing together a very informal but
highly flexible group of donors, and the promotion of a group of highly
competent research institutes have demonstrated the will and the mecha-
nism for international collaboration in this important activity. It faces
many challenges in the future, not least of which is the danger of growing
into a bureaucracy that could stifle the creativeness of those on whom its
success depends-the research scientists. Thus, it must be ready to drop
some activities and take up some new ones, to be bold in exploring new op-
portunities but not to lose sight of its major objective: providing a series of
alternative technologies that would benefit the poorer countries' least-
endowed citizens.
In concluding this discussion, it is appropriate to emphasize the role of
national agricultural research systems. The first international centers were
started when much of the national agricultural research was weak, but it
was never intended that the centers would substitute for weak national re-
search. At best, they could help them speed up the development of tech-
nology while building up their institutional capacity. To do so inevitably is a
long-term undertaking, and the international center-national program in-
teraction brought about production results that the latter could not have ac-
complished alone. The investment in the international centers was well
justified, but there has also been a growing realization that investment in
national research systems is also essential. This is demonstrated by the de-
veloping countries themselves, which now invest about $1.4 billion (in 1977
dollars) in agriculture research, by the investments of the World Bank and
bilateral donors, and by the creation of the International Service for Na-
tional Agricultural Research. As the national research systems become
stronger, the role of the centers will change, but the synergistic effect of the
one on the other will become even more important.



The Tropical Diseases
Research Program
Adetokunbo 0. Lucas
The general poor state of health of the people in many developing countries
is a matter of continuing concern, not only because of the humanitarian
desire to relieve pain and suffering but also because the widespread occur-
rence of disease can be a significant barrier to development. It is widely
recognized that poverty is one of the important determinants of some of
these diseases, and yet disease may constitute a constraint to development,
thereby creating a mutually reinforcing vicious cycle.
Such situations are often complicated by the ecological effects of major
development projects. Some of the large-scale projects for crop irrigation or
the production of hydroelectric power, for instance, have intensified the
transmission of disease by expanding the breeding sites of the vectors of
malaria, schistosomiasis, and other parasitic infections. Other major prob-
lems encountered in the field of public health are the emergence of strains of
anopheline vectors of malaria, which are resistant to commonly used insecti-
cides, and the occurrence and spread of drug-resistant parasites. Although
technical problems do not entirely account for the failure of some of the anti-
malaria programs, they have contributed significantly to the difficulties.
There have been some outstanding successes in the control of specific
diseases: the reduction in the incidence of yaws and other treponematoses
and the dramatic eradication of smallpox. Apart from reduction in the in-
cidence and prevalence of certain endemic diseases, a steep decline has oc-
curred in the mortality rate in many developing countries, an indication of
Improvement in the general health of the population. The decline in mor-
tality has not occurred in all developing countries, however, and within each
country, the changes have not occurred uniformly in all population groups.
Furthermore, although a steady decline occurred initially, in some countries
the mortality rate is no longer falling appreciably.
One of the major characteristics of the situations where the health of the
population has improved significantly has been the broad application of ex-
isting kiowledge about disease prevention and the promotion of better
health in the context of total community development. It has included not
only specific health interventions like immunizations against prevalent com-
municable diseases but also broad noncategorical inputs such as education,
better nutrition, and improvements in environmental sanitation.
In spite of the advances, certain specific health problems of the develop-
ing countries continue to prove difficult to solve, particularly the major par-
283



284                 Technology, Finance, and Development
asitic infections such as malaria, schistosomiasis, and onchocerciasis. For
some tropical parasitic and infectious diseases, relatively simple control
measures are available. For others the available tools for control are crude,
cumbersome, and costly, and it is clear that in many endemic areas, these
diseases cannot be brought under control with the available technology.
Therefore a two-pronged approach is necessary: there must be vigorous ap-
plications on existing knowledge, including field research to determine the
optimal methods for applying such tools, and it is necessary to undertake
research designed to discover new and improved tools for the control of
these diseases. The general specifications of these tools are effectiveness,
safety, simplicity of application, and relatively low cost.
Tropical Diseases Research in Historical Perspective
The history of research in tropical diseases shows many interesting features.
At the turn of the century, there were the exploits of the great entrepreneurs
such as Patrick Manson, Ronald Ross, and Aldo Castellani. Much of this
early research, sponsored through public funds, was related to the colonial
medical services of the imperial powers, and the activities of field teams
were carried out in the colonial territories and backed up by basic research
in the great European schools of tropical medicine.
This research was motivated by both humanitarian concerns and the
need to solve the health problems that threatened the thriving commercial
enterprises in colonial territories. In the extreme situation of West Africa,
the occurrence of malaria, yellow fever, and other tropical infections con-
stituted an insuperable barrier to European settlement, and in the early
colonial days it was a major constraint to commerce. Another feature was
the intensification of tropical diseases research in relation to military ef-
forts. In both world wars, malaria and other tropical infections assumed
strategic importance in some theaters of military action. This increased war-
time effort resulted in the significant clustering in time of the discovery of
new antimalarial drugs in the 1920s and later in the 1940s and 1950s.
Although research continued in both universities and pharmaceutical
firms, the overall effort has been relatively small compared with that
devoted to other medical problems, such as cardiovascular diseases and
cancer. Although data are difficult to obtain on a global scale, it was
reckoned a few years ago that no more than $30 million was being spent
each year throughout the world on tropical diseases research, whereas in
one country alone, thirty times that amount was allocated to cancer
research. Following independence, many of the former colonial territories
did not have the capability to undertake medical research on a significant
level, and for most of the research and development aimed at control of



Tropical Diseases Research Program                       285
parasitic diseases, they remained dependent on the activities carried out in
the nonendemic areas. Although the pharmaceutical industry has con-
tributed to the development of new technology for controlling tropical
diseases, there was some indication of declining interest on its part in this
field of activity.
The Objectives of the Program and the Role of
the World Bank
In response to these challenges, WHO initiated in 1977 the Special Program
for Research and Training in Tropical Diseases, following a 1974 resolution
in its governing body, the World Health Assembly, which called for the in-
tensification of research on malaria and other tropical diseases. The Special
Program, which is cosponsored by the UNDP and the World Bank, has two
interrelated objectives. The first is the development of improved tools
needed to control tropical diseases. This includes new preventive,
diagnostic, therapeutic, and vector control methods specifically suited to
prevent, treat, and control selected tropical diseases in the countries most
affected by them. The second is the strengthening of biomedical research
capabilities in tropical countries, specifically in the countries most affected
by tropical diseases, through training in biomedical sciences and various
forms of institutional support. This capability must be strengthened
because major activities in the specification, development, and testing of
new tools must take place in the countries where the diseases are endemic so
as to ensure that these tools are effective in controlling the target diseases.
These two objectives are closely interdependent. It is important to
secure and expand the involvement of scientists and institutions in the
developing countries so that they may participate in the identification of the
local problems and the definition of their determinants, both behavioral
and environmental, in the specifications of the new technology to be devel-
oped, in the testing of the new products, and in their adaptation to local
- onditions in order to facilitate adoption. The long-term goal is to promote
self-reliance in medical research so that these countries can identify and
define their problems, initiate the research for solutions, and collaborate
meaningfully with others in developing new technology.
The World Bank is beginning a major lending effort in the field of
public health. It is also sponsoring a number of global multilateral research
and development programs, focused on the production of technologies for
the health care systems of the developing countries. The Bank contributes to
these programs through its expertise in project management and in the ap-
plication of research results through its lending activities. In addition, the
Bank acts as the financial manager for a number of programs. Through its



286                Technology, Finance, and Development
own activities, it is also able to influence a wide spectrum of national
ministries dealing with planning, finance, health, and development.
It is in this context that the Bank acts in its capacity of cosponsor of the
Special Program for Research and Training in Tropical Diseases, of which
WHO is the executing agency. As a cosponsor and member of the Standing
Committee of the Special Program, the Bank provides a bridge between in-
ternational health organizations and development agencies, a link now
recognized as a prerequisite to the success of health programs.
After extensive consultations among the cosponsors, various govern-
ments and agencies that were interested in promoting the program, and
representatives of the developing countries concerned, agreement was
reached about the content and the mechanisms of the program. Initially a
package of six diseases was included in the program: malaria, schis-
tosomiasis, filariasis, the trypanosomiases (both African sleeping sickness
and the American form called Chagas disease), leprosy, and leishmaniasis.
Each disease was selected on the basis of three criteria: that it constitutes a
major public health problem, that existing tools for control are inadequate,
and that there is some indication that basic research could contribute to the
solution of the problem. The criteria for the control methods are that they
be susceptible to implementation at a cost that can be borne by developing
countries, that they require minimal skills or specialized supervision, and
that they can be easily integrated into the health services, and in particular
into the primary health care services, of developing countries.
The Role of Research and Development
The activities of the program are directed toward the development of prac-
tical tools to solve the problems of the six selected diseases. They focus on
the development of new drugs, the modification of existing drugs, the
search for vaccines, new methods of vector control, and improved
diagnostic tests.
In the search for new tools, four approaches have been considered for
each disease: drugs, vaccines, methods for the biological control of vectors,
and simple-to-perform diagnostic tests. The research therefore concentrates
on chemotherapy and chemoprophylaxis, immunotherapy and immunopro-
phylaxis, biological control of vectors, and diagnostic aspects, especially
immunodiagnosis.
The research activities are carried out by multidisciplinary groups of
scientists formed on a worldwide basis. These so-called scientific working
groups (SWGs) focus on both the specific diseases and on transdisease
research areas. In addition to SWGs for each of the six diseases with which
the program is concerned, SWGs have also been formed in four transdisease



Tropical Diseases Research Program                      287
areas: epidemiology, the control of vectors, basic biological sciences, and
social and economic aspects.
An SWG comprises all the scientists who plan and/or carry out research
on a specific aspect of the program. Members of the group define the
research objectives, devise a strategic plan to achieve them, carry out the
research according to the plan, and review the plan and the research as the
work progresses.
To develop such a plan and operate an SWG, the scientists must de-
scribe or formulate the detailed objectives of the SWG (for example, the
specifications for a malaria vaccine applicable and effective in rural India),
the current state of the art in relation to the objectives, the problems that re-
main to be solved, the possible research approaches and disciplines, and the
feasibility, sequence, and cost of the activities, or projects, in each line of
research. They must also formulate a clear strategic plan, including each
research approach and its line(s) of research, leading toward the final objec-
tives.
One or more SWGs are now operating for each of the diseases selected
by the program. In general, three areas are covered for each disease, either
by separate SWGs or by subgroups of one SWG: chemotherapy and drug
development, immunoprophylaxis and immunodiagnosis, and, where rele-
vant, epidemiology and vector control. Within this broad framework, the
priorities in each component of the program have been selected on the basis
of a careful analysis of needs and opportunities, always in consideration of
activities on the subject already undertaken by other agencies.
The overall strategy of the program is to identify and attempt to fill
gaps in the efforts directed toward the development of new tools for the
control of these diseases. Investigations showed, for instance, that a num-
ber of pharmaceutical companies were actively engaged in the development
of new schistosomicidal drugs but that one major constraint was the clinical
evaluation of the promising compounds. The SWG on schistosomiasis
therefore accorded high priority to the promotion of well-designed,
multicenter clinical trials of schistosomicidal drugs. On the other hand, in
the case of filariasis, where the SWG had identified the need for a
macrofilaricide that is effective against the onchocercal worm as a top prior-
ity, a major constraint was the lack of validated biological screens. The
SWG on filariasis has therefore supported the development and validation
of these screens for testing potential filaricides in a network of academic
centers stretching from the United States, through the United Kingdom,
Germany, and Japan to Australia. Selected compounds supplied by various
pharmaceutical companies are now being tested in order to identify useful
leads. In addition, clinical trials are being promoted in endemic areas. Each
component of the program is being designed in such a way as to match
needs with opportunities in the most rational manner.



288                Technology, Finance, and Development
Because the Special Program represents a new experiment in the inter-
national organization of research, it is useful to examine the operation of
the network mechanism of the SWG. This can best be illustrated through
the example of the SWG on the immunology of leprosy (IMMLEP), the
oldest group of the Special Program. Established in 1974, the IMMLEP
group devised a plan for the development of a vaccine and for diagnostic
tests. Its activities were designed to exploit an earlier breakthrough outside
the program, which made available for the first time relatively large quan-
tities of the leprosy bacillus from infected armadillos. The first requirement
was to secure a steady supply of bacilli derived from armadillos. Contracts
have been awarded to several institutions, and currently over 300 infected
armadillos are being kept in the various laboratories for the production of
leprosy bacilli. One important constraint is that the susceptible animals are
found in a restricted geographical area (the southern part of the United
States, and Central and South America) and so far connot be bred in cap-
tivity. In order to make the bacilli available to the global network of institu-
tions collaborating in the IMMLEP program, the material harvested from
the infected armadillos is stored in a central bank. A series of protocols
have been devised and tested for the extraction of the bacilli from the ar-
madillo tissue, and now a technique has been developed that combines high
purity with minimal damage to the bacilli. Through research grants
awarded by the IMMLEP group and the biological materials available,
research institutes in several continents are activeiy collaborating to achieve
the objectives of this group. The network is operating in such a way that ar-
madillo tissue derived in one continenit may be subjected to immunological
studies in another continent and the purified antigens tested in the field in
an endemic area in a third continent. The SWG is now able to report suffi-
cient progress in its search for a vaccine so that detailed consideration can
be given to the design of vaccine trials. Similarly, with regard to serodiag-
nosis, significant progress has been made, and some promising new test
systems are being further developed.'
The malaria component of the program illustrates another feature of
the operation of the network system, the interaction of SWGs. The research
and development work on malaria is carried out by three SWGs: one in the
area of chemotherapy, another in immunology, and the third in field re-
search. The emergence of drug-resistant strains of the parasite is one of the
challenging problems tackled in this component.
The field research SWG has developed a program of global surveillance
and monitoring of the distribution of these resistant parasites. This map-
ping will provide the basis for planned containment of the problem and its
eventual control. Test kits for in vitro detection of drug resistance are the
main tools used in this epidemiological survey. The SWG sponsored
regional courses in which participants from developing countries were trained



Tropical Diseases Research Program                     289
in the use of the technique. Next came national workshops and finally na-
tional surveillance programs, which are now being developed and imple-
mented in endemic countries of Asia, Africa, and the Americas. The kits
are being produced for the program in an institution in the Philippines.
Recently a microtest modification was produced by Professor K.H.
Rieckmann, who developed the original technique. The new method was
tested in parallel with the original and was shown to have several advan-
tages. The Special Program is sponsoring a collaborative effort through
thirteen institutions to develop the microtest and manufacture new diagnos-
tic kits for field use.
The chemotherapy SWG, in collaboration with the Walter Reed Armed
Forces Institutes of Research and a pharmaceutical company, is conducting
clinical trials in Thailand, Brazil, and Zambia on a new drug, mefloquine,
that is effective against strains of the parasite that are resistant to other
drugs. The new test kit will be used to monitor sensitivity to this new drug.
Basic research on the mechanisms of drug resistance is supported by the sec-
tion, which is jointly run by the chemotherapy and immunology SWGs.
Studies are being conducted on the biochemistry of drug-sensitive and drug-
resistant strains, and isoenzyme studies are being used to characterize the
genetic basis for resistance. The mode of action of drugs in sensitive and
resistant strains is being studied to determine how the latter escape drug ac-
tion.
Other biochemical studies aim at discovering biochemical differences
between the parasite and the host that can be exploited in novel approaches
to drug design. New drug delivery systems such as the use of liposomes are
being explored in the hope of obtaining more effective and safer drug action
through specific targeting to the parasite. Thus, in tackling the problem of
drug resistance, a broadly based program ranging from basic biological
research to field studies is being managed by the three malaria SWGs.
Collaboration with the Pharmaceutical Industry
Early experience indicates that the program can identify useful modes of
cooperation with industry. Four main mechanisms are in effect: participa-
tion by industry-related scientists in SWGs, the provision of agents for
screening, contracts for technical services, and clinical evaluation of new
drugs and vaccines. There are currently some sixty projects involving the
participation of pharmaceutical enterprises.
The contractual arrangements with industry are designed in such a way
as to protect the public interest and to ensure that any products that are
developed with support from Special Program investments will be made
available to the affected populations on the best possible terms,



