51213 IMPLEMENTING AGRICULTURE FOR DEVELOPMENT WORLD BANK GROUP AGRICULTURE ACTION PL AN 2 0 1 0 ­ 2 0 1 2 IMPLEMENTING AGRICULTURE FOR DEVELOPMENT World Bank Group Agriculture Action Plan: FY2010­2012 July, 2009 THE WORLD BANK © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org/rural E-mail ard@worldbank.org All rights reserved. This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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TABLE OF CONTENTS LIST OF BOXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii ACKNOWLEDGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix ABBREVIATIONS AND ACRONYMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii CHAPTER 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CHAPTER 2 The Global Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 CHAPTER 3 Results We Want to Help Our Clients Achieve . . . . . . . . . . . . . . . . . . . . . . . . . 11 CHAPTER 4 Needed Growth and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 CHAPTER 5 What We Will Help Our Clients Do . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 I. Raise Agricultural Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 II. Link Farmers to Markets and Strengthen Value Chains . . . . . . . . . . . . . . 21 III. Reduce Risk and Vulnerability . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 IV. Facilitate Agricultural Entry and Exit, and Rural Nonfarm Income . . . . . . . . . 27 V. Enhance Environmental Services and Sustainability . . . . . . . . . . . . . . . . 28 CHAPTER 6 How this Translates into the FY2010­2012 World Bank Group Program . . . . . . . . . . . 31 I. Aggregate Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 II. Regional Differentiation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 A G R I C U LT U R E AND RURAL DE VE L OP ME NT iv C ONTENTS CHAPTER 7 How We Will Do It. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 I. Strengthen Business Lines, Maintain Quality . . . . . . . . . . . . . . . . . . . 45 II. Focus on the Ultimate Client, Especially Women . . . . . . . . . . . . . . . . . 46 III. Strengthen Local Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 IV. Better Match Instrument Choice to Need . . . . . . . . . . . . . . . . . . . . . 47 V. Strengthen and Leverage Donor Partnerships . . . . . . . . . . . . . . . . . . . 47 VI. Better Organization to Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 A GR ICULTURE A ND RURA L D EVELOPM ENT LIST OF BOXES BOX 1: The Interconnection of Climate Change, Agriculture, and Forestry . . . . . . . . 8 BOX 2: Large-scale Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 BOX 3: A More Responsive Consultative Group on International Agricultural Research . 20 BOX 4: Multilateral Investment Guarantee Agency Support for Agricultural Investment . 24 BOX 5: Insurance Innovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 BOX 6: Blend of Instruments to Manage Intensive Livestock Systems. . . . . . . . . . 29 BOX 7: New Research Activities in the Development Economics Group of the World Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 BOX 8: The Three Worlds of Agriculture and Implication for our Mix of Support . . . . . 36 BOX 9: Rural Livelihoods Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 BOX 10: Lending Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 BOX 11: Selected Global Programs and Partnerships . . . . . . . . . . . . . . . . . . . 48 BOX 12: Strengthening Agricultural Statistics . . . . . . . . . . . . . . . . . . . . . . . 49 A G R I C U LT U R E AND RURAL DE VE L OP ME NT LIST OF FIGURES FIGURE 1: World Bank Group Agriculture and Related Sector Financing . . . . . . . . . . xx FIGURE 2: Global Food and Fertilizer Prices Remain High. . . . . . . . . . . . . . . . . . 8 FIGURE 3: Five Percent Sustained Agricultural Growth is an Ambitious Target . . . . . . . 13 FIGURE 4: Growth Rates of Yields for Major Cereals are Slowing in Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 FIGURE 5: Ongoing Program: Composition of Undisbursed US$ . . . . . . . . . . . . . . 31 FIGURE 6: World Bank Group Agriculture and Related Sector Financing . . . . . . . . . . 33 FIGURE 7: IDA/IBRD Commitments to Agriculture 2006­2008 . . . . . . . . . . . . . . . 34 FIGURE 8: Regional Composition of Current Program: Undisbursed Balance . . . . . . . . 41 FIGURE 9: Farmer Empowerment in Agricultural Knowledge and Information Systems Projects, World Bank Africa Region . . . . . . . . . . . . . . . . . . . . . . . 46 A GR ICULTURE A ND RURA L D EVELOPM ENT FOREWORD We are very pleased to present the World Bank Group's Agriculture Action Plan for Fiscal Years 2010­2012, a summary of the World Bank's proposed work program for agriculture and rural development for the next three years. We consider it especially timely in the context of the World Development Report 2008: Agriculture for Development, as well as with the renewed attention to food security issues caused by recent and projected food price volatility. Agriculture for Devel- opment has become a major analytical and strategic platform for promoting "more and better" investment in agriculture and rural development by stakeholders in both developing countries and donor organizations, including the World Bank. The main message of the WDR 2008 is that 75 per- cent of the world's poor are rural, most are involved in farming, and agriculture remains fundamen- tal in the 21st century for poverty reduction, economic growth, and environmental sustainability. The WDR 2008 involved a very broad external collaboration, through both the composition of its preparation team and through extensive consultations with stakeholders in both devel- oped and developing countries during both the preparation and dissemination phases. The World Bank's new Agriculture Action Plan FY2010­2012 is intended to describe how we at the World Bank plan to support the broad international consensus represented by WDR 2008. The World Bank Group projects a significant increase in support from IDA, IBRD, and IFC to agriculture, from a baseline average support in FY2006­2008 of $4.1 billion annually to between $6.2 and $8.3 billion annually over the next three years. While the Agriculture Action Plan is largely consistent with the themes of the 2003 World Bank Rural Development Strategy, Reaching the Rural Poor, it also follows the specific insights of WDR 2008. It thus gives relatively greater attention to: (i) the critical need to increase agricultural productivity, especially of poor smallholders, in order to make headway with rural poverty alleviation; (ii) differentiating the mix of support across the "Three Worlds of Agriculture" (agriculture-based, transforming, and urbanized countries, as described in the WDR 2008); and (iii) the role of agriculture in providing environmental services, including in the context of climate change. The Agriculture Action Plan is organized around five focal areas: · Raise agricultural productivity--including support to increased adoption of improved technol- ogy (e.g., seed varieties, livestock breeds), improved agricultural water management, tenure security and land markets, and strengthened agricultural innovation systems. · Link farmers to market and strengthen value addition--including continued support for the Doha round, investments in transport infrastructure, strengthened producer organizations, improved market information, and access to finance. A G R I C U LT U R E AND RURAL DE VE L OP ME NT vi i i FOREWORD · Reduce risk and vulnerability--continued support for social safety nets, for better managing national food imports, innovative insurance products, protection against catastrophic loss, and reduced risk of major livestock disease outbreaks. · Facilitate agricultural entry and exit and rural nonfarm income--including improved rural investment climates, and upgraded skills. · Enhance environmental services and sustainability--including better managed livestock inten- sification, improved rangeland, watershed, forestry and fisheries management, and support to link improved agricultural practices to carbon markets (e.g., through soil carbon sequestration). We hope that the World Bank Group's new Agriculture Action Plan will help us to align our work with the strategic views and investments of our partners in both developed and developing countries, and we look forward to working together to promote more and better investment to fully harness the power of agriculture to promote poverty alleviation, economic growth, and environmental sustainability. Katherine Sierra Thierry Tanoh Vice President Vice President Sustainable Development Sub-Saharan Africa, Western Europe, and The World Bank Global Manufacturing Cluster International Finance Corporation A GR ICULTURE A ND RURA L D EVELOPM ENT ACKNOWLEDGEMENTS The World Bank Group Agriculture Action Plan FY2010-2012 was written by a core team comprised of Robert Townsend (Agriculture and Rural Development Department, team lead), Martien van Nieuwkoop and Francois Le Gall (Africa Region), Norman Piccioni and Melissa Williams (South Asia Region), Marie-Helene Collion and Yurie Tanimichi (Latin America and the Caribbean Region), Matthias Grueninger (Europe and Central Asia Region), Julian Lampietti (Middle East and North Africa Region), Steven Schonberger and Iain Shuker (East Asia and Pacific Region), Christopher Delgado and Sanjiva Cooke (Agriculture and Rural Development Department), Harry Palmier (CGIAR), Susanne Scheierling (Water Unit), Don Larson (Develop- ment Economics