290                 Technology, Finance, and Development
Social and Economic Research
Although the Special Program has invested considerable effort in biological
research, it clearly recognizes that social and economic factors are also impor-
tant in determining the occurrence and distribution of tropical diseases. It is
further recognized that if the tools devised for their control are to be
effective, they must be capable of application in the social and economic cir-
cumstances of the communities in which the diseases occur. These cir-
cumstances will determine such aspects as cost, acceptability, and prac-
ticability.
This component of the program will be developed by the SWG on social
and economic research. Following initial consultations, four major areas of
research were identified: behavioral issues, problems associated with the
delivery of disease control, the relationships between development activities
and disease, and decision analysis and disease control. This component is in
an early stage of development. Extensive consultations are taking place with
site visits to institutions in developing countries. Literature surveys are also
being carried out, supplemented by data from unpublished reports, and an
initial field workshop to standardize water contact studies for schisto-
somiasis control has taken place.
Institution Strengthening and Manpower
Development
Intimately related to the search for new tools is the second objective,
equally important and interdependent: the development of manpower and
the strengthening of research institutions in the endemic countries of the
tropics. This area of the program is rightly regarded as the one that prom-
ises the most important long-term benefits from the program.
To accomplish this task, the Special Program has established a Research
Strengthening Group (RSG), which, together with its executive subgroup,
plans the strategy and guides the implementation of this sector of the pro-
gram. The objectives of the RSG are to strengthen research and training in-
stitutions in these countries so that they can better respond to their own na-
tional as well as Special Program needs, to support the training of persons
from the tropical countries to help meet national manpowfer needs, and to
contribute to a rapid transfer to the affected countries from the industrial-
ized world of the knowledge, technology, and skills relevant to their health
objectives and within the sphere of the Special Program.
A strategic plan for institutional strengthening has been drawn up to
enable institutions in tropical countries to assume appropriate roles in
analyzing and solving local and regional health problems. The institutional
support and training opportunities provided through the Special Program



Tropical Diseases Research Program                      291
ensure an increasing involvement of research scientists and institutions in
tropical countries in the research and development activities of the Special
Program. A further benefit of such strengthening is increased national com-
petence in health research, equipping countries to tackle other health prob-
lems of high national priority.
Thus, with regard to promotion of research, the Special Program assists
research institutions in tropical countries in playing their essential role in
developing, testing, and applying new control methods or refining existing
ones, and it tries to strengthen the national capability of tropical countries
for health research.
The program focuses on the training of individuals at all of the levels
needed for research to identify the problems and develop the new tools re-
quired to improve prevention, diagnosis, and treatment of tropical diseases;
on research training programs to meet national needs within health service
manpower development programs; and on appropriate national programs
for biomedical research and training. The strengthening of institutions and
training of research manpower are interdependent, and the program
therefore operates in such a way that one is used to promote the other.
The need for involvement of the tropical countries themselves in all
phases of the research and development process, as well as in the planning
and implementation of programs for training and the strengthening of
research institutions, is manifest if the technology that is developed is to be
effective in the places where it is needed. If the new tools are to be of value,
they must be applicable to disease control in endemic areas. Thus, scientists
and health planners from the endemic areas must be involved in drawing up
specifications for potential new tools and in assessing the problems that
must be overcome to develop tools with such specifications.
A new method of disease prevention or control-a new drug, a vaccine,
a diagtnostic test, or a vector control method-requires careful testing in
endemic areas. Although the fundamental biomedical research necessary to
develop new tools initially takes place chiefly in sophisticated laboratories
outside the endemic areas, clinical and field trials can take place only in the
endemic areas. Scientists in the endemic areas must be brought in to par-
ticipate increasingly at all levels of this research.
The adaptation of new methods to local situations often requires local
operational studies prior to application. Epidemiological, clinical, genetic,
and other differences may necessitate some modifications, for instance, in
dosage of drugs or in schedules of immunization. Differences in the local
systems of health care and in local cultural and social factors may also re-
quire special assessment, work often best carried out by local scientists.
The use of existing institutions in the endemic area is usually a more
cost-effective and rational approach than the creation of new facilities.
Selected existing institutions may be suitably strengthened and expanded



292                 Technology, Finance, and Development
to carry out research and development and thereby strengthen the basis of
national research. If institutions are nationally supported, they will have a
higher probability of continued operation should there be, in due course, a
phasing out of the support from the Special Program.
The involvement and training of local scientists in the endemic areas at
all levels of research and development is designed to enable the tropical
countries to assume increasing responsibility for health research. Each
country should undertake a significant part of the epidemiological and
operational research relevant to its own national health problems, whereas
thie developmental research to fill essential gaps in scientific knowledge can
often best be carried out if responsibility is undertaken on a regional or
global basis. Furthermore, epidemiological and operational research work
can be carried out with relatively simple tools, while developmental and
laboratory-based research usually demands expensive, sophisticated equip-
ment and highly skilled manpower.
A rational strategy is to strengthen national research capabilities to
enable each national health authority to analyze its own health problems
and choose the best options for applying its own health care resources. The
required development work and the more fundamental research will be pro-
moted through national, regional, or global efforts in a network of col-
laborating centers. The institution-strengthening and training activities of
the Special Program in return will ensure an increasing involvement of
scientists from the tropical countries in the program's research and develop-
ment effort.
There can be no stereotyped plan according to which the Special Pro-
gram should cooperate with all tropical countries, varying as they do in
social, economic, and environmental circumstances and in scientific
development. The only prerequisite is the conformity of the activity to na-
tional requirements and plans for the development of research.
Among the terms of reference of the Research Strengthening Group is the
planning and development of an informal network of collaborating centers in
tropical diseases. These centers, which must be able to make a significant con-
tribution to the program, may be located anywhere in the world, but only
those in tropical countries are eligible for institution-strengthening support
from the RSG. Groups of centers in tropical countries will be able to col-
laborate in serving regions with common disease problems.
Various types of grants are available from the Special Program to assist
network centers. Grants for long-term support (for periods of up to five
years) may include core support for such items as equipment, supplies,
salaries for full-time persorinel, the employment of consultants, and staff
training. They may also contain special linkage agreements between the insti-
tute and a more developed research center, including exchange of research
staff, joint research projects and training programs, and secondment of staff



Tropical Diseases Research Program                     293
from their regular positions at the more developed center for temporary
assignments in the less-developed one. Short-term support takes the form of
capital grants to assist well-established institutions needing a single capital
sum to enlarge their research capability. Small granlts are intended to assist
promising young scientists from tropical countries who are engaged in or
starting research relevant to the Special Program objectives but not sup-
ported by the program. Training grants for scientists are also available,
chiefly to complement institution-strengthening activities and to meet the
needs of the SWGs.
A model of a successful Special Program activity was provided in April
and May 1978 when training courses were held at the Faculty of Science of
Mahidol University in Bangkok, Thailand, under the sponsorship of the
SWGs on the chemotherapy and immunology of malaria. William Trager,
from Rockefeller University in New York, coordinated a course on the
technique achieved in his laboratory for the continuous cultivation of
Plasmodium falciparum. Participants from the local faculty, from other
parts of Thailand, and from Burma, India, and Korea were experienced
researchers who had the necessary facilities for setting up the technique in
their own laboratories. In the second of the two courses, much of the train-
ing was carried out by the newly trained members of the local faculty. A
later course was run exclusively by them, representing a completely suc-
cessful transfer of a new technology.
Evaluation Mechanisms
Mechanisms for evaluation have been built into every aspect of the pro-
gram. Individual research projects are evaluated by the steering committees
of the SWGs. Each SWG in turn is evaluated by the Scientific and Technical
Advisory Committee, a body of fifteen to eighteen scientists who review the
entire program annually. An in-depth evaluation of the program as a whole
is planned for the end of the first five years of operation.
Conclusion
The Special Program is operating in an area of major concern to developing
countries. It is tackling diseases that have been selected because of their delete-
rious effects on a sufficiently large scale to be recognized as major public
health problems. In its search for solutions, the program has selected mech-
anisms aimed at rapid technical advances while at the same time providing the
opportunity for promoting self-reliance in the developing countries. The
institution-strengthening and manpower-training component of the program
focus on the rapid transfer of technology to the affected countries.



294                Technology, Finance, and Development
The orientation is not solely from the developed to the developing coun-
tries, however. Rather, there is a strong element of technical cooperation
among developing countries built into the program through promotion and
support of regional workshops, through regional collaborative studies, and
through the exchange of scientists.
There was much discussion initially as to the appropriate scope of the
program. Some favored investment in basic research, and others felt that
the emphasis should be on applied field research. Some believed that the
research and development component should be dominant; others recom-
mended that priority be given to the strengthening of research capabilities.
The present balance within the program has been adjusted to take into ac-
count these different concerns. Through the various mechanisms, the ques-
tion will be continuously examined, and adjustments will be made to ensure
that the objectives remain relevant and that they can be achieved in the most
cost-effective manner.
Since 1979, the program has made considerable progress. As planned, a
quinquennial review was carried out after five years of operation, the Exter-
nal Review Committee found that the program was making an "important
contribution to the world-wide efforts against the six diseases that are its
target." Some of the products of the research and development effort are
now in an advanced stage of clinical and field evaluation or in operational
use.
Note
1. See Third Annual Report of the Special Programme for Research
and Training in Tropical Diseases (Geneva: World Health Organization,
1978), chap. 7.



Cotton Development
International
Charles Weiss and
Wil Lepkowski
The UNDP, the World Bank, and the Rockefeller Foundation for six years
promoted the establishment of what came to be known as Cotton Develop-
ment International (CDI). CDI was to have been a new intergovernmental
organization, controlled by the governments of cotton-producing countries
and run along business lines, with the purpose of carrying out an integrated
international program of cotton market development, including research,
development, promotion, and technical and commercial services to industry
and trade. CDI was to have built on the efforts of an existing organization,
the International Institute for Cotton (IIC).
The effort failed totally, but honorably and instructively. The failure il-
luminates the difficulty of promoting and organizing an international, and
especially an intergovernmental, program to apply modern science and
technology to a global problem of interest to a large number of developed
and developing countries. It also illustrates the specific issues involved
in applying modern science and technology-integrated with up-to-date
marketing-to an agricultural export commodity whose production is
shared by farmers in dozens of countries.
The IIC had already pioneered in achieving necessary integration
among research, development, and the commercial structure of the crop.
But it had been unable to expand its membership beyond a small minority
of the cotton-producing countries and suffered from a limited financial
base. Indeed, 73 percent of its budget was paid by the United States.
Moreover, IIC is not an answer to cotton's overall technological problem
because it concerns itself only with industrial research on end uses and
manufacturing processes of cotton. The CDI promoters therefore attempted
to design an integrated approach that would meet the needs of both the
developed andi the less developed countries and would be financed by both
the producers and the consumers of cotton.
CDI was to take advantage of the technological and marketing lessons
already drawn by IIC from the history of polyester development. This syn-
thetic fiber cut severely and quickly into cotton markets because of its ad-
vantages in the manufacturing progress, its wash and wear capabilities, and
its crease and wrinkle resistance. Its manufacturers, all large chemical com-
panies, were able to combine fiber research, research on textile manufac-
ture, marketing, and promotion into a single integrated product strategy,
295



296                 Technology, Finance, and Development
which, despite cotton's initial price advantage, quickly captured a large
share of the textile market. Polyester manufacturers presented the textile in-
dustry with a complete package of spinning, weaving, and dyeing technol-
ogy, extending even to design and fashion servicing.
They not only offered to share the costs of promoting the synthetic
fabrics but also gave textile manufacturers the added cost advantage of hav-
ing their brand names used in advertising, paid for by the chemical firms.
Such subsidies were offered with the proviso that the finished textile prod-
uct use a high percentage of synthetic. Cotton therefore found itself at a
distinct economic and technological disadvantage. Up to that point, textile
manufacturers had paid for their own research and promotion. Now, with
the fiber manufacturers offering research, development, and promotion,
cotton began to fade from priority.
Polyester cannot match cotton for comfort, and the practice has been to
blend the two fibers into a fabric that combines the best properties of the
two. Thus, cotton is able to compete with polyester as both a pure fabric
and a constituent of blends, which may vary in the relative proportion of
the fibers used. Cotton producers, however, misjudged the speed with
which blends were to take over the market and were unaccustomed to spon-
soring market-oriented research. Rather than seek to defend their product
in the market or to maximize the share of cotton in the new blends, they lost
nearly a decade in an attempt to match the easy-care properties of polyester
with the chemical technologies then available.
Background
Many export commodities produced by developing countries have benefited
from production research and extension support that was much stronger
than that provided for domestic food crops. Cotton, coffee, tea, oil palm,
cocoa, and sugar are examples of such export commodities. Staple food
crops were neglected by colonial regimes and only recently have received
major attention from developing-country governments and from the inter-
national community. In general, however, even nonfood agricultural com-
modities have never been a keen subject for large-scale integrated research
and development on all aspects of the commodity, including industrial
research on end uses. The exception to this rule is rubber, for which an in-
tegrated research and marketing program exists but which is limited to a
handful of exporting countries.
Unlike basic food crops, cotton is an export crop that faces competition
on world markets from alternative fibers. This market discipline imposes
the need for research to increase yields, raise fiber quality, and lower pro-
duction costs, regardless of the level of research effort being devoted to other



Cotton Development International                          297
crops. The research base for cotton has been hurt by "closing of the Cotton
Research Corporation of the United Kingdom, the contraction of produc-
tion development support by international trading firms, and the shift in
textile institute research emphasis from cotton to the man-made fibers."'
Approximately 140 million people in the developing countries make
their living from growing cotton, with another 40 million earning their in-
come in the cotton textile industry, according to the IIC. Cotton producers
in developing countries range from large plantation owners in many parts of
Latin America to some of the poorest farmers in the world in India,
Pakistan, and Central and West Africa. For many of these poor farmers,
cotton is an essential element in a crop rotation system and a source of cash
income for clothing and other indispensable purchases and for payment of
taxes. For still others, who are constrained by distance from markets or un-
favorable weather or soil conditions, cotton is the only possible crop.
The 1979-1980 annual world production of cotton lint and cottonseed
was abouit 14 million tons and 26 million tons, respectively. The value of the
year's lint production exceeded $19 billion; the value of the annual seed pro-
duction was about $5 billion.
The dependence of the developing countries on cotton for growth,
foreign exchange, and employment is illustrated by the statistics in tables
18-1, 18-2, and 18-3. To cite three of the most dramatic country examples,
cotton lint in the late 1970s accounted for 9 percent of the GNP and 46 per-
cent of the exports of Chad and contributed to the cash incGme of 71 per-
cent of its population; cotton lint and manufactures, taken together, ac-
counted for 41 percent of the exports and 24 percent of the GNP in Egypt
and I 0 percent of the employment, 26 percent of the exports, and 10 percent
Table 18-1
People Dependent on Cotton for Their Livelihood, Selected Developing
Countries, 1970
Percentage of
Country                   Millions of People            Total Population
Chad                            2.6                          71.4
Nicaragua                       0.7                          35.4
Guatemala                        1.0                         19.8
Syria                           1.0                          16.0
Sudan                           2.0                          12.7
Ivory Coast                     0.5                          11.2
Pakistan                        5.5                          10.3
India                          45.0                          8.4
Mexico                          3.0                           6.1
Peru                            0.7                           5.2
Source: International Institute for Cotton, "The Importance of Cotton and Cotton Products
to the Developing World," June 1973.



298                   Technology, Finance, and Development
Table 18-2
Cofton Yarn and Fabric Manufacture and Exports in Developing Countries,
1977
Manufacture  Manufacture   Exports of   Exports as
GNP Per     of Yarn        as a       Yarn and   a Percentage
Capita    and Fabric  Percentage of   Fabric      of Total
(U.S.$)  (U.S.$ million)  GNP     (U.S.$ million)  Exports
Africa
Egypt            340       1,744         13.5         238          13.9
Ivory Coast      770        n.a.         n.a.          35           1.6
Asia
Hong Kong       2,620      1,030          0.9         329          3.4
India            160       6,757          6.7         342a         5.4
South Korea      980         598          1.7         204          2.0
Malaysia         970         42b          0.3           lb           0
Pakistan         200         707          4.7         271          22.8
Thailand         430         491          2.7          54           1.6
Latin America
Argentina       1,870       223C          0.5          25          0.4
Brazil          1,410       n.a.         n.a.         187           1.5
Colombia         760        n.a.         n.a.          54          2.2
Mexico          1,160        612          0.8          61           1.3
Southern Europe
Greece          2,950        452          1.7         175          6.4
Portugal        1,840        665          3.8          98          4.8
Turkey          1,110      1,194          2.6         161          9.2
Sources: World Bank Atlas, 1979; FAO trade tapes; International Financial Statistics, 1979.
aExcludes hand-loomed fabric.
bYarn only.
cFabrc only.
of the GNP in Pakistan. Even allowing for the unreliability of the employ-
ment figures, these are impressive statistics.
World cotton consumption, according to a World Bank report, rose
from 9 million tons in 1955 to 13.6 million tons in 1976, a 2.1 percent
average annual growth rate.2 Population and income projections indicate
that by 1990 consumption should rise to 17.5 million tons, with the fastest
growth taking place in the developing countries.
Synthetic fiber consumption will grow even faster than consumption of
cotton, according to the same report. The market share of cotton is pro-
jected to fall from slightly over 50 percent in the mid-1970s to 42 percent in
1990.
Productivity is improving in the poor countries. Third World cotton
yields rose 1.6 percent per year between 1961 and 1977, compared with a 3.4
percent rise in the centrally planned economies and only 0.6 percent in the
developed countries.



Cotton Development International                                  299
Table 18-3
Importance of Cotton Lint Production and Exports in Developed and
Developing Countries, 1977
Lint Pro-               Lint Exports
GNP Per   Cotton Lint   duction as    Lint      as a Percent-
Capita   Production  a Percentage   Exports    age of total
(U. S.$) (U. S. $ million)  of GNP  (U.S.$ million)  exports
Africa
Chad               130         49          8.7            58         46.0
Ivory Coast        770         43          0.7            21          1.0
Mali               120         65          9.0            57         45.7
Nigeria            510        120          0.3             6          0.1
Sudan              330        361          6.4           378         57.3
Tanzania           210         83          2.4            66         12.1
Middle East
Egypt              340       1,316        10.2           466         27.3
Iran              2,060       271          0.4           107          0.5
Israel            3,760       103          0.8            57          1.8
Syria              860        263          3.9           212         19.9
Southern Europe
Greece            2,950       256          0.9            31          1.1
Spain             3,260        80(E)       0.1(E)          0           0
Turkey            1,110       799          1.7           209         11.9
Latin America
Argentina         1,870       233          0.5            88          1.6
Brazil            1,410       654          0.4            41          0.3
Colombia           760        258          1.4           113          4.7
El Salvador        590        100          4.0            76          7.8
Guatemala          830        149          2.8           155         13.1
Mexico            1,160       500          0.7           183          4.0
Nicaragua          870        153          7.3           149         23.5
Paraguay           750         100         4.7            80          0.2
Peru               720         164         1.4            47          2.9
Venezuela         2,630        28          0.1             0            0
Asia
China              410(E)    2,405         0.6            85         n.a.
India              160       1,450         1.4            12          0.2
Pakistan           200        835          5.5            39          3.2
Developed Countries
United States     8,750      4,947         0.3          1,536         1.3
USSR              3,330(E)   3,821         0.4          1,368        n.a.
Sources: World Bank Atlas, 1978, 1979; FAO trade tapes.
Note: E = estimate.
The developing countries have raised their share of the cotton market
from 37 percent to 43 percent in a twenty-year period. Almost all of this in-
crease occurred before the food grain shortages of the early 1970s. During
the 1970s, substantial cotton acreages were shifted to food crops, especially
in Africa.



300                 Technology, Finance, and Development
Since 1961, world production of cotton lint has grown at an average an-
nual rate of 1.7 percent. The 1979-1980 season produced nearly 14 million
tons, more than twice as much cotton lint as the 1950-1951 season. The in-
crease in production has been general, but there has been some change in
the shares of output among producers.
Per capita consumption of all fibers in 1961 was 5.0 kilograms. In 1978
it was 6.7 kilograms. Cotton's share of the fiber imarket stood at 85 percent
in 1920, falling to 75 percent in 1940, 71 percent in 1950, and 48 percent in
1978. Man-made fiber penetration rose from 0 to 47 percent in the same
years.
Parallel with the advent and growth of man-made fibers was a marked
shift in the geographical distribution of cotton manufacturing capacity. In
1950, industrial countries accounted for 69 percent of world cotton spindles
and 64 percent of all cotton looms. Those countries have been reducing
their spindles and looms for several decades. By 1977, they accounted for
only 33 percent of all spindles and 34 percent of looms. In contrast, many
developing countries have initiated or expanded their textile capacities since
1950. Their share of world cotton system spindles and looms increased from
16 and 17 percent in 1950 to 38 and 35 percent in 1977. Even more spec-
tacular has been the growth of cotton textile exports from the developing
countries-from $550 million in 1960 to $2.7 billion in 1978.
The trade potential looks good for the cotton-producing countries. Best
assessments are that if international trade policies continue to be no more
restrictive than they are today, the developing countries' share of cotton
textile markets is likely to increase in the 1980s.
The Bank projects that the world demand for cotton in the 1980s will
grow to around 17 million tons.3 This indicates a need to expand production
by 2.5 million to 3.5 million tons above recent outputs. No single producing
nation alone can meet this rise in demand. Moreover, although this total in-
crease in cotton production can be achieved through rising yields alone, in-
vestments in irrigation systems, machinery and equipment, and other input
supply systems will be needed to obtain the required productivity gains.
Cotton production is by far the largest user of agricultural pesticides in
both developed and developing countries. Not only has indiscriminate use
of pesticides caused severe environmental damage, but it has raised produc-
tion costs and, through ecological backlash (destroying natural predators
and elevating hitherto minor pests to the status of major scourges), actually
destroyed the cotton industry in several places where it once seemed to have
great promise.
The shift of world textile manufacturing capacity has brought with it
important ramifications for world trade policies. Fearful of unemployment
caused by the lack of competitivenes of their domestic textile industries,
developed countries have negotiated a series of treaties, called Multi-Fiber



Cotton Development International                       301
Agreements, to limit the amount of textiles that can be imported from
developing countries. Several developing countries, notably Hong Kong,
Singapore, Taiwan, and Korea, have quickly filled their quotas and been
forced to curtail their plans for textile expansion. In other countries, there
remains room for expansion before the quoti limits are reached.
The developing countries have sought to place liEnmts on the extreme
fluctuations of cotton prices during recent years. For example, the price of a
widely traded variety of cotton ranged from 60 cents to 91 cents per pound
between August 1975 and July 1976. Developing countries pressed for the
establishment of an int :nationally managed buffer stock, to be purchased
when the world supply of cotton exceeded the demand and sold off when
the reverse was the case. The stable prices and reliable supply that would
result from such a buffer stock, it was argued, would provide more predict-
able foreign exchange earnings to cotton-exporting countries and would
also greatly increase the attractiveness of cotton for textile manufacturers.
Negotiations on the so-called International Cotton Agreement, which
would establish such a cotton buffer stock as one of a series of reserve
stocks for commodities exported by developing countries, have been under-
way under the auspices of the UN Conference on Trade and Development
(UNCTAD). In international forums, many developing countries have voiced
the general conviction that the world prices of natural commodities ex-
ported by developing countries are declining relative to the prices of the
manufactured goods that they import, an argument that played an impor-
tant role in the original establishment of UNCTAD. Most developed coun-
tries have opposed the creation of such a buffer stock on the grounds that it
would be impractical and expensive to maintain and might be managed in
such a way as to raise prices to consumers.
CDI was not to have had any role in establishing or sustaining any such
buffer stock arrangements. It would, however, have been designed to
benefit from support from the so-called UNCTAD/Common Fund second
window account, a special fund that is to be supported by voluntary dona-
tions, mostly from developed and oil-exporting countries, that would sup-
port efforts to improve the market competitiveness of LDC exports through
programs of marketing and technological development.
While neither the Multi-Fiber Agreements nor the proposal for an inter-
national buffer stock directly affects the rationale for an international pro-
gram of research and development, they did contribute to a political at-
mosphere that tended to hinder dispassionate consideration of the technical
merits of the CDI proposal. For example, the positions of some govern-
ments on the CDI proposal were affected by a broader strategic position
that CDI might (or that it must) serve for diplomatic purposes as a
substitute for a broader cotton agreement. These cross-currents were
ultimately decisive in defeating the CDI proposal.



302                 Technology, Finance, and Development
Recent Developments Affecting Cotton
Three recent developments have brightened the outlook for cotton on world
markets. The first of these is the explosive increase in the use of cotton,
especially in the form of denim, as a fashion fabric and the general trend in
clothing markets toward natural fibers. To these developments the promo-
tional efforts of the IIC and of Cotton Inc., in the United States, made a
significant contribution. Second is the rise of oil prices. Although price in-
creases have raised the costs of cotton production, higher oil prices have
brought about an even more serious increase in the cost of petrochemical
feedstock, with the result that during part of 1980, synthetic fibers became
even more expensive than cotton in the cotton-importing markets of
Western Europe. The third of these developments is directly traceable to the
Utilization Research Program of the IIC and to the work of its technical
director, Frank Burkitt, as well as to the work and collaboration of
coworkers and scientists around the world. Drawing on the strategic lessons
of the failure to produce a 100 percent cotton easy-care fabric by cookbook
resin treatments during the 1950s, Burkitt and his collaborators undertook
to learn enough about the fundamental structure of the cotton fiber to
understand why cotton reacted to the chemical resins that produced easy-
care properties by losing its strength and wear resistance.
Working on a very limited budget in collaboration with European
researchers in several laboratories, IIC researchers found that traditional
techniques of cotton finishing caused the chemicals used in easy-care treat-
ment to be distributed nonuniformly. These techniques, moreover, did not
allow complete relaxation of physical strains introduced into the fabric by
earlier processes such as spinning, sizing, and weaving. IIC recognized that
treatment by liquid ammonia allowed these strains to be dissipated and that
the new minimum application systems for easy-care finishing gave a more
uniform and improved product. The new systems of application also pro-
vided major saving,s in energy and chemicals.
The research revealed that either liquid ammonia treatment or
minimum application easy-care finishing, used alone, gives improvements.
Used in combination, 100 percent cotton products having the easy-care per-
formance of blends, as well as adequate durability and strength, can be pro-
duced. The magnitude of this achievement is illustrated by the fact that as
recently as 1976, one of the authors of this chapter was told by the director
of research of a leading U.S. textile company that easy-care 100 percent cot-
ton was an unfeasible technological objective.
This signal success of the IIC program shows that cotton can, if backed
by a modern program of research and market development, defend its
market niche against synthetic competitors. The success of natural rubber in
retaining its market volume (although not its market share) lends further
credence to this assertion.



Cotton Development International                        303
A fourth development that may affect cotton's long-term future is the
possibility that cotton eventually may become a major food or energy crop
in addition to being a major source of fliber. Up to now, cottonseed, which
comprises 60 percent of the cotton crop by weight, has been crushed to pro-
duce oil and animal feed. Recent increases in the price of petroleum have led
to widespread interest in the possibility of using vegetable oils as substitutes
for diesel fuel. Also, until recently the use of cottonseed protein for human
consumption has been prevented by the presence of a toxic impurity,
gossypol. In recent years, two different technological approaches were
developed that raise the possibility of a gossypol-free cottonseed meal
suitable for human food. Cotton breeders have succeeded in producing
varieties that produce the same yield per acre as regular varieties but whose
seeds do not contain the glands that produce and store gossypol. Technolo-
gists have developed a so-called liquid cyclone process for physically sera-
rating these glands from normal cottonseeds after harvesting and girling.
For a variety of reasons, neither of these technologies has progressed or
spread as fast as their proponents had hoped.
How the CDI Concept Was Born
The idea of CDI emerged out of a suggestion from the IIC. Based in
Brussels, Belgium, IIC is currently funded by eleven countries that grow
cotton, eight of them developing countries. Its programs include promo-
tion, economic and market research, industrial research, technical services,
public relations, and industrial and trade services for European and
Japanese industrial markets.
The majority-of cotton-producing LDCs, many of them very poor
countries, have not chosen to become members of IIC. IIC's programs in-
clude no cotton production research and only very limited assistance to cot-
ton textile manufacture or cotton marketing in developing countries. In ad-
dition, during the past several years, it has experienced problems in raising
funds to support its programs. Until 1979, IIC's membership fee was one
dollar per bale of raw cotton exports to Europe and Japan. Under this for-
mula, the IIC's base of funding was declining because of the general erosiorn
of the dollar at the time, global inflation, and the increased exports of cot-
ton textiles (rather than raw cotton) in the member countries. Recently IIC's
membership formula has been revised, but its financial situation is still
critical, and its program has had to be reduced in the last few years because
of lack of funds.
In 1970, IIC knew that it had to expand and therefore sought additional
sources of support. It approached the UNDP for assistance in expanding its
work in utilization research and promotion. The request resulted in a decision
to explore the total situation of international cotton since cotton's problems



304                Technology, Finance, and Development
ranged across production, end-use research, marketing, and promotion in
both developed and dcveloping countries, a scope that extended beyond
IIC's expertise and, some might say, its ambitions.
Why an International Cotton Research and
Development Effort was Needed
In 1972, UNDP established a fact-finding mission in which IIC staff par-
ticipated. The findings of this mission formed the basis of the CDI pro-
posal. The UNDP reported that the importance of cotton to the developing
countries was crucial but that its production was fragmented. It said a mna-
jor effort would be needed to meet the competition from polyester, but the
developing countries were neither financially nor organizationally able to
mount such an effort on an individual basis. Thus it urged a joint program
involving the major cotton-producing countries in a long-term effort requir-
ing greatly increased financial support and technical guidance from the in-
ternational community. It noted the availability of high-quality technical
assistance for production research in the LDCs from such agencies as the
Institut de Recherches du Cotton et des Textiles Exotiques in France and
from such multilateral sources as FAO, as well as utilization research and
promotion conducted by IIC in Western Europe and Japan and by Cotton,
Inc., in the United States.
But the mission found notable and wide gaps. As IIC had pointed out in
its request for funds, there was a need for substantially more resources for
utilization research and for marketing and promotional activities. There
was also a lack of formal international coordinating and information ex-
change machinery to help address such issues as common production
research problems, lack of plans for utilization research geared to the grow-
ing needs of developing countries, lack of an integrated program and
strategy for cotton with which developing countries could jointly maintain
their interests, and lack of a planning mechanism for supervision and con-
trol of research and for obtaining and allocating research funds.
Not more than five developing countries, the mission reported, had
well-balanced, multidisciplinary research programs in cotton production.
Most of the research institutes in developing countries lacked expertise in
relevant research disciplines, especially entomology and soils science, and
lacked important equipment and funding. There was (and still is) a great
need to train developing-country nationals for research and to furnish op-
portunities for travel and exchanges through visits and conferences.
These conclusions were repeated and reinforced by a second report,
financed by the Rockefeller Foundation at the request of the Bank and
UNDP, and chaired by the late George Harrar, former president of the
foundation.



Cotton Development International                      305
The development of the CDI program and proposed structure was an
intricate technical task requiring the efforts of several Bank and UNDP
staff and five expert working groups over a period of a year and a half. The
large number of governments that would have had to be involved with the
cotton issue and the complex internal structure of each government led
sponsors to decide not to consult with governments until the proposal had
been fully worked out, despite the obvious advantages of having involved
them from the beginning while the proposal was being formulated. A for-
mal prospectus for establishment of CDI was issued in July 1977 by the
UNDP, Rockefeller Foundation, and World Bank. The concept of CDI was
contained in that proposal.
CDI's purpose was to have been to:
1. Promote the greater use and production of cotton and cotton products,
including blended fabrics.
2. Improve the overall efficiency and productivity of cotton manufacture
in developing countries through consulting services to industry.
3. Increase the competitiveness of cotton through industrial research and
market development and promote the transfer of new cotton technol-
ogy to industry.
4. Improve the yield and quality of cotton production in developing coun-
tries through agricultural research and development.
5. Improve the capacity of developing countries to carry out promotion,
extension, marketing, and industrial research and development.
In other words, CDI was to integrate all elements of a cotton market system
and link agricultural research to industrial processes, product research to
marketing needs, and to build institutions to strengthen each single element.
Besides the IIC, its models were to be the International Wool Secretariat, the
Malaysian Rubber Research Institute, and Cotton, Inc., which carry out
similar functions for wool, rubber, and U.S. cotton, respectively. It was to
build on the nucleus provided by the staff and program of the IIC and retain
the location of the IIC headquarters in Brussels, Belgium, which is close to the
center of the European textile industry and a hub of global communications.
The CDI program was to include iDtei national agricultural research, in-
dustrial research, technological services to the developed- and developing-
country textile industry, economic analysis, marketing, and promotion.
In agricultural production research, CDI was to have established
regional production research teams to carry out a global program of
research on cotton production problems. Initial priorities were to be yield,
fiber quality, integrated pest control, improved varieties, and low-cost
farming systems. CDI was also to have assisted national research programs
in such areas as the following:



306                 Technology, Finance, and Development
1. Improving varieties and developing germ plasm collections for high-
yield qualities, insect and disease resistance, and toleranice to cold, heat,
salinity, and drought.
2. Reducing losses from cotton pests.
3. Improving productivity through changes in farming practices, such as
dates and rates of planting, crop rotations, soil fertility and manage-
ment, water management, weed control, and evaluation of varieties
under different conditions.
4. Improving engineering systems, such as seedbed preparation, insec-
ticide application equipment, and ginning.
In industrial research, CDI was to have absorbed and expanded the
research now underway in the IIC utilization research laboratory in Man-
chester, England, in such areas as easy-care cotton, adaptation of cotton to
new textile technologies such as open-end spinning, and responlses to con-
sumerist and environmental legislation in developed and developing coun-
tries concerning such issues as pollution, flammability, and worker health
and safety (specifically freedom from brown lung, or byssinosis, a serious
disease caused by accumulation of cotton dust in millworkers' lungs).
CDI would have benefited textile manufacturing industries in both
developing and developed countries. It would ha-.< offered them technical
assistance and programs of research, development, and promotion designed
to increase the demand for cotton goods in export markets and to increase
the proportion of cotton used in textile mills throughout the world. Projects
were to include the following:
1. Improving the quality of cotton-containing textile products in regard
to easy-care performance, stability to laundering, and similar charac-
teristics.
2. Ensuring that cotton can be processed economically on new processing
systenms and is compatible with developments in knitting machines,
open-end spinning equipment, and high-speed bleaching and scouring
ranges.
3. Minimizing the problems caused by impurities in raw cotton by eco-
nomic methods of cleaning and nonpolluting systems of dyeing and fin-
ishing.
4. Advising on the organization and management of textile centers else-
where.
Regional centers were also to have been established for coordinating
technical assistance to the textile industries in developing countries to in-
crease the amount of cotton they use. They were to have helped build.
capacity for carrying out promotional activities on behalf of cotton, for