Group), and Joyce Msuya (IFC). Additional inputs and support were provided by Anke Reichhuber, Johannes Jansen, Grahame Dixie, Renate Kloeppinger-Todd, Steven Jaffee, Marc Sadler, Eija Pehu, Riikka Rajalahti, Nabil Fawaz, Erick Fernandes, Gerhard Dieterle, Jimmy Smith, John Lamb, Kieran Kelleher, Klaus Deininger, Marjory-Anne Bromhead, Anne Davis Gillet, Ludovic Subran, Mona Sur, Pauline Zwaans, Saswati Bora, Fionna Douglas, Elizabeth Petheo, and Sonia Madhvani. Overall guidance was provided by the Agriculture and Rural Development Sector Board, com- prised of Juergen Voegele, Sector Director; Mark Cackler, Karen Brooks, Rahul Raturi, Dina Umali-Deininger, Ethel Sennhauser, Luis Constantino, Adolfo Brizzi, Oscar Chemerinski, Ren Wang, Gershon Feder, Abel Mejia, Monika Huppi, Eric Schlesinger, and Konrad von Ritter. Review and additional guidance was provided by Katherine Sierra, Vice President of the Sus- tainable Development Network (SDN); Hartwig Schafer, Director of Strategy and Operations for SDN; other SDN Sector Directors; and both the regional and non-regional Vice Presidential Units within the World Bank. Staff input and feedback were received through multiple chan- nels, including presentation and discussion of the emerging Action Plan at the World Bank Group's Agriculture and Rural Development Week in March 2009. A G R I C U LT U R E AND RURAL DE VE L OP ME NT ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities ARD Agriculture and Rural Development CAADP Comprehensive Africa Agriculture Development Program CGIAR Consultative Group on International Agricultural Research CAS Country Assistance Strategy CDD Community Driven Development CO2 Carbon Dioxide CP Cooperative Program DEC Development Economics Group DPL Development Policy Lending EU European Union FAO Food and Agriculture Organization FY Fiscal Year GDP Gross Domestic Product GHG Greenhouse Gas GDPRD Global Donor Platform for Rural Development GFRP Global Food Crisis Response Program GMO Genetically Modified Organism HD Human Development HLTF UN Higher Level Task Force on Global Food Security IBRD International Bank for Reconstruction and Development ICT Information and Communications Technology IDA International Development Association IEG Independent Evaluation Group IFAD International Fund for Agricultural Development IFC International Finance Corporation IFPRI International Food Policy Research Institute IIED International Institute for Environment and Development MIGA Multilateral Investment Guarantee Agency MDG Millennium Development Goal A G R I C U LT U R E AND RURAL DE VE L OP ME NT xi i ABBREVIATIONS AND ACRONYMS ODA Official Development Assistance OEI World Animal Health Organization PNG Papua New Guinea EAP East Asia and Pacific ECA Europe and Central Asia LCR Latin America and the Caribbean MENA Middle East and North Africa PREM Poverty Reduction and Economic Management PRSP Poverty Reduction Strategy Paper SAR South Asia SDN Sustainable Development Network SPS Sanitary and Phytosanitary SSA Sub-Saharan Africa US United States WDR World Development Report WFP World Food Program A GR ICULTURE A ND RURA L D EVELOPM ENT WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 Executive Summary 1. The World Bank Group has made a renewed commitment to agriculture: This document presents the World Bank Group's Agriculture Action Plan, FY2010­2012. It follows on from the World Bank agriculture and rural development strategy: Reaching the Rural Poor 2003­2007, and operationalizes the World Development Report 2008: Agriculture for Development. Consis- tent with client demand, the Agriculture Action Plan outlines the new phase of the World Bank Group's commitment to support client countries improve agriculture's contribution to food security, raising the incomes of the poor, facilitating economic transformation, and providing environmental services. This new World Bank Group Agriculture Action Plan (FY2010­2012) projects an increase in support (from IDA, IBRD, and IFC) to agriculture and related sectors from a baseline average support in FY2006­2008 of $4.1 billion annually to between $6.2 and $8.3 billion annually over the next three years. This would be between 13 and 17 percent of total projected World Bank commitments. Reaching these projections will, among other fac- tors, be dependent on continued strong client demand to borrow IBRD resources and to use IDA concessional financing for agricultural development. 2. The changing global context adds new urgency. Sudden increases in food prices in 2008 drove an estimated 100 million more people into poverty.1 The seasonal nature of agriculture resulted in a lagged production response. Global food prices more than doubled from 2006 to mid-2008, then declined by 30­40 percent through to the end of May 2009. Global food prices are now increasingly being driven by events exogenous to the food sector. Future prices are expected to remain higher than in the 1990s and likely more volatile. Higher price volatility may dampen supply response to higher average prices, negatively impacting both poor producers and consumers. In addition, the financial crisis has both slowed growth and trade. Resultant declines in government revenue have curbed the ability of governments to respond. Exchange rate depreciations have kept food prices high for many developing country importers. Tighter lending practices of commercial banks have led to higher interest rates on farmer and agribusi- ness borrowing and lowered subsequent investment in the sector. Lower remittances and migration back to rural areas have lowered purchasing power and pressured household bud- gets. The severity of the impact of the food and financial crises has been amplified by broader trends that need to be acknowledged in future action. These include the ability of institutions, policy, and investment to respond to accelerated demand for food, globalization of markets 1 Ivanic and Martin (2008). Implications of higher global food prices for poverty reduction in low-income countries, Agricultural Economics 39:405­416. A G R I C U LT U R E AND RURAL DE VE L OP ME NT xi v WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 and associated risks, rising urbanization, efforts to integrate smallholder farmers growing land and water scarcity, and climate into growing global agricultural markets change. Each has implications for the role of and supply chains. agriculture in the broader economy, and the · Urbanization and economic transformation: associated priorities for action. Demand for manufactured goods and services, affordable food, and market · Rising food demand: By 2050 there will driven rural-to-urban shifts of land and be an estimated 2.3 billion more people labor all facilitate economic growth and 2 to feed (one third more than today). transformation. Agriculture must play its Demand for grains and protein will significant role. Income growth to spur increase. Competing uses of food are demand, productivity growth to provide growing rapidly (e.g., biofuels), and water affordable food (and raise real wages), scarcity will increase. Climate change and market driven release of land and adds to the uncertainty. Yet global annual labor for urban development all require growth rates in yields of major grains more investment in agriculture. have declined from around 3 percent in · Climate change: Climate change is likely to 3 1980 to 1 percent today. These trends expose more people, more frequently and place upward pressure on food prices, for longer periods to threats to their liveli- on further deforestation for crop area hoods.4 Agriculture can play a significant expansion and associated climate change role in mitigating climate change, but ad- impacts. Substantial investment in ag- aptation also remains important. Produc- ricultural productivity growth is needed tivity growth potentially reduces the need now. for deforestation. More drought tolerant · Poverty reduction and the globalization crops and livestock breeds can improve of markets: Seventy-five percent of the resilience. Education and training can world's poor live in rural areas, and most improve management of climate induced are involved in farming. Overall GDP changes in pests, weeds, and diseases. growth originating in agriculture has Better managing agricultural intensifica- proven to be, on average, two to four tion can reduce GHG emissions, as can times as effective in raising incomes of sequestering more carbon in the soil. The the poor as growth generated in nonagri- latter offers an important potential income cultural sectors. Maintaining and enhanc- source for the poor, but only if soil carbon ing these poverty reducing impacts of sequestration is adequately included in agricultural growth will require concerted future carbon trading systems. · Rising rural-urban income disparities: 2 United Nations (2008). World Population Prospects. The Rapidly rising rural-urban income 2008 Revision. 4 3 World Development Report 2008. World Development Report 2010. A GR ICULTURE A ND RURA L D EVELOPM ENT WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 xv disparities, particularly in South and East other sectors; a strong policy base, backed Asia, coupled with continuing extreme by extensive analytical research; and strong rural poverty are major sources of social institutional memory. In addition, other and political tension. Tensions that can multi- and bilateral development partners spill-over to undermine the overall growth have tended to favor social sectors, such as process. Improved agricultural perfor- health and education, while the Bank has mance can help temper these income dis- retained a larger share of its support for parities and associated tensions. But the agriculture. We also have demonstrated focus needs to be on raising farm and ability to respond rapidly to shocks, as nonfarm rural incomes, to avoid subsidy reflected in the rapid response to the global and protection traps. food price crisis--particularly important for a more uncertain world. 3. The global investment needs for agricul- ture are significant. The global incremental 5. What we will help our clients do. The World agricultural public investment required--the Bank Group will respond to the short-term additional amount necessary to meet the effects of the food and financial crises, but Millennium Development Goal of halving embed these within our response to the poverty by 2015--is estimated to be $14 longer-term challenges outlined above. We billion annually for all developing countries, will focus on five key areas of action over and $3.8 to $4.8 billion annually for sub- FY2010­2012: (i) raise agricultural produc- 5 Saharan Africa. Recent policy reforms tivity growth, (ii) link farmers to markets have improved price incentives for agricul- and strengthen value chains, (iii) reduce risk tural producers in developing countries -- 6 and vulnerability, (iv) facilitate agriculture improvements that can strengthen future entry and exit, and rural nonfarm income, investment returns. and (v) enhance environmental services and sustainability. The mix of support across 4. We have a comparative advantage to these five areas will differ by region. respond. The World Bank Group has the largest number of country level programs · Raise agricultural productivity: Provide across all bilateral and multilateral develop- additional support for agricultural pro- ment partners; strong in-country represen- ductivity in at least 30 countries. Sup- tation; depth in technical expertise; strong port technology adoption to reduce the links with the Ministries of Finance and significant gap between yields achieved 5 Fan, S. and Rosegrant, M. (2008). Investing in Agriculture to in farm trials and average national yields, Overcome the World Food Crisis and Reduce Poverty and and focus on improving the relevance Hunger. Policy Brief 3. International Food Policy Research Institute. and effectiveness of agricultural advice 6 Anderson, K. (ed). Forthcoming 2009. Distortions to Agricul- through improved extension services to tural Incentives: A Global Perspective, 1955­2007. London: Palgrave Macmillan; and Washington, DC: World Bank. farmers. Improve livestock off-take rates A G R I C U LT U R E AND RURAL DE VE L OP ME NT xvi WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 and aquaculture yields. Improve agricul- in growing higher value markets (such tural water management and expand as livestock and horticulture in Asia). and improve the efficiency of irrigated Strengthen market institutions (rules that area, particularly in Sub-Saharan Africa. define the risks and obligations of buyers Strengthen property rights through and sellers). Help developing countries to support of new low-cost approaches to improve food safety infrastructure and issuing certificates of land ownership (as institutions, thus facilitating their access to was used in Ethiopia), and strengthen developed country markets. Strengthen land rental markets, particularly in Asia. producer organizations to ensure scale in Assist in the development of standards sales and purchases, and attractiveness (a code of conduct) on foreign investment to private trade and industry (such as in large-scale agricultural production. support to community groups in Andhra Scale-up support for new technology Pradesh). Increase access to finance generation, with more focus on regional through continuing support to service approaches, including support for global provision, market facilitation, and the actions through a reformed Consultative enabling environment, but also build on Group on International Agricultural cell phone and other relevant technologi- Research (CGIAR). cal advances to spread access. Continue · Link farmers to markets and strengthen to support agribusiness restructuring in value chains: Provide additional support transition economies and strengthen on- to at least 15 countries to better link going support to agribusiness enterprises farmers to markets, improve their com- in this period of financial crisis, particu- petitiveness, and continue with global larly through the IFC. efforts to improve trade. Continue to sup- · Reduce risk and vulnerability: Continue port the Doha round (Doha failure could to support the Global Food Crisis further reduce developing country agri- Response Programs ongoing across more 7 cultural exports by 12 percent ), and sup- than 30 countries. Expand reach to at port improved regional trade. Better link least an additional 10 countries with $800 farmers to markets through targeted in- million in new fast-track programs-- vestments in market places, rural roads, focusing on short-term budget support, telecommunication (market information), social protection, and agricultural supply and electrification for agribusiness, and response. Help client countries better scaling up business models that better manage national food imports, improve enable smallholder farmers to compete trade and transport facilitation, particu- larly for clients with large food deficits 7 Bouët, A. and Laborde, D. (2008). The Potential Cost of a such as in the Middle East and North Failed Doha Round. Issues Brief 56. International Food Policy Research Institute. Africa. Better understand the extent and A GR ICULTURE A ND RURA L D EVELOPM ENT WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 xvii drivers of food price volatility and global same time mitigating climate change ef- and local policy implications. Continue to fects. Reduce natural resource depletion, implement and use innovative insurance particularly forests and fisheries. Improve products to help clients transfer risk of soil and moisture conservation and invest weather and grain price shocks (as done in more drought-, heat-, salt-, and flood- in Mongolia and Malawi). These actions tolerant crops and livestock systems to will be undertaken to address the rising make agriculture more resilient to climate uncertainty of grain prices over the next variability and change. few years. Continued attention will be 6. The mix of support across the five focal given to surveillance and rapid response areas will vary by country and region. For of major livestock/crop pests and disease example, the dominant focus in Africa and outbreaks. Other aspects of risk from in parts of Asia, where agriculture is still farm to end-market will be addressed in a major contributor to overall growth and the other pillars of the action plan. poverty reduction, will be on agricultural · Facilitate agricultural entry and exit, productivity growth, particularly for food and rural non-farm income: Strengthen staples, with less attention to facilitating land rental and sales markets. Learn from rural nonfarm income and exit. In parts recent rural investment climate assess- of East and South Asia, and Europe and ments to improve incentives for local pri- Central Asia, relatively more emphasis will vate investment. Upgrade skills (educa- be given to nonfarm income and exit, and tion levels in rural areas tend to be lower linking farmers to higher value markets, than in urban areas, and among women although productivity growth remains lower than among men). Better link important. This differentiation is consistent private sector skills demand with training with the "Three Worlds" of agriculture curricula. Support regional clustering of highlighted in the World Development economic activity (e.g., territorial devel- Report 2008. In addition, complementari- opment). All these aspects are particular- ties across the five focal areas need to be ly important for Latin America, East and recognized in program design; for example, South Asia, and Europe and Central Asia. strengthening linkages to markets can · Enhance environmental services and help raise technology adoption, dampening sustainability: Better manage intensive price volatility can reduce the risks associ- livestock systems to reduce pollution and ated with productivity investments, and disease risk. Tap into carbon markets and improving land productivity can help reduce pilot soil carbon sequestration projects deforestation. as a climate change mitigation measure. 