Cotton Development International                    307
commissioning or executing programs of transfer and adaptation of cotton
technology to meet regional needs, and for helping build research and
development capacity at the national and regional level. Market research
and economic analysis were to have played a key role. Assistance would
have been given to the development of market intelligence, projecting the
impact of international social, economic, and political developments on the
cotton economy.
In the original proposal, CDI was to be an organization of the govern-
ments of cotton-producing countries, many of them developing countries.
These governments were to take the responsibility for financing the CDI
program according to a formula that reflected both their production of cot-
ton and cotton textiles and their per capita income. This structure was based
on the principle that only the producers of cotton could be expected to take
responsibility for its future.
In summary, the basic principles of the CDI proposal were as follows:
1. The need for a large increase in the funding of cotton research and
development to raise it to a respectable fraction of the sum being ex-
panded by synthetic competitors for similar purposes.
2. The need for an effort controlled and financed by producers, who alone
had a direct interest in the competitiveness of cotton.
3. The need for an integrated approach combining agricultural research,
industrial research, and marketing.
4. The need for a development-oriented approach in which the needs of
poor cotton farmers in developing countries would receive appropriate
attention.
To the sponsors, these principles were critical to any effort to bring
modern science and technology to bear on a commodity that was both a ma-
jor export earner and a major source of income to farmers in developing
countries.
The Effort to Promote CDI
The formal presentation of the CDI prospectus in July 1977 was followed
by a one-year program to explain the CDI proposal to the governments of
producing countries (who were invited to become dues-paying members)
and nonproducing countries (who were asked to make financial contribu-
tions). This effort was needed because of the novelty of the CDI proposal
and the need to inform the government of forty-five or so countries, each of
which had several ministries concerned with cotton. The donors then con-
vened an informal meeting at Bellagio, Italy, financed and hosted by the



308                Technology, Finance, and Development
Rockefeller Foundation, where the proposal received encouragement from
leading cotton experts from developed and developing countries. Active
promotion of the CDI proposal followed. An intensive lobbying effort was
initiated, culminating in three intergovernmental working groups at which
government representatives formally discussed the CDI proposal with each
other and with representatives of the sponsoring organizations.
The CDI proposal was not easy to explain to governments. Export crops
like cotton in many developing countries are regarded as a hangover from
the colonial past, whose economic role is to finance the development of the
country through industrialization. Perhaps for this reason, government
policies for the promotion of cotton normally take the form of trade pro-
motion rather than science, technology, and marketing.
For many years, international cotton diplomacy has centered on the
negotiations for quotas under the various multifiber agreements that
regulate textile trade between the developing and the developed countries
and on efforts under the auspices of UNCTAD to establish a buffer stock
and reference prices to assure cotton producers of stable and satisfactory
returns. Many of the foreign policy officials in developing and developed
countries have participated in these negotiations, which focus on efforts to
win trade concessions from one side or the other rather than on develop-
ment-oriented discussions seeking areas for constructive cooperation. The
idea that developing-country producers need to take financial and manage-
ment responsibility for a modern program of market-oriented science and
technology to defend the competitiveness of this export crop was in many
cases a novel message to this constituency.
No country is purely a producer of cotton; all developing countries con-
sume cotton, and many developing countries are promoting their own cot-
ton textile industry. Each government has several ministries corncerned with
cotton, some as an item of agricultural production, others as an item of ex-
port trade, and others as an input to textile manufacture. All of these
ministries have to come to a consensus before a governmental position is
reached. For this reason, no government can identify itself solely with the
interests of the cotton producer.
In the negotiations that followed the Bellagio meeting, the CDI proposal
changed in fundamental ways that reflected the desires of the participating
governments. Developing countries, however much they appreciated the need
for CDI, felt they could not afford its cost. The sponsors argued in vain that
cotton was a major producer of foreign exchange so that research money
should be considered an investment off the top and that the dues of cotton
producer countries for CDI's program to protect cotton's competitiveness
would be, in any case, less than their premiums for fire insurance.
As the CDI negotiations proceeded, the prospects for funding of the
UNCTAD second window improved. UNCTAD indicated that proposals



Cotton Development International                       309
from CDI would receive sympathetic consideration from the management
of the second window when it becomes operational. The working group
therefore indicated its desire to change the structure of CDI into an
organization composed of the governments of both producer and consumer
countries in order that it might be eligible for second window funding. The
prospect of a second window funding increased the political attractiveness
of the CDI proposal but at the cost of undercutting the argument that the
developing-country producers should themselves assume the financial and
substantive responsibility for the work of CDI.
The Failure of CDI
CDI's prospects for success rested on three requirements: that IIC
members, especially the United States, agree to join CDI and to allow IIC to
serve as the nucleus of the new agency; that several major producers of cot-
ton which are not IIC members agree to join; and that donors support CDI
with enough funds to draw additional support from member countries. Two
of these requirements failed to be accomplished.
The major success of CDI's promoters was to gain strong U.S. support
for the proposal. This was not an easy task. U.S. involvement could be
justified in two ways. The United States is a major cotton exporter, is
already a member of IIC, and has a strong interest in expanding the overall
market prospects for exported cotton. Second, the United States is a rich
country with money to spend in support of foreign aid projects offering
good prospects of benefiting poor people in developing countries.
The Carter administration gave CDI its firm support. The interests of
the United States as a cotton producer, however, ran counter to any U.S.
contribution to production research. They agreed, however, to support
CDI, albeit reluctantly, as the best way to help the IIC programs of in-
dustrial technology and marketing, which they wholeheartedly supported,
to survive and expand. Throughout the negotiations, the United States held
to a position of strong support for CDI but with the proviso that it was
precluded by congressional action from spending funds appropriated for
market development (such as are now being used to support IIC) for pro-
duction research. This restriction was taken into account in the design of
CDI's financial structure.
Support of the IIC was also essential to CDI since IIC's membership,
staff, and facilities were to be the nucleus around which CDI was to be
built. IIC gave its backing to the general concept of an expanded program
for cotton, and many of its members stated that they wished to be founding
members; so did several key producing countries, such as the Sudan, that
were not members of IIC. Support from IIC to the CDI proposal was never



310                Technology, Finance, and Development
wholehearted, however, reflecting as much as anything the reluctance of
any well-established organization to embark on new and uncharted waters
at great risk to itself. What is more, the support CDI received from non-IIC
countries was muted by political developments originating far from the do-
main of science and technology.
The final blow to CDI's prospects for success started with the organiza-
tion of a group of developing-producer governments at a meeting held in Iz-
mir, Turkey, in March 1980. The major purpose of the so-called Izmir
group was to assist producing developing countries to adopt common posi-
tions in the negotiations over buffer stocks and reference prices in the
regular meetings held under the auspices of UNCTAD. The governments of
the Izmir group also agreed to speak with one voice at meetings of the work-
ing groups discussing CDI. The group decided to use the CDI proposal as a
bargaining chip in the UNCTAD discussions, in the belief that the United
States was strongly committed to CDI and would make concessions on the
larger issues in order to achieve its establishment. In the end, the group
deemed even the tiniest prospect of the most minute concession sufficient to
justify acceptance of a very strong probability of scuttling the entire CDI
proposal, despite its repeated formal protestations that CDI was technically
sound and advantageous to the developing countries. Individual countries
in the Izmir group, including several important producers that strongly sup-
ported CDI, were constrained to keep silent in formal sessions in order to
maintain group solidarity. The United States, for its part, held firmly to its
opposition to any such arrangements.
As the world slid into recession, the costs of the CDI proposal loomed
larger and larger, both to prospective donors and prospective members.
Even with the promised support of the UNCTAD second window, the most
optimistic projection of the financial base for CDI was only a little more
than one-third of that projected in the prospectus.
Some prospective donor countries that had enthusiastically backed the
CDI proposal retreated from their earlier positions of strong support and
voiced support for only an administrative budget to cover the costs of a
small staff, which would prepare individual proposals for research projects,
an approach quite incompatible with the integrated approach that formed
the heart of the CDI proposal. Some of these donors were represented by
officials in charge of commodity negotiators who seemed motivated at least
as much by the desire to divert discussion on buffer stocks as by a wish to
help poor .armers or developing countries. This attitude was the mirror im-
age of the position of the Izmir group.
At the end of the third working group meeting in October 1980, four years
after the publication of the prospectus and after the expenditure of more than
$1 million, the sponsors decided that the prospects of launching CDI as an ef-
fective organization did not justify fulrther time and expenditure. They with-



Cotton Development International                     311
drew their sponsorship and turned over the responsibility of promoting it to
UNCTAD. Their action in effect killed the proposal in the form it had been
presented.
On April 23, 1982, the governments of the Izmir group, meeting in
Kaduna, Nigeria, agreed to establish a new International Cotton Producers
Association to "intensify economic cooperation and coordination among
all developing cotton producing countries." Secretariat support for the new
organization is to be provided by UNCTAD, and support is expected from
the UNCTAD second window when and if this is funded. Many of the
stated objectives of the new association are the same as those of CDI.
The history of CDI shows the great difficulty encountered by technically
oriented international civil servants dealing with the political dimension of
launching a new kind of intergovernmental organization based on scientific
and technological principles that are still unfamiliar in the international
community. The history of the CDI proposal shows the dangers of allowing
proposals for research and development to be tied too closely to the mlch
more contentious and expensive proposals for buffer stocks and reference
prices. It also shows fundamental contradictions in the notion, basic to the
framework of commodity negotiations, that measures to improve the com-
petitiveness of commodities should be taken jointly by producers and con-
sumers. The interests of producers and consumers on most issues do not
coincide; on the contrary, they are opposed. In commercial life (and this is
surely the world of the export commodity), the proper defender of the com-
petitiveness of a produce is its producer, not its consumer. Developing
countries cannot expect consumers to take responsibility for this function.
We therefore suggest that the principle of support on a substantial scale
of development and market-oriented research by producers is essential if
commodities like cotton are to benefit from the application of science and
technology in their modern, commercial context.
CDI was to have given the developing countries the power to mobilize
science and technology for their own benefit. Control of CDI was to have
been in the hands of the producing countries, most of them developing
countries. The obverse of this power was the responsibilty to pay for the
organization, a difficult responsibility in hard economic times but an in-
escapable one.
Notes
1. M. Elton Thigpen, "International Cotton Market Prospect," in
Price Prospects for Major Primary Commodities, Report Number 814-82,
(Washington, D.C.: World Bank, 1978), vol. 3.
2. Ibid.
3. Ibid.



I             General Conclusions
I             Nicolas Jequier and
ML          Charles Weiss
The chapters of this book have shown that technology is an important ele-
ment of the work of the Bank as a development institution. Indeed, the
World Bank is a technological institution in the sense that it contributes to
technological innovation, promotes the transfer of technology, and directly
or indirectly helps to build up technological capabilities in the developing na-
tions. It differs in important respects from more conventional technological
institutions, such as national science councils, technological institutes, tech-
nology-oriented consulting firms, and large-scale research centers.
The first difference is that in the World Bank, technological activities
are an element of development rather than an objective in their own right.
From this point of view, the Bank is closer to an innovative corporation or
investment bank than to a conventional technological institution. For the
latter, the promotion of research, the development of new products, or the
transfer of technology are central features of their day-to-day activities and
their long-term development strategy.
A second difference is that the World Bank's importance in techno-
logical development is only beginning to be recognized by governments,
development experts, and the banking community. In fact, the idea that an
international development bank should also be an important actor on the
technological scene may strike many readers at first as something rather
new, although on second thought it should be acknowledged as a natural
consequence of the important role of technology in overall development.
The cases presented in this book are aimed primarily at showing how the
World Bank operates in practice as a technological institution, but this ex-
perience has significance far beyond the confines of this particular institu-
tion. The regional development banks, notably the Inter-American Devel-
opment Bank and the Asian Development Bank, also carry out important
technological activities, and the same is true of many local development
banks in such countries as Mexico, Brazil, Colombia, India, and Korea.
These banks, like the World Bank, have had a major impact on the
technological capabilities and orientations of the countries in which they
operate. Therefore the experiences presented in this book should not be
viewed as something totally new or exceptional but rather as an illustration
of a much broader and more important phenomenon, the growing role of
financial institutions in the process of technological development.
313



314                 Technology, Finance, and Development
The fact that policymakers are not yet fully aware of the role played by
development banks as a major force in the technological system of the
developing nations has meant that they have not paid attention to the ways
of making these institutions more effective instruments of technological
development. A better understanding of the technological role of financial
institutions would also enable policymakers to minimize the contradictions
that often exist between technological development objectives and
economic and developmental priorities. Greater self-reliance and the
development of indigenous technological capabilities are important goals,
but major development projects need to be operationally successful and
financially acceptable, and this often calls for a choice of technology or a
paEtern of implementation that does not necessarily make the optimum con-
tribution to these longer-term technological objectives.
The technological activities of the World Bank raise a number of ques-
tions, not all of which have been fully addressed in this book. In what way,
for instance, do Bank-financed projects contribute to the building up of in-
digenous technological capabilities? Does the Bank tend to be rather conser-
vative in the technological field? Do the project design and preparation pro-
cedures of the Bank tend to favor foreign technology at the expense of
locally designed technology? Before attempting to answer these important
questions, it may be useful to try to assess the effective size of the Bank's
technological activities and show how they fit into the organization's overall
operations.
The Size and Nature of the World Bank's
Technological Activities
The Bank's technological activities can be divided into two broad categories
of unequal importance. The first comprises all of the activities specifically
geared to technological development. This includes the Bank's financing of
the international research network of the CGIAR, its participation as fiscal
agent and financial contributor to the Tropical Diseases Research Program
(TDR), specific project loans devoted exclusively or principally to the sup-
port of education and research institutions, the research-oriented com-
ponents of conventional projects in areas such as agriculture and industrial
development, assistance to governments in building up their consulting and
engineering industry, technical support in energy planning, and research on
appropriate technology in such fields as sanitation and civil works. The sec-
ond category includes the vast array of technological activities that form an
integral part of virtually all Bank projects. These activities range from the
training of the technical and managerial personnel needed for the success of
a project to the international transfer of equipment-embodied technology



General Conclusions                                   315
and from the design of sectoral technology strategies to the upgrading of the
borrowing agency's institutional capabilities.
The funds applied to the first group of activities are of the following
order of magnitude:
$5.0 billion in loans and credits for education in the period from fiscal
years 1963 to 1983.
Loans and credits totaling $1.4 billion for agricultural research projects
or project components through fiscal year 1983.
Loans totaling $118 million for upgrading industrial technology at the
enterprise level through fiscal year 1983.
Grants to CGIAR totaling $105 million, of which the most recent, for
the year 1983, was $19 million.
$4 million for research on appropriate technology in sanitation and
labor-intensive civil works construction.
To put these sums into perspective, we may compare them with a lending
amount of $14.5 billion in fiscal 1983, net income of $752 million for the
same period, and a cumulative total lending of $80.5 billion in the period
from July 1970, the year of the first agricultural research project, until June
1983.1
Activities in which science and technology are the primary elements
(with the possible exception of education and agricultural research) clearly
do not have a major claim relative to other World Bank operations on its
financial resources or staff time. But the sums invested by the Bank in
science and technology, when compared to the sums available from other
organizations in the field, are far from negligible, and their multiplier ef-
fects are often considerable since the Bank frequently acts as a catalyst that
helps to mobilize funds from other institutions.
The Bank's financial contribution to international agricultural research,
for instance, is relatively small. But the Bank's active involvement in the
management of the CGIAR, reinforced by this contribution, acts as an im-
primatur which helps assure other donors that the research of the interna-
tional programs financed by the CGIAR is a sound investment of their aid
resources. The Bank's technical assistance to locai technology policymakers
and consulting firms also involves relatively small sums of money, but its
long-term impact may well be much greater than what these figures would
suggest. In the same way, much of the Bank's research on appropriate
technology has been carried out in cooperation with many other donors and
research organizations (many of which rely on the Bank for technical judg-
ments), but the projects based on this research often do not appear in the



316                Technology, Finance, and Development
statistics on the Bank's technological activities since they are funded by
other development agencies.
The second category of technological activities of the World Bank-the
technological elements of loans and credits for directly productive activ-
ities-is by far the more important. They are not always specifically recog-
nized as technological activities and are difficult to single out from the
overall contribution of the Bank to the preparation and supervision of pro-
jects, the conception of sectoral development strategies, and the review of a
country's economic situation. For this reason, it would be extremely dif-
ficult, if not meaningless, to try to measure their size relative to the Bank's
overall lending commitments.
The importance of these technological elements in the Bank's operation
varies from sector to sector and from project to project. Some sectors are by
nature more complex and more technology intensive than others; this is the
case of exploration and exploitation of petroleum and natural gas
resources, for instance, or of major power generation and distribution
schemes. There are also major differences among projects within the same
sector: a project involving a whole set of fairly new technologies is obviously
more complex than a project that is in essence a replication of other projects
carried out elsewhere.
Project hardware (machines, tools, equipment, and physical infrastruc-
ture) is often less critical to the success of a project than its software
elements (the institutional structures, the managerial tools, the quality con-
trol procedures, the training mechanisms, and, more generally, the under-
standing of the ways in which technology in the hardware sense fits into the
culture and social structure of the community in which the project is carried
out). The balance between hardware and software differs from project to
project and from one sector to another. Even in projects that use large
amounts of equipment-fertilizer plants, large-scale water development
schemes, or power generation and distribution networks, for in-
stance-these software elements are considerable. They are even more im-
portant in the projects aimed at alleviating urban or rural poverty or
meeting basic human needs, where a large amount of effort must often be
spent in designing and testing new types of organization and new manage-
ment and training procedures.
When trying to appreciate the size and nature of the Bank's technolog-
ical activities, it is important to keep in mind that the Bank is a very large
and diverse institution. This diversity, largely the result of a long evolution
spanning more than three decades, accounts to a large extent for the fact
that such concepts as technological development, technological capacity, or
even technology tend to be defined and applied in rather different ways
within the various departments of the Bank. It also explains major dif-
ferences in emphasis in projects.