7. Attention to sector governance will be These could result in opportunities to crucial. Successful implementation of the improve incomes of the poor while at the above agenda will require addressing the A G R I C U LT U R E AND RURAL DE VE L OP ME NT xvi i i WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 governance challenges in the agriculture learning with insurance innovations, and sector--including better balancing public- technologies to spread access to finance, private roles, which is more challenging in and explore new product development in agriculture than in others sectors, improving support for environmental services. In ad- local and national state capacity, strength- dition to new commitments, we will con- ening voice (particularly of marginalized and tinue to focus on maintaining quality of vulnerable groups), and improving efficien- our ongoing programs (with about $10bn cy of agricultural public spending. We will in committed support to be disbursed support governance improvements through over the next several years). capacity building of local government and · Focus on the ultimate client, especially Ministries of Agriculture, strengthening pro- women. Greater focus on empower- ducer organizations, support for community ment of the ultimate beneficiaries of our driven development, technical assistance, support (e.g., farmers, livestock keepers, analytical work to better understand trade- fishers) has been associated with offs of policy reform, and public spending improved project performance. For reviews. example, an increase in the number of extension and research projects in Africa 8. How we will do it. Our support to the five giving farmers more influence over fund- focal areas will give attention to the follow- ing allocation decisions (from 5 percent ing aspects: to 35 percent of projects) was associated · Strengthen business lines, maintain with improved project outcomes. Similar- quality: We will consolidate a set of good ly, in Andhra Pradesh, farmer empower- practice programs across the five focal ment through collective action improved areas, highlighting principles of design, access to services. We will continue to and unit costs to guide scale-up. Areas learn lessons and draw on good practice of ongoing core business lines include design for scaling up. In many countries, irrigation, land tenure, and research and agricultural production and use of forest extension, which account for a large products for energy, food, and medicines share of our agriculture portfolio. These is dominated by women, and specific will continue to be important programs attention will be given to improving with continued demand for them, par- their access to assets (particularly land), ticularly in IDA countries. Agricultural finance, and services. markets and trade related programs · Better match instrument choice to need: are increasingly demanded by client Specific investment loans will continue countries, for which there are emerging to account for the major share of our good practice examples to be scaled up. support, with increased used of adapt- We will continue experimentation and able program loans, and supplemental A GR ICULTURE A ND RURA L D EVELOPM ENT WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 xix financing to speed additional support, and often undermines the strengthening and follow-on programs. Emergency of local systems. This effect is strongest recovery loans will be the main instru- in countries where development partner ment to address climatic, price, or pest support accounts for the major share of and disease shocks. Development policy public spending in agriculture, particularly lending (DPLs) will continue to be an in Sub-Saharan Africa. Consistent with the additional tool used in selected cases. Paris Declaration and Accra Agenda for We will also explore options for using Action, we will continue to work to inte- commodity linked loans as instruments grate our support into government-led ef- to reduce commodity price risk, and will forts, including joint financing of programs work with the investment lending reform by development partners, especially those team to try to ensure reforms assist the involving the Global Donor Platform for action plan implementation efforts. Rural Development. We will work to bet- · Strengthen local processes: Country ter leverage Global Programs and Partner- led and implemented programs offer the ships, such as support to the CGIAR. greatest prospect for long-term sustain- · Better organization to deliver: We will able outcomes. The World Bank will continue to decentralize on a country- focus on strengthening processes at by-country basis as the business case regional, national and local levels (e.g., dictates. The World Bank will continue to including community-driven development draw on the FAO Cooperative Program programs and regional initiatives such (CP) to provide specialized expertise. as the Comprehensive Africa Agriculture Technical support for each of the five Development Program [CAADP]). We will focal areas will be provided by the ARD continue to engage in the Poverty Reduc- thematic groups and we will continue to tion Support (PRSP) processes as well capitalize on and facilitate south­south as work to ensure Country Assistance learning across thematic areas. In addi- Strategies (CASs) and Country Partner- tion, the World Bank will work to leverage ship Strategies give satisfactory attention synergies with the CGIAR. The integration to agriculture. of the Sustainable Development Network · Strengthen and leverage donor partner- strengthens the World Bank Group's ships: Fragmentation of development capacity to support clients in addressing partner projects geographically, themati- cross-cutting issues that impact agricul- cally, and in use of financial management, ture. Implementation of the action plan accounting, and reporting systems raises also requires collaboration with other net- transaction costs, diverts local capacity, works and non-regional vice presidencies. A G R I C U LT U R E AND RURAL DE VE L OP ME NT xx WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 FIGURE 1 World Bank Group Agriculture and Related Sector Financing Annual average 9 8 8.3 7 6.2 6 US$ billions 5 4.1 4 3.0 3 2.3 2 1 0 2000­02 2003­05 2006­08 2010­12 2010­12 Low case High case Other agriculture related investments Agricultural production and markets IFC (US$ billions) Annual average Annual projections 2010­12 2000­02 2003­05 2006­08 Low High IDA/IBRD (by sub-sector) Agricultural production and markets* 1.1 1.6 1.8 3.4 4.8 Agriculture, fishing & forestry** 0.9 1.5 1.6 3.0 4.3 Agriculture markets, trade, & agro-industry 0.2 0.1 0.1 0.4 0.5 Other agriculture related investments 0.9 0.9 1.2 1.1 1.6 IFC 0.3 0.5 1.2 1.7 1.9 Total 2.3 3.0 4.1 6.2 8.3 * Is the sum of Agriculture, Fishing & Forestry, and Agriculture Markets, Trade, and Agro-industry. ** As reported in the World Bank Group Annual Reports as agriculture. The Agriculture Action Plan includes IDA, IBRD and IFC financing. IDA/ IBRD, including Special Financing, reflects: (i) project components specifically coded as Agriculture, Fishing and Forestry as well as those coded as Agriculture Markets and Trade, and Agro-industry, and; (ii) in order to capture important related investments such as land administration, agricultural agency reform, agricultural and rural finance, market roads etc, other investments directly related to agricultural production under the oversight of the Agriculture and Rural Development (ARD) Sector Board. The disaggregation across agriculture production, marketing and other agriculture related investments is reflected in the table above. For IFC it includes: (i) agribusiness production and processing, (ii) agri-related trade finance, (iii) fertilizers, (iv) agri-logistics and infrastructure, and (v) food retail. Trust Funds are not included but relatively small in comparison: $73 million in 2000­2002; $110million in 2003­2005, and $132 million in 2006­2008, of which GEF accounted for about 70 precent. The Africa region and LCR accounted for 34 and 28 precent of trust fund commitments in FY06­2008. 9. The above-mentioned actions translate into the projected scaled-up financing for agriculture and related sectors in Figure 1. As overall IDA/IBRD financing for development is expected to increase, these scaled -up projections translate into an estimated change in the share of IDA/ IBRD Agriculture and Related Sector Financing from 12 percent in FY2006­2008 to between 13 and 17 percent in FY2010­2012. A GR ICULTURE A ND RURA L D EVELOPM ENT CHAPTER 1: Introduction 1. A new phase of the World Bank Group's commitment. This document presents the World Bank Group's Agriculture Action Plan, FY2010­2012. It follows on from the World Bank agriculture and rural development strategy: Reaching the Rural Poor 2003­07, and operationalizes the World Development Report 2008: Agriculture for Development (WDR 2008). Consistent with client demand, the Agriculture Action Plan (Action Plan) outlines the new phase of the World Bank Group's commitment to support client coun- ties improve agriculture's contribution to food security, raising the incomes of the poor, facilitating economic transformation, and providing environmental services. The World Development Report 2008 provides the strategic framework for our support, which is not duplicated here. Rather, this document reflects on the recent extent and implications of changes in the global context, and the proposed World Bank Group actions over the next three years. The main messages of the WDR 2008 are integrated throughout the document. 2. The changing global context adds new urgency. Global food prices are now increas- ingly being driven by events exogenous to the food sector. Global food prices more than doubled from 2006 to mid-2008, then declined by 30­40 percent through to the end of May 2009. Future prices are expected to remain higher than the 1990s and likely more volatile. Low global grains stocks and thin markets amplify the effect of demand surges (from biofuels and institutional investors), and supply disruptions (from more volatile weather patterns), factors which converged in 2008. Despite declines in global food prices from mid-2008, depreciating exchange rates from the financial crisis kept local prices of food imports high in many developing countries. Lower remittances have reduced household purchasing power. Less private investment, higher local costs of borrowing, and reduced government revenue and spending, all reduce capacity of households to respond. 