General Conclusions                                    317
In the more traditional sectors of the Bank's activities-for instance,
power generation or fertilizer production-where much of the technology is
available on the international market in the form of equipment manufac-
tured by well-established suppliers and the technical services that go with it,
building up a local technological capability in the borrowing countries con-
sists in large part of formulating project objectives, assessing resources and
alternative project designs and technologies, selecting, acquiring, and im-
plementing the technology, and operating it efficiently. In such sectors, the
Barnk's work as a technological institution focuses primarily on the process
of technology transfer rather than on the creation of an indigenous in-
novative capability. This process begins in the project's early phases with
decisions as to the project's overall technical characteristics, continues in
the preparation phase with the work of the consulting and engineering
firms, which is carried out in close cooperation with the Bank and the bor-
rower, and ends once the borrower has mastered the organizational,
managerial, and technical skills necessary to the successful operation of the
new productive unit.
By contrast, in many of the newer sectors of activity, where there is
much less institutional experience within the Bank (or for that matter in
other development agencies and in the borrowing countries' government
departments) and where locality-specific circumstances are likely to be
critical to the design of a project, technological and organizational innova-
tion is a necessity. One of the indirect effects of such projects is the develop-
ment and diffusion of important new technologies (hardware and software)
within the borrowing country or institution.
The Appropriateness of the Bank's Choices of Technology
Technology is widely recognized today as one of the important instruments
of development, and considerable attention has been given by researchers
and policymakers alike to the problem of choice of technology. The
assumption underlying this concern is that the developing countries, which
require vast amounts of foreign technology in order to achieve their
development goals, do not always choose the technology that is most ap-
propriate to their resources and capabilities.
Can the World Bank contribute to better technical choices in the
developing countries? When considering this question, it is important to
keep in mind that for a conventional technological institution such as an in-
dustrial research center or a government laboratory, the promotion of
innovation is not only a major goal but its raison d'etre. For the World
Bank-or for that matter any other international or national development
bank- technological activities at the project level are governed by priorities



318                 Technology, Finance, and Development
other than the need to innovate or to promote the most sophisticated
technology. The crucial determinant is the success of the project, and a
balance must be struck between the risks inherent in any new technology
and its potential benefits.2
This need to minimize risk from a technological point of view does not
rule out innovative technological solutions, particularly in areas where ex-
isting technology is inadequate; however, it would probably be fair to state
that in the majority of projects, notably those in areas where the Bank has
traditionally been involved, the technologies chosen are up to date but fairly
conventional and do not necesarily represent the latest state of the art.
This general pattern in the process of technology choice might be viewed
as a form of technological conservatism. If in practice the Bank does show a
strong preference for well-tested technological solutions, this is largely be-
cause such choices are imperative if the project is to meet its objectives. The
well-tested solution of today is often very different from the well-tested so-
lution of yesterday. As a result of its wide experience in the design of proj-
ects, its contacts with industry and the technological community, its institu-
tional knowledge embodied in its staff, and its constant monitoring of
technological developments in a wide number of areas, the Bank is probably
in a better position than many countries, and many government institutions
dealing with technology and development, to assess the quality, reliability,
and likely effectiveness of a technology proposed for a project. This cap?c-
ity to monitor innovation and technological developments worldwide, anld
hence to know fairly well what will work and what will not, can help to
avoid major technological risks in a project. For the borrowing country,
this involvement of the Bank in the process of technology choice is an im-
portant assurance of the project's ultimate success. It can also help to avoid
the very high costs and long delays often associated with the importation of
highly sophisticated but still largely untested foreign technologies and en-
sures that the borrowing country will not be serving as the proving ground
for a foreign supplier of equipment.
In many of the Bank's more recent projects, which address complex
socioeconomic and organizational issues for which there is little previous
experience in the Bank or anywhere else, the goal that a project be replicable
within the cost constraints typical of a particular country has led to a con-
siderable amount of technological and organizational innovation. This
emerges clearly from the chapters in this book dealing with agriculture and
rural development, sites and services, water supply and waste disposal, and
basic education. These are domains where the Bank has not only been in-
novative but more than once has been the leading institution in pushing the
state of the art.
The risks of such innovations are not only economic and financial but so-
cial and political. If major technical problems arise in the process of building



General Conclusions                                    319
a cement plant or a hydroelectric dam, they usually translate into cost over-
runs, delays in start-up time, or lower productivity, problems that can
generally be corrected. But if a slum-upgrading program goes awry or
becomes involved in broader political issues not directly stemming from the
project itself, the result may be greater unemployment, rioting, and loss of
confidence on the part of the people whom the project is intended to
benefit; no amount of money can correct this.
The Decision-Making Process in Technology
Any discussion of the Bank's role in the process of technology choice-
whether the technology is simple or advanced, conservative or innovative-
must take into account the fact that practical operations are rather different
from the models of economic theory.
One of the central features of the abundant economic literature on
technology choice is the high degree of sophistication of the analytical tools
(such as shadow pricing, sensitivity analysis, consideration of factor en-
dowments, and combinations of different technological subcomponents)
used in evaluating possible technological alternatives. The development of
these tools has made a major contribution to our understanding of the role
of technology in the economic system and has contributed to opening the
eyes of many policymakers to the importance of the problem of technology
choice. These tools now play an important part in the evaluation of projects
and are widely used by development finance institutions such as the World
Bank.
The availability of such tools should not obscure the fact that the pro-
cess of making decisions about technology involves far more than the one-
time application of sophisticated analytical tools. In practice, such decisions
are the result of an iterative process that develops over a long period of
time and involves complex interactions among policies, objectives, ex-
perience, technological opportunities, economic considerations, and social
priorities. This can perhaps best be urnd rstood by looking at the ways in
which the project cycle interacts with sector work and country economic
work. The first important stage in the cycle is that of project identification.
Here government officials of the borrowing country and World Bank staff
members work in close cooperation within the broad framework of the bor-
rowing country's priorities and development objectives and define the main
parameters of a project.
Project identification may be viewed as the earliest phase in the process
of technology choice. The choices here are implicit rather than explicit and
consist essentially of a gradual narrowing down of technological options. If
a project is conceived from the beginning as a large productive unit, for



320                 Technology, Finance, and Development
instance, rather than as a much smaller one or as one whose output will have to
conform to one set of specifications rather than another, this will rule out
some types of technology. It is also important to keep in mind that this process
of gradual exclusion, or narrowing down of technological options, is colored
to some extent by the professional backgrounds of the people who carry it out
and by their experiences with similar types of projects undertaken elsewhere.
In this process of interaction between the Bank and the borrower, the
scope of the project and its technological parameters are influenced by the
borrowing country's technological sophistication and level of development.
In conventional projects carried out in an advanced developing country, the
borrower tends to play a more important part than the Bank in determining
broad technological options. In totally new types of projects or in projects
carried out in much less developed countries, the Bank tends to have a
greater role than the borrower in the definition of these early technological
options and the choices among them.
The second important stage in the cycle as far as technology is concerned
is that of project preparation. This work, carried out by the borrowing
country, often with the help of foreign or local consulting firms, consists
essentially of making a detailed presentation of the project, its objectives,
its technical specifications, its relevance to the country's development
priorities, and alternative approaches to its design. The two main partners
here are the government of the borrowing country and the individual con-
sultants or engineering consulting firm that may be hired by the government
with the funds provided by the World Bank as a normal part of the project's
overall cost.
The Bank deliberately tries to foster the participation of local con-
sultants in this preparation stage. The possibility of doing so varies from
country to country and from one sector to another. Even in relatively
undeveloped countries, much preparatory work in some sectors (such as
education) is done by government officials and by local consultants,
sometimes in collaboration with foreign firms. In other sectors by contrast,
such as ports or basic industries, many borrowing countries do not have the
consulting firms to perform what is, in most cases, a rather large, complex,
and novel type of job. As a result, the core of the preparatory work tends to
be carried out mainly by big international consulting firms.
Based as they are for the most part in the industrialized countries,
foreign consulting firms tend to be more familiar with the technologies,
equipment, standards, and ways of doing things in their own country and,
to a lesser extent, of other industrialized countries than with those of a
developing nation. As a result, projects tend to be prepared in such a way
that the technological options left open at the end of this phase are generally
those prevailing on the international market, which in practice means those
of the highly industrialized countries.



General Conclusions                                     321
This is not to say that the consulting firms from industrialized countries
have an inherent bias against technologies originating in developing coun-
tries. In fact, precisely because of their international exposure and
worldwide experience, they have the technical capacity to compare different
alternatives and are often less influenced by the standards and values of
their own home country than a smaller local firm, which has always been
working in its home environment. The problem is not so much that of the
size or nationality of the consulting firm as that of the terms of reference
given to the firm. If it is not asked to investigate alternative technological
approaches, it will not do so. The preparation process therefore should in-
clude a detailed anaiysis of the alternatives before all but one are finally
rejected.
The third phase in the project cycle is that of appraisal. This work,
which requires a considerable amount of time and effort on the part of
Bank staff members who carry it out and which in many respects is the most
important in the whole cycle, is finally embodied in a staff appraisal report
submitted to the Bank's board of directors in support of the management's
recommendation that the loan be approved. This report contains a detailed
description of the project, sets forth its economic and financial rationale,
and examines such aspects as institutional structures, managerial organiza-
tion, and technological options. Once a project has reached this stage, it
cannot generally be modified substantially, although some projects, par-
ticularly in fields relatively new to Bank staf f, may have to be modified dur-
ing execution. The function of the appraisal is to examine the justification
for the project as it emerges from the preparation phase and set forth the
reasons for selecting a particular technological alternative. When the ap-
praisal work reveals unexpected problems that require a complete redesign
of the project, this is done; however, major problems are generally iden-
tified in the preparation stage, and unjustified or poorly designed projects
are usually eliminated before reaching the appraisal stage.
This rather schematic view of the ways in which technological factors
come into play in the project cycle illustrates the fact that the process of
technology choice is a continuous process operating throughout the project
cycle.
Technology in Economic and Sector Work
The decision-making process in technology is also intimately linked with,
and to some extent conditioned by, the Bank's country economic work and
its sector work. The detailed analyses of specific sectors or problem areas,
carried out at both the country level and a more general policy level, form
the general framework within which projects are identified and developed.



322                 Technology, Finance, and Development
These analyses suggest the most appropriate development policies for the
different sectors and in turn have an important influence on the identifica-
tion of projects and on their more general design features. In some
cases-rural development, forestry, fisheries, urban development, or small
industries, for instance-considerable attention is paid to technological fac-
tors, and these analyses, distilled from the World Bank's experience, positive
and negative, amount in effect to the technological element of a sectoral
policy-that is, a rational, action-oriented view of the ways in which
technology can contribute to the development of the sector in question.
These explicit sectoral technology policies are a fairly recent development
in the Bank's activities and do not yet cover all of the fields of activity of the
Bank. They arose as the Bank staff organization grew in size and complexi-
ty and hence needed to explain formally to itself and to the outside world
what it was doing and why it was doing it. They are important in that they
testify to the Bank's growing awareness of its technological role and seek to
identify both the ways in which technology can contribute to development
and what might be the most effective technological strategy to meet par-
ticular goals. They are also an important instrument in setting the general
framework for new projects and in determining their main technological
parameters.
The emergence of technological issues in the Bank's sector work and the
gradual development of sectoral technology policies can probably be con-
sidered as important innovations in their own right, but they are also impor-
tant for a number of other reasons. First, these policies are being developed
by an institution that has the ability to translate policies into investment
projects. One of the major problems facing many developing countries is
the absence of effective linkages between the technological system and the
production system.
Second, they are importent because they focus on broad problem areas,
or sectors, rather than on conventional economic and technological
categories. This integrated, problem-oriented approach could well be a bet-
ter instrument in mobilizing technology for development purposes than the
discipline-oriented approach favored by conventional technology policies,
which tends to stress manpower and research needs for each discipline and
each sector, together with sectoral and cross-sectoral infrastructure.
The third reason for the importance of this technological work at the
sector level is its influence on the policies of member countries. These
analyses carried out by the Bank are in effect a major channel of com-
munication between the Bank and the development community and often
represent the state of the art concerning the ways in which to ;:obilize
technology for development in specific sectors.
The Bank also spends a considerable amount of time and effort on
country economic work, broad macroeconomic analyses of the general



General Conclusions                                    323
economic situation and policies in each of the borrowing countries. These
analyses are relatively sophisticated and generally carry a lot of weight with
both the country and lending agencies. For the former, they amount in ef-
fect to an international evaluation of its economic performance; for the lat-
ter, they give important indications as to the borrower's investment needs
and ability to repay loans.
Building Local Technological Capabilities
One of the major objectives of many developing countries is to strengthen
their indigenous technological capabilities, to reduce their growing
dependence on foreign technology, and to acquire a greater degree of
autonomy in technology choices. These goals may be elusive; they may also
be difficult to balance with other development objectives such as growth or
equity and must take into account the complex interdependencies between
industrialized and developing nations. But the concern that underlies them
is a very real political and developmental issue, and one of the important
questions to raise at the end of this book is that of the World Bank's role in
helping to meet these objectives.
This question perhaps could be formulated in more specific terms: Do
Bank projects tend to favor the use of foreign rather than indigenous
technology? Are specific efforts made in the design of projects to foster the
building up of local technological capabilities? Do the Bank's international
competitive bidding procedures discriminate in practice against local sup-
pliers or suppliers from other developing countries? Does its preference for
liberal trade policies inhibit indigenous technological development?
In this connection, two important points must be kept in mind. The first
is that as an international financing institution, the World Bank was designed
to lend foreign currency at reasonable rates for projects that could not nor-
mally be financed otherwise. The second point is that the main imperative at
the project level is that the project itself be successful and meet the objec-
tives outlined in the appraisal report.
Building local capability is an important part of most projects financed
by the Bank. In many sectors, it is a prerequisite to their success, even as
measured by targets of physical output. And in most cases, it can proceed in
stages so that it reinforces project success. It is, however, important to bear
in mind that there is sometimes a trade-off between helping to build a local
technological capability and getting the project on stream. If a fertilizer
project, for instance, is delayed in order to give design experience to local
engineers or in order to use a locally developed technology, this will have a
direct impact on agricultural production.
Building up local technological capabilities, promoting locally designed
innovations, and encouraging greater self-reliance is a long, difficult, and



324                Technology, Finance, and Development
expensive process, the cost of which generally has to be borne by the coun-
try itself. For example, using local consulting firms in the preparation of
development projects can help to build up the professional experience of
these firms, an important contribution to the development of indigenous
technological capabilities.3 In the same way, purchasing equipment from
local suppliers can be vitally important in giving the latter direct access to a
technologically sophisticated market and in raising their standards.
The promotion of local technology through such means may entail
short-term costs. Inexperienced consultants may be nominally inexpensive,
but their mistakes can be costly. Locally designed and manufactured equip-
ment may not give satisfactory performance and may be more expensive as
well. Many governments recognize this and are prepared within reason to
accept these costs for the sake of fostering greater technological autonomy.
Protective tariffs and preferences for local suppliers of equipment or
technical services are legitimate instruments of national policy, and the
costs they entail must be balanced against their long-term contribution to
the development of local technological capabilities.
For this reason, the Bank's rules on international competitive bidding
and its general adherence to liberal trade policies deserve special attention in
a book devoted to the role of the Bank as an instrument of technological
development.
The Bank's rules on international competitive bidding attempt to assure
each menmber country the opportunity to compete on equal terms for the
business generated by goods and services financed by the Bank through its
projects. Such equal access is in the interest of economy and efficiency; it is
also essential to the political support for the Bank by governments and
business communities in the developed member countries.
International competitive bidding, moreover, gives developing coun-
tries access to a wider variety of technology and equipment at prices that are
more favorable than would otherwise be obtainable. There are many ex-
amples of projects the Bank has financed in which equipment and services
were obtained at much lower prices than had been the case in previous,
essentially similar projects in the same country, where supplies or equip-
ment had been procured under less open procedures. In the telecommunica-
tions sector, to cite a notable example, procurement under World Bank
rules typically takes place at about three-quarters of the usual non-
competitive price for the same equipment. Similarly, there are many ex-
amples in which open bidding on the international market has given
developing countries access to new sources of improved technology.
The World Bank in practice has espoused a variety of arrangements in-
tended to make the process of international competitive bidding flexible and
responsive to the aspirations of developing countries to build up their own
local industry. It allows the borrowing country to add the prevailing tariff,



General Conclusions                                    325
up to a maximum of 15 percent, to the bids of foreign suppliers of manufac-
tured goods. Very poor countries may also add 7.5 percent to the bids of
foreign contractors.
The Bank also makes considerable efforts to ensure that the standards
and quantities of equipment specified in international tenders do not ex-
clude local firms from bidding when they would otherwise have been able to
participate. It allows smaller firms to bid on only part of a large procure-
ment package so that they may participate to the extent their capacity and
competitiveness allows. All of this having been said, the promotion of
technological development depends much more on the ways in which a proj-
ect is conceived and designed than on the rules and regulations governing
the procurement of equipment.
In practice, developing-country suppliers have won an increasing
percentage of Bank-financed procurement under the Bank's rules of inter-
national competitive bidding as a result of their own development and of
the shift in Bank projects toward less sophisticated equipment. To put mat-
ters in perspective, it should be remembered that Bank projects account for
only a small percentage of government-financed procurement in any
developing country.
The Bank's adherence to liberal trade policies is frequently criticized on
the grounds that such policies inhibit technological development, which for
the supporters of this position can take place only behind protective bar-
riers. Such barriers, it is argued, should protect not only local manufacture
but also local design and technology.
It is easy to show that protective barriers do not in general preclude
technological development. Many Latin American countries have achieved
an important degree of industrialization behind protective barriers and now
export technology to other developing countries and sometimes to de-
veloped countries. Indeed, the industrialization of the United States itself
and of many other countries that are now industrialized took place behind
high tariff walls.
What is not clearly established, however, is how much tariff protection
is necessary or how long it should extend beyond a brief initial period needed
to protect infant industry and technology. In other words, it may be possi-
ble to enjoy technological development without suffering the costs of
diminished growth rates that are imposed by protection.
Many economists argue that protection from the rigors of international
competition, whether at the project level or the macroeconomic level, ac-
tually inhibits technological development by insulating domestic industry
from the pressure to achieve international quality standards and price
levels. In addition, these economists argue, domestic consumers pay dearly
for the industrialization of the country under a protectionist regime because
of the higher costs of local production. As a result, the country as a whole



326                 Technology, Finance, and Development
will suffer diminished growth compared to what it would have enjoyed with
a less distorted economy.
Whatever the virtues of modest protection for infant industry, it is
probably fair to state that existing levels of protection in most developing
countries are much in excess of those needed to promote healthy industrial
development. In this connection, researchers on technology policy in many
countries have found that the protection and other incentives granted to
local manufacturers are so high that it is difficult to provide special incen-
tives for local technology. Both liberal and protective trade policies have
defenders, and research on this issue is still far from being conclusive.
Several chapters of this book describe projects financed by the Bank
that have the promotion of local capabilities for design and manufac-
ture-and hence a lessening of technological dependence-as a major ob-
jective, and some have been outstandingly successful in so doing. It is im-
portant to keep in mind, however, that the Bank as a development agency is
concerned with economic and social development taken in the broadest
sense. Technology is an important dimension in this process, and in recent
years this dimension has been the object of increasing attention on the part
of the Bank in the design of policies and the conception of projects. Still,
science and technology is only one of the many important dimensions of
overall development.
Even in countries where the Bank's commitments have been very large,
the total value of its loans remains small relative to overall investments. In
this sense, the Bank is but one of the many actors that account for the suc-
cess or failure of a country's development effort. What is more, it has
relatively little, if any, influence on the many social, political, and cultural
factors that ultimately condition a country's success in building up its inter-
nal innovative capabilities and creating an environment congenial to science
and technology.
Conclusion
The Bank's technological function is an inevitable, and indeed necessary,
component of its activities as a financing institution and development agency
in the conception and execution of projects and in the formulation of sec-
toral development strategies.
Its organizational objectives and its interactions with the science and
technology system are rather different from those of more conventional
technological institutions, such as research laboratories, ministries of
science and technology, or industrial corporations, which are concerned
with research, the development of new products and new technologies, and
the organization and day-to-day operations of a science and technology



General Conclusions                                     327
system. The World Bank, by contrast, does not itself carry out scientific or
technological research; its internal research activities are very largely
socioeconomic and serve as a support for individual projects or for the
Bank's country work and sector work. Its involvement in scientific and
technological research is nevertheless considerable, but it might be
characterized as a second-order involvement. The Bank operates as a fund-
ing agency, as a coordinator, as an initiator, and as a problem identifier.
What is more, this work is carried out at the world level and in a multina-
tional perspective. In this sense, the World Bank is a rather original type of
technological institution. It may not fit easily in the familiar geography of
the science and technology system as it has been studied by historians of
technology or analysts of national science and technology policy, but it
nevertheless has an important role to play.
This book has presented a general picture of the ways in which the
World Bank operates from a technological point of view. It has not sug-
gested that this is the right way or the only way to work, nor has it attempted
to outline the ways in which this technological function of the Bank could
be made a more important instrument of development. The main ambition
of this undertaking has been to show what is happening in practice and to
sensitize policymakers, bankers, development specialists, and political
scientists to the important technological role that this major financial and
development institution is playing.
The experiences of the Bank in the technology field are of relevance to a
large number of other financial institutions: international development
banks, development finance corporations, and industrial development
banks. These institutions operate in a somewhat similar way to that of the
World Bank, and several of them could become or are in the process of
becoming technological institutions.
The potential role of financial institutions as major actors in the
technological system of the developing countries is important not only as a
political and sociological phenomenon but also-and this is much more
significant-as a pointer to new policy instruments in the development pro-
cess. A bank's investment capacity and operational experience, combined
with its access to technology sources, is potentially one of the most effective
bridges between the production system and the innovation system and could
help to overcome one of the basic structural problems in the economies of
the developing nations: the weakness of the linkages between their in-
digenous innovation efforts and their productive activities. If financial in-
stitutions were more widely recognized by themselves and by others in their
actual or potential role as technological institutions, this technological role
could almost certainly be made more effective, and they could evolve in the
next ten or twenty years into a new type of development institution, better
attuned to the needs and challenges of development.



328                 Technology, Finance, and Development
Notes
1. Figures are according to the U.S. system of numeration.
2. This discussioni refers to risks bearing on the success of the project,
not to the risk that the Bank loan or credit might not be repaid. The risks in-
volved in a project financed by the World Bank differ from those involved
in a loan from a commercial bank. A commercial bank normally insists on
collateral to guard it against the risk that the project will fail. The borrower,
typically a commercial firm, may therefore be reluctant to use the loan to
finance a risky project.
By contrast, World Bank loans and credits are guaranteed by the
government of the country that benefits from the project. Its concern for
the soundness of the project is part of its role as a development institution.
The safety of the loan itself, as far as the Bank is concerned, depends on the
creditworthiness of the government, not on the success of the project. In
practice, debts to the World Bank are always repaid on schedule since the
damage to a country's credit rating would otherwise be severe. The will-
ingness of a country to borrow for a worthwhile development project
should depend on its creditworthiness and ability to assume additional debt
rather than on the degree of risk or innovation of the project.
3. A useful device is to encourage joint ventures between local and more
experienced consulting firms, an arrangement that requires explicit division
of responsibilities and explicit attention and resources devoted to training.



Index
Abrams, Charles, 142                      Automobiles and urban traffic, 69, 71-73,
Acceptance of technology, 24                 75, 77; see also Parking
Aerial surveys, 86, 88-89, 93-94, 95, 96;  Avocados, 31
see also Satellite remote sensing      Axial tomograph, 43, 44
African Development Bank, 7
Agency for International Development, 99,  Bacteria, 134-135
117                                    Bagasse, 239
Agricultural Refinance and Development    BAKOSURTANAL, 98-99
Corporation (ARDC), 30-31              Balenghian, Father, 162-163
Agriculture, 3, 15, 16, 19-34, 318; and   Bali, 98
disease, 278-279; and education, 33; and  Bamboo, 239
infrastructure development, 16, 23, 25,  Bananas, 280
30, 33; and institutional facilities, 16,  Bangkok, 76, 81, 148, 202, 293
22-24, 25, 188, 275; and labor, 58; loans  Bangladesh: agriculture, 27; civil works, 55;
and credits for, 22, 23, 24-29, 32, 315;  education, 172; remote sensing, 97;
and machinery, 16, 22, 24, 28, 30, 33,    water resources, 181
273, 280; on-farm inputs, 16, 22-25, 28,  Banjul, 96
33; and remote sensing, 17, 88, 90-93,  Bank of Mexico, 50
100, 101, 102; research, 23-24, 32-33,  Barangays, 152
261, 262-263, 261-281, 314; sector     Barley, 268, 269, 271
characteristics, 19-21; and sociocultural  Bayano hydroelectric plant, 203
patterns, 21, 276-277; storage and pro-  Becak, 75
cessing, 23, 27, 32, 55; and water, 16,  Bellagio, Italy, 307-308
24, 31, 183-184, 190-191, 214, 279;    Beltsville Aerated Rapid Composting
yield improvements, 273, 275-276,        (BARC) system, 134
278-279, 298                           Bembara, 167
Ahmed, Manzoor, 173                       Ben-Gurion University of the Negev, 44
Ammonia, 217, 218, 219, 221, 222, 224,    Benin, 168, 172
225; and cotton treatment, 302         Bihar, India, 33
Ammonium nitrate, 217-218, 222            Bilharzia, 263
Anaerobic composting, 130                 Biogas, 134, 135-136
Animal disease. See Livestock, diseases   Bombay, 70, 71
Ankara, 204                               Botswana, 145, 146, 147, 155
API, 231                                  Brazil, 32-33, 53, 195, 313; and fertilizer,
Apples, 31, 32                               221, 224; power generation, 202; and
Appropriate technology, 60, 103-105,        remote sensing, 87, 93; and urban traf-
176-177, 229-230, 315, 316; and educa-   fic, 69, 70, 79-80
tion, 158-161, 168                     Brown lung disease, 306
Aqaba, 220                                Brussels, 305
Aquaculture, 31                           Bubinga wood, 114
Arable land, world, 265                   Buffer stocks, 301, 308, 310
Arab Potash Co. (APC), 220                Bureau Veritas, 231
Arch dam, 202                             Burkitt, Frank, 302
Area licensing, 71-73, 81                 Burundi, 168-169
Area trafC4-e control (ATC), 76-77        Buses, 69, 71, 72, 76, 78-79; lanes, 80, 81,
Argentina, 87, 202, 206                      83-84; see also Minibuses
Armadillos, 288                           Bush fallow resting period, 274
"Arpegio," 41                             Byssinosis, 306
Ascaris, 135
Asian Development Bank, 7, 99, 313        Cagayan de Oro, Philippines, 152
Aswan Dam, 187                            Calcium nitrate, 217
Auditing of projects, 12                  Calcutta, 70
Australia, 87, 89                         Caminos, H., 137
329



330                     Technology, Finance, and Development
Canada, 87, 94                           CONACYT, 50
Canadian International Development       Consortia, 201, 207
Agency, 98-99                         Consultative Group on International
CANAMBRA, 202                               Agricultural Research (CGIAB), 4, 33,
Capital goods, 247, 259                     261, 262-263, 265-281, 314; research
Caracas, 75                                 programs, 270-272; Technical Advisory
Carnallite, 219-220                         Committee (TAC), 267
Carter admih-istration, 309              Consulting companies, 52, 55, 313, 314,
Cassava, 268, 269, 279                      320-321; local, 52, 315, 320, 324; and
Castellani, Aldo, 284                       power generation, 198, 203; and
CAT scanner, 43, 44                         technology transfer, 176; and urban
CDI. See Cotton Development Interna-        development, 185, 188
tional                                Continuous casting mills, 234-235
Cebu, Philippines, 152                   Coombs, Philip H., 173
Cellulose, 238-239                       Cooperatives, 23, 31, 167
Cement, 177, 232, 237-238                Correspondence schools, 240
Center for the Development of Industrial  Costa Rica, 70
Technology (Spain), 39-42             Cotton, 238; demand, 300; employment,
CGIAR. See Consultative Group on Inter-     297; as fuel and food, 303; lint, 297,
national Agricultural Research           300; research, 261, 269, 280, 295-311;
Chad, 297                                   seed, 297, 303; world production, 297
Chadwick, Edwin, 126                     Cotton Development International (CDI),
Chagas disease, 286                         4, 261, 263, 295-311
Changwon, Korea, 251                     Cotton, Inc., 302, 305
Chemotherapy, 287, 289, 293              Cotton Research Corporation of the United
Cherval, Andre, 158                         Kingdom, 297
Chick pea, 268                           Cowpea, 268, 279
Chile, 24, 191, 201-202                  Creditworthiness, 328
China, 55, 63-64, 134                    Crop research. See Agriculture, research
Choice of technology, 2-3, 317-319       Culexpipiens, 128
Cholera, 107, 108, 126                   Curitiba, Brazil, 80
Chow, Ven Te, 195
Civil works construction, 4, 34, 55-67;  Dagaari, 159
design and implementation, 64-65; loans  Dagat Dagatan, 150
and credits to, 315; and machinery, 55,  Dairying, 31
56, 57, 59, 63; managerial and organiza-  Dams, 23, 183, 184; construction, 55, 56;
tional factors, 57-61; technical factors,  loans, 27, 28; and power generation,
61-64                                    179, 185, 201-204, 205
Clay building materials, 238             Dandora, Kenya, 144, 146-147
Coal, 225                                Davao, 152
Cocoa, 31, 296                           Dead Sea, fertilizer production, 219-220
Coconut tree, 31, 280                    Denim, 302
Coffee, 31, 296                          Departmento Nacional de Agua e Energia
Colombia, 266, 277, 313; education, 160,    Electrica (Brazil), 202
161; industry, 49; research institutions,  Detailed design, 193-194
266, 268; water development, 188, 195  Development banks: international, 7, 327;
Col6n, Panama, 203                          local, 313; regional, 7, 313
Commercial banks, 30-31, 37-38, 207      Development finance companies (DFCs),
Community Relations and Information         37-38, 327
Organization (Manila), 151-152        Diagnostic tests, 286, 289
Compania Paname6ha de Fuerza y Luz       Diammonium phosphate, 215, 216
(FyL), 203                            Diffusion of technology, 12, 108, 116-118,
Competitive bidding, 66, 324-325            317
Composting ponds, 134-135, 136           Digital data storage, 89-90, 92
Compressors, 225                         Diseases: agricultural, 278-279; livestock,
Computers, 16, 47-48; and remote sensing,   263, 268, 271; see also Health; Tropical
87, 89, 90, 91, 97-99; and urban devel-  diseases
opment, 192-193                       Downy mildew, 278-279



Index                                                              331
Drainage tiles, 30                        European Space Agency, 101
Draught animals, 61-62                    Exchange rate, 11, 45
Drought, 30, 31, 90, 278                  Expatriates. See Foreign experts
Drought Prone Areas Program (DPAP),       Exports, 248, 253-254
30, 31                                 Extension services, 16, 32-33
Drugs, 286, 287, 288-289
Dry farming, 31                           FAO. See U.N. Food and Agricul-
tural Organization
Earthworks, 56, 60, 61                     Farming systems research, 273-274, 305-
East Coast fever, 268                        306; see also Agriculture, research
Economic Development Institute, 117, 229  Feachem, R., 127-128
Ecuador, 191, 195                         Feasibility studies, 193-194, 210, 211,
Edge enhancement, 89                         229-230, 249
Education, 4, 6, 104, 157-172, 187; and   Fecal bacteria, 127-128
agriculture, 33; appropriateness,      Fertilizer, 16, 20, 22, 28, 33; equipment
158-161, 168-171; basic, 161-165,         manufacturers, 220-222; granulation,
171-172; and industry, 46; loans and      216; imports, 215-217; production, 4,
credits to, 315; and urban develop-       5-6, 175, 177, 209-225, 316; technology
ment, 146, 153-154; see also Schools;      transfer, 211-215; and yield im-
Training                                   provements, 270-271, 272
Egypt, 30, 187, 397-398                   Field beans, 268, 279
Electricity. See Power generation and     Filiarsis, 128, 286, 287
transmission                           Fisheries, 31
Electricity authorities, 198, 202         Fishponds, 136
Electricity Generating Authority of Thai-  Flood, 55, 88, 95-96, 110
land, 202                              Flumes, 30
ELECTROBRAS (Brazil), 202                 Fondo Equipamiento Industrial (Mexico),
Electronics, 16, 45, 47-49; see also Com-     50-51
puters                                 FONEI, 50-51
Electronics Technology Project (Korea), 47  Food Technology Development Center
El Salvador, 71, 169, 172; site and service  (Indonesia), 32
projects, 143, 144-145                 Footpaths, 70, 77, 153
El Toro hydroelectric station, 202         Force account, 58-59
Energy, 6; and cement production, 237-    Ford Foundation, 266
238; costs, 38; and fertilizer, 225; and  Foreign experts, 182-187, 243-245, 320-
sanitation systems, 126, 130; and school  321, 323
construction, 170; see also Power      Forestry, 31; and remote sensing, 17, 85,
generation and transmission.               89, 92, 93-94, 98-99
Engineering, 4, 41, 175, 177-178, 247-259,  Fourth African Highway Conference, 82-84
320; and civil works, 55; and efficiency,  Framework planning, 191-192
249-253; growth of industry, 248-249;  France, 83-84, 101, 205, 304
and industrial innovation, 41, 42, 52;  Frontinus, 107
national policies, 253-255; and power  Fruit trees, 31
generation, 201-204, 207; and water    Fundacion Salvadorena de Desarrollo y Viv-
resources, 117, 179-180, 185, 188         ienda Minima (FSDVM), 143, 145
ENISA, 41-42
Entrepreneurs, 36, 51, 53-54               Gambia, 96
Environmental issues, 11, 300             Ganges-Brahmaputra basin, 97
Equipment, 314-315; maintenance, 242,      Gangetic plains, 97
250; suppliers, 200, 201, 324-325       Gas turbines, 205, 206
Equipment-intensive operations. See        Geological surveys, 17, 95-97, 98-99; see
Machinery                                  also Satellite remote sensing
Ergot, 279                                 Geothermal energy, 44, 199
Ethiopia, 146, 268                         Germany, 79
Etibank, 203                               Ghana, 117; Upper Region, 158-159
European Economic Community (EEC), 38,     Goethert, R., 137
39                                      Government, 12; and engineers, 255, 258,
European Investment Bank, 7                   259; and industrial innovation, 35-54;