3. Agriculture remains essential for growth, food security, poverty reduction, and envi- ronmental sustainability. Agriculture still comprises a significant share of overall growth and household income, and provides essential food security, in many of the poorest coun- tries, a fact amplified by the recent food price crisis. Improved agricultural performance can lead to dramatic improvements in the incomes of the poor, provide affordable food, and spur structural transformation. As highlighted in the World Development Report 2008, histori- cally, poverty plummeted in China, India, and Vietnam, and other countries that went through major spurts in agricultural growth. Economic transformation through industrial takeoffs and rising incomes also followed in the wake of major spurts of agricultural growth in Japan and A G R I C U LT U R E AND RURAL DE VE L OP ME NT 2 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 the Republic of Korea. Moreover, global addition to raising the level of support, evidence shows GDP growth originating improvements to the composition of in agriculture has been, on average, two spending and the enabling environment to four times as effective in raising in- in which these investments are made comes of the poor as growth generated increase investment returns. Where 7 in nonagricultural sectors. The recent these have been put in place, agricul- events in food and financial markets tural performance has improved. reiterate the importance of these rela- 5. Lessons learned from implementa- tionships. In addition, agriculture's role in tion of the last rural strategy. The climate change is now becoming clearer 2007 review8 of implementation prog- as both part of the problem and a poten- ress of the agriculture and rural devel- tial part of the solution. opment strategy--Reaching the Rural 4. Reverse the decline in assistance. Poor--highlighted that the most critical Despite its relative importance, the areas for future directions of the Bank's share of agriculture in official develop- ARD agenda are: (i) to keep the Mil- ment assistance (ODA) declined sharply lennium Development Goals (MDGs) from a high of 18 percent in 1979 to of poverty and hunger reduction at the a low of 3.5 percent in 2004, which forefront of the international develop- equated to more than a 50 percent ment agenda; (ii) to put regions with the decline in the value of support. This largest number of rural poor in the fore- was a steeper decline than the decline front of our efforts (Sub-Saharan Africa, in developing country governments' South Asia, and East Asia and Pacific own commitments to agriculture, which have the largest number of poor); (iii) were on average double the share of press for results from our advocacy and total donor commitments, although policy reform efforts on trade liberaliza- with significant differences across tion and removing distorted agricultural regions. This trend has been recently policy regimes; (iv) improve project reversed, including an increasing trend and budget support modalities for rural in World Bank support following the investments, institutional arrangements, strategy for Reaching the Rural Poor in incentive frameworks, and staff skills 2003. The share of IDA/IBRD lending to within the constraints of country driven agriculture declined from 30 percent in assistance programs; and (v) continue 1980­1982, to 7 percent in 1999­2001, to strengthen donor harmonization and then increased to 12 percent in alignment. Each of these aspects is FY2006­2008. As the WDR 2008 reflected in this Action Plan. says, "more and better" is needed. In 8 Agriculture and Rural Development at the World Bank FY2003­2006. 7 World Development Report 2008 A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 1 -- INT RODUCT ION 3 6. The World Bank Group has commit- scale-up will be met over the next three ted to scale-up support for agricul- years (FY2010­2012), and the invest- ture and related sectors. The World ment areas to be scaled up. The WDR Bank group has committed to increas- 2008 provides the strategic framework ing support from $4.1 billion annually to for action, while this document lays out a projected estimate of between $6.2 the World Bank Group's Action Plan for and $8.3 billion annually. This action the next three years (FY2010­2012). plan focuses on how the projected A G R I C U LT U R E AND RURAL DE VE L OP ME NT CHAPTER 2: The Global Context 7. Even before the food price spike, there were 850 million chronically malnourished people. The severity of the impact of the food and financial crises, with estimates of over 100 million more people pushed into poverty,7 has been amplified by broader trends that need to be acknowledged in future action. These include the ability of institutions, policy, and investment to respond to accelerated demand for food, globalization of markets and associated risks, rising urbanization, growing land and water scarcity, and climate change. Each has implications for the role of agriculture in the broader economy, and the associ- ated priorities for action. 8. Rising food demand: By 2050 there will be an estimated 2.3 billion more people to feed (one third more than today).8 While agriculture has met the past global demand for food and fiber with an increase in per capita production, rising productivity, and declining com- modity prices from the early 1980s to 2006, a changing environment amplifies the future challenge. Competing uses of agricultural products are growing rapidly. For example, about 25 percent of the US maize crop is now used for ethanol-based biofuels. Long-term income growth in emerging economies is increasing demand for livestock products, and adding to demand for grain through feedstuffs. Water scarcity will increase, with less predictable rainfall and with increasing amounts of land being shifted out of agriculture for urbanization in many countries. Global annual growth rates in yields of major grains have declined from around 3 percent per year in 1980 to 1 percent today. These trends place upward pressure on prices, on further deforestation for crop area expansion and associ- ated climate change impacts. Substantial investment in agricultural productivity growth, especially for smallholders, is needed now to meet these challenges. 9. Globalization: Globalization has opened new market opportunities for farmers, and agribusi- ness entrepreneurs. Demand for higher value primary and processed products is rapidly increasing, driven by higher income and liberalized trade. But new markets demand quality, timely deliveries, and economies of scale. More widespread movement of food and livestock around the world requires vigilance on food safety and disease risk. More exacting standards pose challenges to poor farmers competing in these growing markets. While agricultural growth has proven to be, on average, two to four times as effective in raising incomes of the poor as growth generated in nonagricultural sectors, preserving and enhancing this impact 7 Ivanic and Martin (2008), Implications of higher global food prices for poverty reduction in low-income countries, Agricultural Economics 39:405­416. 8 United Nations (2008). World Population Prospects. The 2008 Revision. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 6 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 will require concerted effort. Integrat- is often hampered by lack of information, ing smallholder farmers into these new costs, skills, aging, and family and social markets is particularly important in Latin ties. Improving the performance of agri- America and Asia. In addition, accession culture can help reduce both relative and into economic unions and common mar- absolute poverty--as historically demon- kets often requires better alignment of strated. About 80 percent of the world- domestic agricultural policies, particularly wide poverty reduction during 1993­2002 in Eastern European countries seeking can be ascribed to improved conditions in accession and integration into the Euro- rural areas; migration accounted for about pean Union. 20 percent of the reduction.11 10. Urbanization and structural trans- 11. Maintaining political and economic formation: Demand for manufactured stability: Rising rural-urban income dis- goods and services, affordable food, parities, particularly in transforming Asia, and market driven rural-to-urban shifts coupled with continuing extreme rural of land and labor all facilitate economic poverty are major sources of social and growth and structural transformation. political tension. Tensions that can spill Agriculture must play its role in driving over to undermine the overall growth and facilitating transformation. Income process. Improved agriculture perfor- growth to fuel demand, productivity mance can help temper these income growth to provide affordable food (and disparities and associated tensions. But raise real wages), and market driven focus needs to be on raising farm and release of land and labor for urban nonfarm rural incomes, to avoid subsidy development in contexts where land is and protection traps. Subsidy transfers scarce, all require more investment in compete for public funds at high op- agriculture. Even with rapid urbaniza- portunity cost, while import protection tion, the developing world is expected elevates food costs for the large masses to remain predominately rural in most of poor net consumers. The challenge is regions until about 2020.9 Currently to ensure commitment and impacts of 75 percent of the world's poor live in income generating public investments rural areas, and the majority of the poor are large enough to facilitate a shift are projected to continue be rural until away from reliance on subsidy transfers. about 2040.10 Migrating to urban areas 12. Land scarcity: Much of historical agricultural growth was achieved by 9 United Nations World Urbanization Prospects: The bringing more land under cultivation, 2007 Revision Population Database. 