332                      Technology, Finance, and Development
Government (cont.)                         Industrial innovation, 3, 16, 35-54, 314, 315
and water and waste disposal, 118, 119,  Industrialization, 25, 33, 34, 39
122, 179-180, 181                       Industrial Technology Loan Fund, 49
Grain storage, 32                          Informal education, 173
Great Britain, 69, 107, 138, 205           INFOTEC, 50
Greeks, 107                                Infrastructure: and agriculture, 16, 23, 25,
Green revolution, 28, 181, 276-277            30, 33; and industrial innovation, 42,
Grenoble, 83-84                               44-45
Groundnuts, 167, 174, 268                  Institut de Recherches du Cotton et des
Guadalajara, 195                              Textiles Exotiques, 304
Guayas basin, 195                          Institute for Small and Medium Industries
Gulf Coast, 191                               (Spain), 41
Gumi Industrial Estate, 48                 Institutional factors: and agriculture, 16,
Gurenne, 159                                  22-24, 25, 188, 275; and disease,
Guyana, 169                                   280-283; and engineers, 258-259; and
Gwangjiu, Korea, 143                          power generation, 198; and sanitation,
129-130; and textile research, 263; and
Hand pumps, 113-114, 117                       water resources, 188
Hand tools, 62, 254, 273                   Instituto de Recursos Hidraulicos y Elec-
Hardware, 1, 103, 175-176, 316                trificacion (Panama), 202-203
Harrar, George, 304                        Instruction handbooks, 239-241
Haulage, 57, 61-62, 63                     Inter-American Development Bank, 7, 313
Health, 104; and education, 161, 162;      Intermediate technology, 62-63
and productivity, 57, 62; public,       International Bean Yield and Adaptation
285-286; and textile industry, 306; and    Nursery, 279
water supply, 107, 108, 112-113,        International Board for Plant Genetic Re-
127-128, 132, 134, 283                     sources (IBPGR), 268
Helminths, 134-135                         International Center for Agricultural Re-
Heyneman, Stephen, 171                         search in the Dry Areas (ICARDA),
Himachal Pradesh, India, 32                   268, 271
Honduras, 31                               International Center for Tropical Agricul-
Hong Kong, 74, 75, 301                        ture (CIAT), 266, 268, 271, 274, 279
Housing. See Shelter                       International Cotton Agreement, 301
Hydrology. See Water                        International Cotton Producers Association,
311
IDA. See International Development As-     International Crops Research Institute for
sociates                                   the Semi-Arid Tropics (ICRISAT), 268,
IFC. See International Finance Corporation    271, 274, 278, 279
Illich, Ivan, 161                          International Development Associates, 7, 8,
IMIT, 50                                      37, 90
IMMLEP, 288                                International Development Research Center
Immunization, 283                             (IDRC), 115-116
Import controls, 15                        International Drinking Water and Sanita-
Import substitution, 38, 46                   tion Decade, 116
India, 313; agriculture, 27, 28, 30-31, 32.,  International Finance Corporation (IFC),
33, 91-93, 268, 279; civil works con-      8, 176, 177, 210, 227-245; loan com-
struction, 55, 56, 63-64; fertilizer pro-  mitments, 7, 37, 41; and technology
duction, 221, 224, 225; power pricing,     transfer, 227-245
205; remote sensing, 87, 91-93, 101; ur-  International Food Policy Research Institute
ban traffic, 69, 70, 71, 76; water         (IFPRI), 269
resources, 181, 184                     International Fund for Agricultural Devel-
Indonesia, 206; agriculture, 32-33, 272; civil  opment (IFAD), 99
works construction, 55, 56, 62; educa-  International Institute for Cotton (IIC),
tion, 172; nutrition, 32, 62; remote sens-  295, 302-304, 309-310
ing, 93, 98-99; slum upgrading,         International Institute for Hydraulic and
152-154; urban transport, 75               Environmental Engineering, 117
Indonesian Nutrition Development Project, 32  International Institute of Tropical Agricul-
Indus Basin, 28                               ture (IITA), 266, 268, 271, 274, 278, 279



Index                                                              333
International Laboratory for Research on  Korean Institute of Science and Technology
Animal Diseases (ILRAD), 263, 268, 271    (KIST), 46
International Livestock Center for Africa  Korean Technology Development Corpora-
(ILCA), 268, 271                          tion (KTDC), 49
International Maize and Wheat Improve-    Kuala Lumpur, 74
ment Center (CIMMYT), 266, 268,        Kyoto, Japan, 132-134
271-272, 274, 278
International Potato Center (CIP), 268, 271  Labor-intensive projects: and civil works
International Rice Research Institute (IRRI),  projects, 55, 57-67; and engineers, 247,
262-263, 266, 268, 269, 270-272, 273,     254, 257; and industry, 46; organiza-
274, 276, 279, 280                        tional factors, 57-61; and productivity,
International Services for National Agri-    57, 62; and roads, 17, 55; and size of
cultural Research (ISNAR), 268, 281       project, 63-64, 66; wages, 58, 60; and
International Wool Secretariat, 305          water resources, 180-181
Iran, 202                                 La Fortuna hydroelectric project, 203
Ireland, 202                              Lagos, 75
Iron ore, 229, 233, 241                   Landsat, 87-88, 89, 90-102
Iron supplementation program, 62          Landsat Index Atlas of the Developing
Irrigation, 16, 23, 24, 31, 181, 191; con-   Countries of the World, 100-101
struction, 55-56; and disease, 283; and  Land tenure, 104, 149, 152, 154
hydroelectric power, 200; loans and cred-  Language problems, 240, 241
its for, 27, 28, 30; pumpsets, 30, 34; and  Las Minas Electric Plant, 203
remote sensing, 91; and yieids, 266, 272  Latrines, 125, 128, 134, 142, 147
Israel, 16, 42-45, 53, 82                 Least-cost technology, 199
Italy, 87, 102, 185, 202                  Lee, Robert C.T., 139
ITV, 159-160                              Lentils, 268
Izmir (Turkey) group, 310-311             Leprosy, 286, 288
Lerma River basin, 195
Japan, 75, 87, 101, 132-134               Liberia, 268
Jakarta, 75, 76, 153-154                  Li6ge, 83
Java, 98-99                               Lignite power genei'ation, 199
Jitney, 74-75                             Lilongwe Land Development Program, 30
Joint ventures, 328                       Lima, 143
Jojoba, 44                                Liposomes, 289
Jordan, 219                               Liquid cyclone process, 303
Literacy, 158, 159, 161, 162, 164, 166-168
Kadana irrigation project, 28             Livestock: development, 20, 28, 31;
Kadleigh, Sergei, 169-170                    diseases, 263, 268, 271; research, 268,
Kaduna, Nigeria, 311                         271, 280; and sanitation, 137
Kampung Improvement Program, 152-154      Lloyds, 231
Karachi, 76                               Loan agreement, 11
Kareliotis, S.J., 195                     Local capabilities, 323-326; and construc-
Kariobangi Scheme, 144                       tion, 60-61, 230-233; and consulting
Karnataka, India, 31                         firms, 52, 315, 320, 324; and equipment
Kaser.,, 159                                 supply, 324-325; and power generation,
Kenya, 76-78, 94, 268; urban development,    200-201; and water resources, 184-187,
142, 143-144, 145, 146-147                189; see also Training
Kenya Rangeland Ecological Monitoring     Locomotives, 40
Unit (KREMU), 94                       Lovins, A.B., 138
Khan, Ayub, 75-76                         Lusaka, 144
Kia-kia service, 75
Kibaru, 167                               Machinery: and agriculture, 16, 22, 24, 28,
Kilns, 40, 236                               30, 33, 273, 280; and civil works, 55, 56,
Klong Toey, 148                              57, 59, 63; and labor-intensive projects,
Koenigsberger, Otto, 142                     63; and technology transfer, 232
Korea. See South Korea                    Madhya Pradesh, India, 31, 33
Korea Institute of Electronics Technology  Madras, India, 71, 148
(KIET), 48-49, 53                      Madura, 98-99



334                     Technology, Finance, and Development
Magdalena basin, 195                      Multiple cropping, 279
Magnetometers, 89                         Multispectral scanner (MSS), 87-88
Maharashtra, India, 71                    Muscle Shoals, Ala., 225
Mahidol University, 293
Maize, 266, 268, 271, 278                 Nairobi, 143-144, 146-147; transportation,
Maize streak virus, 278                      76-78
Malaria, 263, 283, 284, 285, 286, 288, 293  "Nairobi Address," 25
Malawi, 30                                Naptha, 217, 224
Malaysia, 30, 32-33, 206; education, 172;  National Aeronautics and Space Admin-
remote sensing, 99-100; urban transport,  istration, 87
74, 75                                 National Capital Park Service, 134
Malaysian Rubber Research Institute, 305  National Council of Science and Tech-
Mali, 104, 162, 166-168                      nology (Mexico), 50
Manchester (England) cotton research      National Enterprise for Innovation (Spain),
center, 306                               41-42
Mangla Dam, 187                           National Housing Authority (Philippines),
Mangos, 31                                   152
Manila, 71, 75; slum upgrading, 148, 150-  National Institute of Industries (Spain),
152, 153                                  41-42
Manson, Patrick, 284                      National Laboratory of Engineering and
Mantual on Control of Unaccounted-for        Industrial Technology (Portugal), 50
Water, 115                             National Registry for the Transfer of Tech-
Manufacturing, 38, 45, 248-249; see also     nology (Mexico), 50
Engineers                              National Re-S.ote Sensing Agency of India,
Mapping programs, 90-91, 97-100              92
Marketing, 232; and agriculture, 32; and  National Resources Survey and Mapping
engineering, 253; and industry, 46, 52;   Project (Indonesia), 98-99
and textiles, 236, 295-296, 307, 309   National science and technology councils,
Marshall Plan, 197                           37, 313
Matatus, 77-78                            Natural gas, 217, 222, 224-225, 316
Mathematical models, 191, 192-193         Nepal, 93-94, 96-97, 99
Mauritania, 168                           Netherlands, 185, 188, 268
Metalworking, 247-248                     Negev desert, 44
Methane, 134, 135-136                     Neutralization, 66
Mexican Institute for Technological       New Zealand, 202
Research, 50                           Nicaragua, 117
Mexico, 206, 313; agriculture, 30, 32-33,  Niger, 159-160
271; fertilizer production, 221-222; in-  Nigeria, 266, 268
dustry, 50, 52; research institutes, 266,  Nightsoil, 134-135
268, 271; urban traffic, 75; water     Nile valley, 184-185
resources, 188, 189-191                Nitric acid production, 218
Mexico City, 75, 195                      Nitrogen fertilizer, 209, 210, 215, 217, 272
Microprocessors, 47-49; see also Electronics  Nonformal education, 173
Microwave sensors, 89                     Noor, Abdun, 163
Midgley, Peter, 82-84                     Northeast Thailand Irrigation Improvement
Millet, 268, 269, 271, 279                   Project, 95
Minerals: and agriculture, 215; and remote  NPK fertilizer, 219
sensing, 85, 88, 94, 96-97             Nuclear power, 202
Minibuses, 73-74, 76, 79                  Nutrition, 6, 32, 34, 283; and education,
Mining, 231, 234                             161; and productivity, 57, 62
Ministeel mills, 234-235                  Nyeveli fertilizer plant, 225
Monitoring of projects, 11-12, 185, 258-259
Morocco, 30, 219                          Ocean disposal of sewage, 135
Mortality rates, 283                      Office of the Chief Scientist (Israel), 42-43
Moslem countries, 127                     Office of the Committee for Management
Mosquitos, 128, 283                          of Road Traffic (Thailand), 81
Multi-Fiber Agreements, 300-301, 308      Office for Overseas Scientific and Technical
Multinational corporations, 4, 5             Research (France), 90-91



Index                                                              335
Oil palm, 31, 266, 296                       197; tariffs and finance, 204-206; and
Onchocersiasis, 284, 287                     water resources, 185, 200
On-the-job training, 157, 241; and engineer-  Private industrial corporations investment,
ing, 250, 257-258; and water resources,   4
187-188                                Productivity, 250, 253, 257; and health, 57,
Orissa, India, 92-93                         62
Osaka, Japan, 75                          Program to Accelerate Petroleum Produc-
OXFAM, 117                                   tion in Developing Countries, 96-97
Oxygen converter steel, 233-234           Project cycle, 9-12, 319-321
Proprietary technology, 5-6
Package approach, 123                     Protectionism, 45-46, 254-255, 258, 325-
Pakistan: agriculture, 27, 28, 30; civil     326
works, 55; cotton, 298; fertilizer, 217,  Public health, 285-286
219, 225; flood, 96; urban traffic,    Public transportation. See Urban traffic
75-76; water resources, 181, 184, 187     management
Panama, 31, 202-203                       Pueblo jovenes, 69
Panama City, 203                          Pulp and paper, 177, 231, 238-239
Panniers, 61-62                           Punjab, 181
Pantanal, 195
Paratransit, 73-76, 7'7--8                Quality control, 238
Paris, 83
Parking restrictions, 77, 78, 79, 81, 82  Radar imagery, 101
Patio connections, 108, 119, 121          Radio, 172
Pedestrians, 70, 71, 77, 80               Railroads, 78-79
Pedicabs, 75-76                           Rajasthan, India, 31, 33
Peru, 69, 143, 191, 268                   Ramagundam, India, 225
Pesticides, 20, 33, 300                   Ramot, Deputy Mayor, 82
Petroleum, 316; and fertilizer production,  Rangeland, 86, 94-95
222, 224, 225; and remote sensing,     Rankine cycle turbine, 43-44
96-97; reserve development, 6; and syn-  Rapel hydroelectric project, 202
thetic fibers, 237, 302                Reblocking, 151
Pharmaceutical industry, 285, 289         Recife, Brazil, 69, 70, 80
Philippines: agriculture, 32, 266, 279;   Remote sensing. See Satellite remote sensing
research institutes, 266, 268, 289; urban  Research, 326-327; and agriculture, 23-24,
development, 148, 150-152, 153; urban     32-33, 261-281, 314; and cotton, 261,
traffic, 71, 75; water supply, 117        269, 280, 295-311; local agencies, 23-24;
Phosphate fertilizer, 209, 210, 215, 224, 229  and water, 111-118
Phosphoric acid, 219, 224                 Research and development, 175; and engi-
Pider project, 30                            neering, 41, 42, 52; and industrial innova-
Pigeon pea, 268                              tion, 36, 39-41, 42-44, 46-47, 48-51, 53
Pigs, 137                                 Research laboratories, 15, 53, 262-263, 314
Pilot projects, 64, 117                   Resettlement, 86, 90-91, 93-94, 95; and
"Plan Nacional Hidraulic 1975" (Mexico),     slum upgrading, 148, 150
190-191                                Rhine, 184-185
Plasmodium falciparum, 293                Rhone, 184-185
Plastics, 30, 108, 113, 114, 117          Rice, 92, 262, 266, 268, 269, 270-271,
Politics, 194, 318-319                       275-276, 277-278, 279, 280
Pollution, 51, 73, 81; aerial surveys, 89;  Rickshaws, 76
and cotton industry, 306; water, 181   Rieckman, K.H., 289
Polyamide, 237                            Risks, 328
Polyester, 237, 295-296, 304              RNTT, 50
Polyvinyl chloride (PVC), 113, 114, 117   Roads: construction, 17, 55-56; fatalities,
Portugal, 50                                 69; and traffic management, 69-73,
Potash, 209, 210, 215, 216, 219-220, 224     79-80, 81; and water resources, 183-184
Potato research, 268, 271, 278            Roboscreen, 114
Power generation and transmission, 4, 6, 9,  Rockefeller Foundation, 261, 266, 295,
43-44, 175, 177, 197-207, 316; and        304, 305, 308
agriculture, 33-34; sector development,  Rolling mills, 234-235



336                     Technology, Finance, and Development
Romans, 107, 138                          Socioeconomic issues, 11, 318; and agri-
Ross, Ronald, 284                            culture, 21, 276-277; and civil works
Ross Institute of Tropical Hygiene, 116, 117  construction, 65-67; and disease, 287,
Rubber, 31, 100; research, 261, 296, 302,    290; and education, 161, 162, 163; and
305                                       water supply and waste disposal,
Rural development, 3, 6, 9, 15, 318; see     109-110, 126
also Civil construction                Software, 22, 30-31, 33, 103, 175-176, 316
Rural education centers (CERs), 165-166   Soil surveys, 90-91
Rwanda, 172                               Solar energy, 30, 44, 170
Somalia, 94-95, 172
Sahel, 90-91, 163, 173                    Sorghum, 268, 269, 271, 278, 279
Salvador, Brazil, 79                      South Africa, 87, 225
Samlor, 75                                South Korea, 313; cotton, 301; engineering,
Sanitation, 4, 103, 125-137; see also Waste  177-178, 249, 251-253, 254-258; in-
disposal                                  dustrial innovation, 16, 45-49; sanita-
San Jose, Costa Rica, 70                     tion, 134; urban development, 143
Satellite remote sensing, 4, 85-102, 190;  Soybeans, 268
and agriculture, 17, 88, 90-93, 100, 101,  Space Research and Remote Sensing Organ-
102; costs, 90, 93, 95, 98, 102; future   ization (SPARRSO), 97-98
projects, 101-102; and water develop-  Spain, 16, 32-33, 38-42, 54
ment, 17, 85, 190, 192                 Special Program for Research and Training
Schistosomiasis, 127, 283, 284, 286, 287     in Tropical Diseases (TDR), 261, 263,
Schools, 146, 153-154, 158-159, 169-170;     285, 314
see also Education                     Spinning, 235-236, 296, 306
Schultz, T.W., 34                         Sponge iron, 229
Scientific working groups (SWGs), 286-289,  Squatters, 148-149
293                                    Stabilization pcnds, 134, 135, 136
Scrap, 234-235                            Standposts, 108, 119, 121, 153
Secretaria de Racursos Hidraulicas (Mex-  State Hydraulic Works (Turkey), 203
ico), 190-191                          Steel mills, 5-6, 177, 233-235
Sector technology, 3-4, 15-17, 315, 316-  Streetcars, 79
317, 321-323                           Striga, 279
Seeds, 16, 20, 22, 28, 33                 Subsistence crops, 262, 271
SEFINOVA, 41-42                           Sudan, 96, 309
Semarang, 153                             Sugar, 266, 296
SENA, 160                                 Sulfuric acid production, 219
Senn nuclear project, 202                 Sullage, 127, 128, 130-132, 137
Sensitivity analysis, 319                 Superphosphate, 215
Servicio Nacional de Aprendizage, 160     Surabaya, 153
Shadow pricing, 11, 125, 319              Surakarta, 153
Sheep, 260                                Surveys. See Satellite Remote Sensing
Shelter, 103-104, 141-154                 Sweden, 87
Shoot fly, 278-279                        Synthetic fibers, 227, 237; and cotton, 295-
Silicon Valley, 48                           296, 300, 302, 304
Silos, 32                                 Syria, 268
Singapore, 71-72, 76, 301                 Systems analysis, 193
Site engineering, 64-65
Sites and services projects, 141-145, 318  Taiwan, 134, 301
Sleeping sickness, 286                    Talcher, India, 225
Slice and package, 59                     Tamil Nadu Slum Clearance Board, 148
Slum upgrading, 5, 141, 147-154, 319      Tanzania, 145, 146
Smallpox, 283                             Tariffs, 11, 255, 258
Snow, John, 126                           TDR. See Special Program for Research
Sociedad Espafiola de Financiacion de la     and Training in Tropical Diseases
Innovacion, 41-42                      Technological cooperation between develop-
Societe Nationale des Transports (SNT),      ing countries (TCDC), 6
78-79                                  Technological Laboratory of Uruguay, 50



Index                                                              337
Technology Information Service (Mexico),  Turner, John, 142
50                                     Typhoid, 107
Technology institutes, 46, 48-50, 317-318,
326-327                                Ujang Pandang, 153
Tea, 31, 266, 296                         United Nations, 7, 10
Tehran, 75                                U.N. Children's Fund (UNICEF), 104, 117,
Tel Aviv, 82                                 152
Telephone, 44                             U.N. Conference on Trade and Develop-
Television, 159-160                          ment (UNCTAD), 301, 308-309, 310, 311
Tennessee Valley Authority, 188, 225      U.N. Development Programme (UNDP),
Terai plain, 93-94, 97                       100, 125, 190, 202, 229; and research
Textbooks, 171, 172                          systems, 261, 267, 285, 303-304, 305
Textiles, 227, 232, 235-237; research, 261,  U.N. Educational, Scientific and Cultural
295-311; see also Cotton                  Organization (UNESCO), 10, 163,
TGM lines, 78-79                             168-169
Thailand, 87, 161, 172; engineering,      U.N. Food and Agricultural Organization
177-178, 249, 251-253, 254-258; power     (FAO), 10, 93-94, 267, 304
generation, 202, 205; remote sensing, 87,  U.N. Industrial Development Organization
93, 95; urban transport, 75, 81           (UNIDO), 10, 229
Theileriasis, 268, 271                    U.N. World Water Conference, 116
Thematic mappers, 87-88                   United National Independence party (Zam-
Thermal infrared devices, 89, 101            bia), 145
Third World Prize, 269                    United States, 16; cotton, 309, 310; educa-
Thresher, 280                                tion, 164; fertilizer production, 225;
Tilapia, 31                                  highway fatalities, 69; space technology,
Tiller, 280                                  87, 89, 90, 101, 102; steel making, 233;
Toilets, 130                                 water development, 188, 195
Ton, 168                                  U.S. Agency for International Development
Tondo Foreshore, 148, 150-152                (USAID), 99, 117
Traffic management. See Urban traffic     U.S.-Israel Binational Research and Devel-
management                                opment Foundation (BIRDF), 43
Trager, William, 293                      University of Philippines, 33
Training, 1, 160, 161, 314; engineering, 255,  Upper Volta, 90-91, 104, 165-166
257-258; fertilizer production, 217, 218,  Urban development, 4, 103-104, 146, 153-
220, 221, 224; industrial development,    154; see also Shelter
52-53; manuals, 239-241; power genera-  Urban traffic management, 4, 15, 17, 69-84
tion, 198, 206; tropical diseases,     Urea, 215, 216, 217, 218, 219, 222
290-293; water supply, 117, 187-188,  ULrine, 127
189, 191                               Uruguay, 50, 53
Training, Technical Assistance and Tech-  Usulutan, El Salvador, 143
nology Fund (TTFF), 49                 Vaccines, 286
Transmission lines, 183, 185, 198, 199, 203,  Vectors of disease, 286, 287
EHV, 202                               Virs 134s135
Treponematoses, 283                       Viruses, 134-135
Trishaw, 75                               Wages, 45, 46, 48, 60; agriculture, 58,
Triticale, 268, 271                          276, 277; engineering, 254, 257
Tropical disease, 261, 263, 283-294       Walter Reed Armed Forces Institute of Re-
Tropical Disease Research Program. See       search, 289
Special Program for Research and       Washington, 10, 269
Training in Tropical Diseases          Waste disposal, 4, 107-123, 318; alternative
Trypanosomiasis, 268, 271, 286               methods, 134-137; costs, 120-123,
Tubewells, 22, 30                            125-126, 130, 132, 137; and labor pro-
Tunis, 78-79                                 ductivity, 62; and research, 115-118,
Tunisia, 172                                 132; sector strategy and finance,
Turkiye Elektrik Kurumu (TEK), 204           118-127; selection of system, 137; ser-
Turkey: dairying, 31; power generation,      vice levels, 126-129; and urban develop-
203-204; remote sensing, 96; textiles, 49  ment, 147, 150; see also Sanitation



338                     Technology, Finance, and Development
Water, 4, 5, 103, 107-123, 175, 179-183,  Wheelbarrows, 61
316, 318; aerial surveys, 86, 89; and  Women, 6-7, 166, 168
agriculture, 16, 24, 31, 183-184,      Wood bearings, 114, 117
190-191, 274, 279; cost recovery,      Wood pulp, 31, 231
120-123, 130; and health, 107, 108,    Wood, 31, 261
112-113, 127-128, 132, 134, 283; and   Working hours and traffic management, 70,
labor productivity, 62; metering, 108,    71, 77
115, 121; and remote sensing, 17, 85,  W$i-rld Bank/World Health Organization
92, 95-96, 99, 101, 190, 192; research,   Cooperative Program Staff, 117
111-118; service levels, 126-129; strategy  World Health Organization (WHO), 10,
and finance, 118-123; and urban            104, 117, 261, 285, 286
development, 142, 153                  World Weather Watch, 102
Water Resources Council, 195
Waterstaat (Netherlands), 188             X-efficiency, 250
Weather forecasting, 102, 261
Weaving, 235-236, 296
Welding technology, 230-231               Yaws, 283
Wells, 22, 30, 109, 113-114, 117, 126,    Yellow fever, 284
153, 181                               Yemen Arab Republic, 172
West Africa Rice Development Association  Youth associates, 168, 172
(WARDA), 268                           Yugoslavia, 202
West Bengal, India, 33
Wheat, 262, 266, 268, 271, 275-276, 278   Zambia, 142, 144, 145



About the Contributors
Julian Bharier is chief of the Energy Assessment Division of the Energy
Department of the World Bank. A British national, he earned his Ph.D. in
economics from the University of London and is the author of Economic
Development in Iran, 1900-1970, as well as of many articles on develop-
ment issues.
Basil P. Coukis, a Greek national, is an evaluation officer in the Operations
Evaluation Department of the World Bank. From 1975-80, he worked on
research and implementation issues related to labor-based construction
operations in Africa, Latin America, the Indian subcontinent, and the
Pacific. From 1969 to 1975, he was economic adviser, charged with the
planning and implementation of infrastructure projects, in the Ministry of
Finance and the Ministry of Works in Kenya. From 1961 to 1969, he was a
member of the Greek civil service, where he worked on transport planning
and public investment projects.
John K. Coulter is the agriculture research adviser to the World Bank. He is
the former scientific adviser to the secretariat of the Consultative Group on
International Agricultural Research. Before joining the World Bank in
1974, he was adviser on tropical soils to the British Overseas Development
Ministry, and his previous assignments include that of head of a regional
research project in the West Indies and of director of agricultural research
in Malaysia.
Graham Donaldson is an Australian economist with first degrees in
agriculture and agricultural economics and a Ph.D. from the University of
London. He is currently chief of the economics and policy division of the
World Bank's Agriculture and Rural Development Department. He has
worked with the New South Wales Department of Agriculture, Wye Col-
lege, the Canadian Royal Commission on Farm Machinery, and the Aus-
tralian National University and has written widely on agricultural policy.
Wolfram U. Drewes, a U.S. citizen, is a senior resource planner in the Ad-
ministrative Services Department of the World Bank. His academic training
was in geology, transportation economics, and geography, and he holds a
Ph.D. from Syracuse University. Before joining the World Bank, he
worked for sixteen years with bilateral and regional technical assistance
agencies in Latin America and Asia.
Charles G. Gunnerson is a senior project officer in the Water and Urban
Projects Department of the World Bank, on loan from his position as envi-
339



340                 Technology, Finance, and Development
ronmental engineering adviser to the U.S. Department of Commerce's Na-
tional Oceanic and Atmospheric Administration. He was the manager of
the World Bank's Project on Appropriate Technology for Water Supply
and Waste Disposal and has worked as director of the U.S.-Canada Inter-
national Joint Commission's Great Lakes Regional Office, chief sanitary
engineer of the UNDP/WHO Istanbul Water Supply and Sewerage Fea-
sibility Study, and deputy director in charge of research with the Solid
Waste Program of the U.S. Public Health Service.
H. Geoffrey Hilton, a British national, recently retired from his position as
senior adviser to the International Finance Corporation. An engineering
graduate of Cambridge University, he has had extensive experience with
production and maintenance work in a wide variety of British industries and
has served as an engineer officer in the Royal Navy. He joinied the Engineer-
ing Department of the corporation in 1960 and was a fellow of Harvard
University's Center for International Affairs in 1976-1977.
Phillip Z. Kirpich is a consultant on water resources developments. As a
World Bank staff member for fifteen years, three of which were as division
chief, he worked on a number of major water resource development proj-
ects. During the previous twenty-five years, he worked mainly for private
consulting firms in the United States, the Middle East, and South America.
He has taught graduate courses at Colurmibia University and has published
many articles on the multidisciplinary aspects of water resource planning.
Francis J. Lethem, a Belgian national, is technical cooperation adviser in
the World Bank's Operations Pc2cy Staff. He holds a B.A. from
Antwerp's Higher National Institute of Business Administration (Belgium)
and a Ph.D. in economics from the University of Neuchatel (Switzerland).
Between 1972 and 1975, he was division chief for education in the Bank's
West Africa Region, and he is a former fellow of Harvard University's
Center for International Affairs.
Wil Lepkowski is the senior editor of Chemical and Engineering News. A
U.S. citizen, he holds a master's degree in biochemistry and has worked for
twenty-one years as a journalist covering domestic and international polices
for science and technology.
Adetokunbo 0. Lucas, a Nigerian, is director of the Special Programme
for Research and Training in Tropical Diseases. He did postgraduate work
at Queen's University in Belfast, the London School of Hygiene and Trop-
ical Medicine, and the Harvard School of Public Health. From 1960 to
1976, he worked in the Departments of Medicine and of Preventive and



About the Contributors                               341
Social Medicine at the University of Ibadan. He was coauthor with H.M.
Gilles of Textbook of Preventive Medicine in the Tropics (1973) and is the
author of numerous papers on tropical diseases.
Frederick T. Moore is senior industrial economist in the World Bank's In-
dustry Department. An American citizen, he was formerly chief economist
of Development and Resources Corporation, seniior economist at the
RAND Corporation, and faculty member of the University of Illinois and
the University of California. He is a former member of the Board on
Science and Technology for International Development of the U.S. Na-
tional Academy of Sciences and is the author of books and articles on in-
dustrial economics and development.
Christopher J. Pratt is a private consultant. He was formerly a member of
the World Bank's Industrial Projects Department. Born and educated in the
United Kingdom, he is now a U.S. citizen. A chartered chemical and pro-
duiction engineer by training, he was worked on international sales projects
in many countries and has coauthored several books on fertilizers and
related technologies.
S. Ramachandran was born in India and, after studying engineering and
business administration, worked for a year in the Netherlands. He then
went to the London School of Economics and Political Science for a
master's degree and is now completing his Ph.D. in economics at the
University of Chicago.
K. Nagaraja Rao is professor of management and research professor of
technology and policy at Boston University. Between 1974 and 1983, he was
senior research associate at the Center for Policy Alternatives at the
Massachusetts Institute of Technology. He obtained his Ph.D. in chemical
engineering from the Illinois Institute of Technology and his professional
career has included teaching and research in chemical engineering as well as
consulting and advisory assignments in Asia, Africa, and Latin America. He
was the Ford Foundation's director of science and engineering programs in
Latin America for ten years. An Indian by birth, he is now a U.S. citizen.
Richard H. Sheehan is senior adviser for operations in the World Bank's
newly created Energy Department. He is a registered professional engineer
with an M.C.E. from the Polytechnic Institute of Brooklyn. Before joining
the World Bank, he was a senior hydroelectric engineer with the American
and Foreign Power Company in Latin America. His previous assignments
in the Bank include that of assistant director of the Energy, Water and
Telecommunications Department and chief of the Latin American Region
Power Division.



342                Technology, Finance, and Development
Abraham M. Sirkin, a U.S. consultant on international affairs with B.A.
and M.S. degrees from Columbia University, was director of information
for the Marshall Aid Mission to the United Kingdom in the 1950s and for
the U.S. delegation to UN Conference on Science and Technology in 1962-
1963. He directed U.S. information programs in South India and Greece
from 1963 to 1972. He has served with the U.S. delegations to working
groups of the UN Outer Space Committee and was editorial consultant to
the National Academy of Sciences for its 1977 publication, Resource Sens-
ing from Space: Prospects for Developing Countries.
Herbert H. Werlin, a U.S. national, is a consultant with the Council for In-
ternational Urban Liaison, and until 1983 was editor of the Urban Edge. He
has academic degrees from the Universities of California, Yale, Oxford,
and Chicago. He has worked as a health planning consultant for the U.S.
government, Westinghouse Health Systems, and Montgomery County,
Maryland, and as a teacher in several universities. Among his publications
are a book on local government in an African city (Nairobi) and selleral ar-
ticles on public administration in Ghana.



About the Editors
Charles Weiss is the science and technology adviser to the World Bank. A
U.S. citizen, he received his Ph.D. in biochemistry and chemical physics
from Harvard University and has done research on the primary processes of
photosynthesis and the theoretical chemistry of porphyrins at the University
of California, Berkeley and the IBM Watson Laboratories of Columbia
University. He is the author of several papers on technology and research
policy and the coeditor of Mobilizing Technology for World Development
(1979).
Nicolas Jequier is a professor at the Institut de Hautes Etudes en Ad-
ministration Publique at the University of Lausanne and was formerly a
principal administrator at the Development Centre of the Organisation for
Economic Cooperation and Development in Paris. A Swiss national, he
holds a master's degree in public administration from Harvard University
and a Ph.D. in economics from the University of Lausanne. He has written
several books on technology, industry, and development.