10 Ravallion, M., Chen, S. and Sangraula, P. (2007). New Evidence on the Urbanization of Global Poverty. World Bank Policy Research Working Paper 4199. 11 World Development Report 2008. A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 2 -- T HE GL OBAL CONT E XT 7 driven by population growth and the increases in agricultural output that expanding markets. But in more dense- has fed the world's growing population ly populated parts of the world, the land and stabilized food production would frontier is closed. In Asia land scarcity not have been possible. Irrigation will has become acute in most countries, continue to be an important source and rapid urbanization is reducing the of productivity growth, especially in area available for agriculture. Latin Sub-Saharan Africa and parts of Latin America, and Europe and Central Asia America that still have large untapped are still relatively land abundant, and water resources for agriculture. In other there remains scope for land expansion regions where the scope for further in some Sub-Saharan African coun- expanding irrigated agriculture is more tries. However, in many countries, land limited, efforts are needed to enhance expansion has been at the expense of the policy, technical, and governance clearing subtropical and tropical forests. aspects of agricultural water use. Water With a declining land frontier, more use also needs to be improved in rain- efforts are needed to improve land pro- fed agriculture, which accounts for ductivity and strengthen enforcement about 60 percent of agricultural produc- of land use priorities. Strengthening tion in developing countries. Especially property rights, improving the function- in arid and semiarid regions, yields ing of land markets, and investments in tend to be relatively low. Due to highly better soil management can all help. variable rainfall and long dry seasons, as well as recurrent droughts, dry spells and 13. Water scarcity: Growing demands floods, water management in often a key from agricultural, urban, and environ- determinant for agricultural production mental water users, as well as chang- and productivity in these regions. ing climates, are intensifying water scarcity in many parts of the developing 14. Climate change: Climate change will world, particularly in the Middle East have far-reaching consequences for and North Africa. Agriculture accounts agriculture that will disproportionately for about 70­75 percent of global water affect the poor. Greater risks of crop withdrawals. About 20 percent of the failures and livestock deaths are already world's farmed area is irrigated, and imposing economic losses and under- produces 40 percent of the value of mining food security, and they are likely agricultural production in developing to get far more severe as global warm- countries.12 Without irrigation, much of ing continues. This comes at a time of rising demand for agricultural productiv- 12 Comprehensive Assessment of Water Management ity growth. Future productivity gains in Agriculture. 2007. London: Earthscan, and Colombo: International Water Management Institute. will need to offset the productivity loss A G R I C U LT U R E AND RURAL DE VE L OP ME NT 8 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 Box 1 THE INTERCONNECTION OF CLIMATE CHANGE, AGRICULTURE, AND FORESTRY Agriculture accounts for about a quarter of global green house gas emissions--15 percent from livestock and crop emissions of CO2, methane, nitrous oxide, and other gases, and about 10 percent from deforestation for crop area expansion. Agriculture contributes about half of the global emissions of two of the most potent non­carbon dioxide greenhouse cases: nitrous oxide and methane. Nitrous oxide emissions from soils (from fertilizer ap- plications and manure) and methane from enteric fermentation in livestock production each account for about one-third of agriculture's total non­carbon dioxide emissions. Agricultural productivity growth and better management of agricultural intensification is needed. In the absence of agricultural productivity growth, global food demand will need to be met by crop area expansion, including further deforestation. But recent rates of the global defores- tation (7.3 million hectares per year from 2000 to 2005) already have a climate impact equiva- lent to 14 percent of current global CO2 emissions, a climate impact that further increases the risk of lower crop yields--a reinforcing spiral. Significant investment for agricultural productiv- ity growth can potentially reduce deforestation. Successful incorporation of forestry (carbon sequestration in trees) and agriculture (carbon sequestration in soils) in future carbon trading systems can provide greater incentive to retain forests, and can raise farm incomes and on- farm productivity investment. Sources: Adapted from WDR 2008 and WDR2010 (forthcoming) from climate change and still gener- FIGURE 2 Global Food and Fertilizer Prices ate sufficient gains to meet rising food Remain High needs--a double challenge. Adapta- 500 Nominal US$ index (Jan-2006 = 100) tion to climate change will be critical, 400 but agriculture can also help mitigation (Box 1). More drought tolerant crops 300 and livestock breeds can improve 200 resilience. Better managing agricultural 100 intensification and reduced deforesta- tion can reduce GHG emissions, as 0 M 6 Se 6 Ja 6 M 7 Se 7 Ja 7 M 8 Se 8 Ja 8 M 9 9 can sequestering more carbon in the 0 -0 0 0 -0 0 0 -0 0 0 -0 n- p- n- p- n- p- n- ay ay ay ay Ja soil. These have the potential to offer an Fertilizer Grains Energy important income source for the poor if Source: Development Economics Group, World Bank soil carbon sequestration is adequately in- from 2007 to mid-2008, fertilizer prices cluded in future carbon trading systems. quadrupled, and grain and energy prices 15. Food and energy price levels: Global more than doubled (Figure 2). While food prices increased significantly prices have since come down, grain A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 2 -- T HE GL OBAL CONT E XT 9 prices are still about 50 percent higher private investment in agriculture is than the 2003­2006 average and fertil- needed, such investment will need to izer prices are still about double these ensure local and equitable benefit. earlier levels. Energy prices are similar 16. Food price volatility: Food prices are to 2006 levels, but are again starting not only expected to remain higher in to rise. The extent of pass-through of the future than the 1990s/early 2000s, global to local prices depends on fac- but also to be more volatile. Real food tors such as transport costs, domestic commodity prices are forecast to be on policies and market structure. Before average about 25 percent higher during the price increases, as much as half of 2009­2018 than over the 1997­2006 all spending by poor households was period, driven by higher demand for on food. Sharply higher prices for these biofuels and for livestock products.14 As households meant reducing spending food markets become more integrated on non-food items such as school fees, with other commodity and financial or simply eating lower quality and less markets, they become more exposed to food, with disproportionate impacts the systemic risk and volatility of these on women and girls. As a result, the markets. Oil price volatility is being re- number of people in poverty increased flected in maize markets (through links by an estimated 100 million.13 High with biofuels), financial market volatility food prices offer income opportunities is being reflected in agricultural markets for food producers. High food prices (through links with commodity index and favorable weather encouraged ag- funds), and changes in the frequency, ricultural expansion in 2007 and 2008, distribution and intensity of rainfall but developing country production (through climate change) is impacting responses were generally slower than production volatility. Low global grain developed countries. Higher energy stocks have also increased the sensitiv- costs also raised transport costs. The ity of global price volatility to demand price spike has also induced a number and supply shocks. All lead to a more of countries, many with severe natural uncertain future, and convergence of resource constraints and high depen- volatility shocks can lead to rapid and dence on imports, to explore ways steep price changes as occurred in to lock in future food supply through 2008. Imposition of trade restrictions investments in agricultural production further exacerbated the 2008 price in other countries. Although greater spike by reducing liquidity in these mar- kets. 13 Ivanic and Martin (2008), Implications of higher global food prices for poverty reduction in low-income coun- tries, Agricultural Economics 39:405­416. 14 OECD-FAO Agricultural Outlook: 2009-2018. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 10 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 17. Financial crisis: The financial crisis ity. The mix of support across these five has both slowed global growth and areas will differ by country and regions. trade. Resultant declines in govern- Relative to the 2003 Rural Development ment revenue have curbed the ability Strategy, consistent with the main of countries to respond. Local currency messages of the WDR 2008, and in depreciations kept local food prices response to the current global context, high in many developing countries, the Action Plan gives greater emphasis and lower remittances have reduced to: (i) raising agricultural productivity; purchasing power. Migration back to (ii) differentiating the mix of support rural areas of the unemployed is placing dependent on local conditions (e.g., added pressure on household budgets. across the "Three Worlds" of agricul- Tightening credit markets have raised ture as described in the WDR 2008); interest rates and lowered lending to and (iii) environmental services and rural areas, and, coupled with higher sustainability, including in the context of fertilizer prices, has put input use out climate change. of reach for many farmers. Increased 19. We will use our comparative pressure for reversal of reforms is also advantage to respond. The World Bank likely. These financial crisis impacts am- Group has the largest number of coun- plify the negative impacts of the recent try level programs across all bilateral food price spike. and multilateral development partners; 18. Implications for what we do over strong in-country representation; depth the next three years: The World Bank in technical expertise; strong links with Group will respond to the short-term the Ministries of Finance and other effects of the food and financial crises, sectors; a strong policy base, backed but embed these within our response by extensive analytical research; and to the longer-term challenges outlined strong institutional memory. In addition, earlier. This will include: (i) scaled-up other multi- and bilateral development efforts to spur agricultural productiv- partners have tended to favor social ity growth; (ii) better linking farmers sectors, such as health and education, to markets and strengthening value while the World Bank has retained chains; (iii) a continued focus on reduc- a larger share of its support for agri- ing risk and vulnerability; (iv) facilitat- culture. We also have demonstrated ing agriculture entry and exit, and rural ability to respond rapidly to shocks, as nonfarm income; and (v) enhancing reflected in the rapid response to the environmental services and sustainabil- global food price spike--particularly important for a more uncertain world. A GR ICULTURE A ND RURA L D EVELOPM ENT CHAPTER 3: Results We Want to Help Our Clients Achieve Targets Food security Halve the proportion of the population below minimum level of dietary energy con- sumption (between 1990 and 2015)* Growth 5 percent long-term annual agricultural GDP growth Poverty reduction Halve the proportion of population below $1 (PPP) per day* Environmental sustainability Reduce rate of loss of land area covered by forests* * Millennium Development Goal targets 20. The selected Millennium Development Goal (MDG) targets reflect the global targets of our clients and development partners, not what we could achieve alone with our FY2010­ 2012 program. The 5 percent agricultural growth target reflects the explicit target set by the World Bank's Africa Region (as documented in the Africa Action Plan presented to the World Bank Board). This is an ambitious target both for countries in Africa and elsewhere, but to ensure consistency with one of the most important regions for agricultural devel- opment, the 5 percent target was retained. A G R I C U LT U R E AND RURAL DE VE L OP ME NT CHAPTER 4: Needed Growth and Investment 21. Estimated growth rates needed to achieve the MDGs are higher than those historically achieved. Some estimates indicate that for many countries, particularly in Sub-Saharan Africa, about a 7 percent annual agricultural growth rate is needed to achieve the MDG poverty reduction target. This is a high target when viewed from an historical and global perspective. For example, India has rarely exceeded a five-year aver- age agricultural growth rate of over 5 percent. China achieved agricultural growth above 5 percent following the 1978 reforms, but the rate subsequently settled back to between 3 to 5 percent and has remained there (Figure 3). Because some countries, particularly in Africa, are starting from a relatively low base and can benefit from more widespread adoption of existing technologies, growth of 5 percent annually seems achievable with sufficient and well-targeted public investment and the maintenance of a supportive policy framework, including measures aimed at increasing private sector investments in agricul- ture. Maintaining high growth levels across many countries will require significant invest- ment in productivity growth, particularly against the headwinds of climate change, and rising land and water scarcity. 22. The global investment needs for agriculture are significant. Estimating the global in- vestment needs to better exploit agriculture's potential to provide food security, econom- ic growth, poverty reduction, and environmental services is at best a proximate exercise. The International Food Policy Research Institute (IFPRI) estimated the global incremental agricultural public investment required--the additional amount necessary to meet the Mil- lennium Development Goal of halving poverty by 2015--to be US$14 billion annually for FIGURE 3 Five Percent Sustained Agricultural Growth is an Ambitious Target Rolling 5 year agricultural GDP Growth (percent) China India 11 11 9 9 7 7 5 5 3 3 1 1 ­1 ­1 69 72 75 78 81 84 87 90 93 96 99 02 05 69 72 75 78 81 84 87 90 93 96 99 02 05 19 19 19 19 19 19 19 19 19 19 19 20 20 19 19 19 19 19 19 19 19 19 19 19 20 20 Source: Derived from World Development Indicators A G R I C U LT U R E AND RURAL DE VE L OP ME NT 14 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 all developing countries.7 The estimated producers in developing countries. A incremental annual investment needed recent analysis of a large sample of in Sub-Saharan Africa ranged from countries across the world shows that US$3.8 to US$4.8 billion (the former net agricultural taxation has on average using a unit cost approach, the latter declined sharply8. Between 1980­1984 being the additional investment needed and 2000­2004, it declined from about to meet the Maputo Declaration of 30 percent to 10 percent in Sub- spending 10 percent of Government Saharan African countries, from about budgets on agriculture). The World 15 percent to 5 percent in East and Bank's projected incremental (low and South Asia countries, and from mar- high case) commitment of between ginally negative to a net protection of $2 and $4 billion accounts for between about 10 percent in Latin America. But 14 and 30 percent of these estimated changes in net taxation in some coun- investment needs. tries are the result of rising protection of agricultural imports with continuing 23. The improved policy environment taxation of exports. These differences can strengthen investment returns: suggest space for further policy im- Recent policy reforms have improved provements. price incentives for agricultural 8 Anderson, K. (ed.), Forthcoming 2009. Distortions to 7 Fan, S. and Rosegrant, M. (2008). Investing in Agricul- Agricultural Incentives: A Global Perspective, 1955 to ture to Overcome the World Food Crisis and Reduce 2007. London: Palgrave Macmillan and Washington Poverty and Hunger. Policy Brief 3. International Food DC: World Bank Policy Research Institute. A GR ICULTURE A ND RURA L D EVELOPM ENT CHAPTER 5: What We Will Help Our Clients Do 24. Under the Agriculture Action Plan the World Bank will increase lending to agriculture and related sectors, scaling up good practice examples across five focus areas. World Bank support (from IDA, IBRD, and IFC) is projected to increase from a baseline average support in FY2006­2008 of $4.1 billion annually to between $6.2 and $8.3 billion annu- ally, while maintaining portfolio quality. Our support will be aligned around the following five focus areas: (i) raising agricultural productivity; (ii) linking farmers to markets and strengthening value chains; (iii) reducing risk and vulnerability; (iv) facilitating agriculture entry and exit, and rural nonfarm income; and (v) enhancing environmental sustainability and services. The combination of support among these thematic areas will differ across countries and regions. I. Raise Agricultural Productivity 25. With growing resource scarcity, and FIGURE 4Growth Rates of Yields for Major increasing demand for food, food Cereals are Slowing in Developing Countries production depends more than ever on 6 Average annual growth rate (percent) increasing crop and livestock produc- 5 tivity. For major cereals--rice, wheat, 4 and maize--the growth rates of yields 3 in developing countries have slowed considerably since the 1980s (Figure 4). 2 Except in Africa, the easy gains from 1 high use of green-revolution inputs have 0 already been made. Future productivity 63 67 71 75 79 83 87 91 95 99 03 19 19 19 19 19 19 19 19 19 19 20 gains will need to rely on: (i) narrowing Maize Rice Wheat the gap between average farm yields Source: WDR 2008, derived from FAO data and the experimental yield potential of the crop (i.e. improving technical efficiency), and (ii) reversing the slowdown in spending on research and development to generate new yield enhancing technologies (i.e. techno- logical change). 26. Close the crop yield gap: Average crop yields in many countries are well below experimental farm yields, such as for rice in many parts of Asia, and maize in Africa. For example, average national yields in Malawi, Ethiopia, Nigeria, and Mozambique A G R I C U LT U R E AND RURAL DE VE L OP ME NT 16 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 are about 35 percent or less of yields the last twenty years with the adoption achieved by on farm demonstrations of new breeds and better manage- 7 using "best bet" technologies. Closing ment--increasing by over 50 percent the gap will require improved agricul- for chickens, and by 130 percent of tural extension services to improve farm pigs.8 Significant productivity gains can management practices, increased use still be made through expanding adop- of new seeds and fertilizers, and better tion of new breeds, and reducing live- ways to manage risk (see section III, on stock disease. While many breeds are risk and vulnerability). The World Bank not suitable for developing country en- Group will support: (i) expansion of de- vironments, cross-breeding has helped mand driven extension services (using adaptability, with suitable breeds the capacity of the public and private available for adoption. The World Bank sector, together with the general state Group will focus on: (i) expanding of producer organizations as a guide for veterinary services, (ii) matching grants program design), (ii) expanded use of for adoption of new breeds (and use Information and Communication Tech- of artificial insemination for genetically nologies (ICT) to provide farmers with improved livestock--an approach that better information (building on the Inter- has helped 1.8 million farmers in East net kiosk, e-Choupals, example in India) Africa achieve higher milk yields), and (iii) increased use of matching grants for (iii) expanding extension or advisory ser- technology adoption, and (iv) strength- vices to improve animal and rangeland ening of seed and fertilizer markets. management practices (including ad- dressing externalities). Issues of major 27. Close the livestock productivity gap: disease outbreaks that risk assets and While much attention is often given to public health are addressed in section crops, the livestock sector is becom- III, on risk and vulnerability. ing increasingly important. Livestock accounts for about one third of global 28. Raise aquaculture yields and fisheries agricultural GDP and is one of the fast- sustainability: Aquaculture is a growing est growing subsectors in developing source of income and protein for many countries, particularly in Asia and Latin poor people. Use of genetically im- America. Recent growth has come proved fish is changing aquaculture into mainly from a shift from extensive to one of the fastest growing sectors in intensive livestock system (i.e., owning Asian agriculture. Improved strains have more animals), but productivity gains lowered production costs per kilogram have also mattered. For example, live- stock off-take rates have improved over 8 Steinfeld, H, Gerber, P., Wassenaar, T., Castel, V., Rosales, M., and de Haan, C. 2006. Livestock's Long Shadow: Environmental Issues and Options. Rome: Food and Agricultural Organization. 7 World Development Report 2008. A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 17 of fish (e.g., farmed tilapia), increased able water management through local survival rates, raised the average weight water users associations, through incor- of fish, with yields 9­54 percent higher poration of broader river basin manage- 9 than existing strains. Expanded use ment aspects, and through improved of improved strains can raise yields. use of shared watercourses, includ- Capture fisheries' productivity can be ing support for cooperation between improved by reducing fishing effort to different riparian states on the use of enable fish stocks to rebuild. Critical the scarce resource. Greater attention reforms to allow this to happen include will be given to strengthening linkages the effective removal of open access between the different water using conditions from capture fisheries, the sectors, including joint multisectoral institution of secure tenure and property support for water management (e.g., rights systems, and removal of subsi- multipurpose hydro). Attention will be dies that induce increased fishing effort. given to both expanding irrigated areas, The World Bank Group will continue where feasible, and improving water to: (i) raise awareness of the benefits use efficiency of existing schemes. of improved fisheries governance, (ii) Support for rain-fed agriculture will fo- support capacity of developing coun- cus on improved water control, includ- tries to implement and enforce effective ing broader water shed management. management, and (iii) support improved This will complement efforts to invest management and new strain adoption in more drought tolerant varieties. in aquaculture. Investments in improved water man- agement are in many circumstances 29. Improve agricultural water manage- catalytic--reducing the barriers to adop- ment: Our support for irrigated agri- tion of otherwise costly soil and crop culture, where feasible, will consist of management practices by increasing a combination of: (i) market oriented the returns to such investments. irrigation on a public-private partnership basis, (ii) individual smallholder irrigation 30. Improve tenure security and land for high-value markets, (iii) small-scale markets: Induced by higher agricultural community-managed irrigation for local prices, new foreign interest in invest- markets, and (iv) reform and modern- ing in agricultural production, including ization of existing large-scale irrigation. land acquisition, raises the importance Across these areas, greater attention of property rights. In addition, security will be given to ensuring more sustain- of property rights and the ability to draw on local or national authorities to enforce 9 Asian Development Bank (2005). An Impact and those rights are fundamental elements Evaluation of Genetically Improved farmed Tilapia and their Dissemination in Selected Countries. Manila: for increasing local incentives for invest- Asian Development Bank. ment and for productive land use. These A G R I C U LT U R E AND RURAL DE VE L OP ME NT 18 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 can be sensitive issues politically, and a in the focus on land policy is the issue of wide range of options, from full formal foreign investment in large scale agri- title to legally backed mechanisms at the culture, an issue of growing significance community level, can be employed to (Box 2). promote higher levels of tenure secu- 31. Strengthen agricultural innovation rity. Programs to make land rights more systems: Developed countries spend secure, especially for poor farmers, have almost four times as much as develop- long formed a major thrust of World ing countries on agricultural research Bank interventions in this area. Linked as a share of their respective agricul- to security of tenure is the transferability tural GDPs. The gap has widened but of land rights. Making land rights trans- needs to be narrowed to reduce the ferable not only increases investment growing knowledge divide. There has incentives but also allows the landless also been significant underinvestment to access land through sales and rental in agricultural extension. While more markets or through public transfers. investment is needed, so too is more In some countries, particularly in Latin effective innovation systems. Rec- America and Southern Africa, inequal- ognizing that markets primarily drive ity in the land ownership often leads to agricultural development, the World underutilization and deep-rooted rural Bank programs are increasingly assist- poverty. In these cases, increased ac- ing farmers and agribusinesses to more cess to land by the poor through tar- explicitly orient agricultural research geted programs of financial assistance and extension services. This has led to enter into land markets can potentially to improved outcomes, sustainability, increase productivity and promote equal- institutional development, and poverty ity. Land programs also help agricultural impacts of the World Bank's programs regions to rebuild after conflicts and in these areas. Increased attention to natural disasters, such as in Sri Lanka support pluralistic public and private and Aceh, Indonesia. The World Bank sector involvement in agricultural re- Group will focus on five areas of a search and extension is a key element comprehensive approach to improving of the new approach. World Bank sup- access to and security of land for agri- port will specifically focus on improving cultural development: (i) land policy and the relevance and responsiveness of legal reforms; (ii) increasing security of cutting edge and traditional research existing customary or informal land ten- and extension through: empowerment ure; (iii) modernizing land administration; of end-users, encouraging pluralism in (iv) land redistribution through socially delivery, and better linking research and manageable processes; and (v) prevent- extension. The World Bank Group will ing and reducing land conflicts. Included A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 19 Box 2 LARGE-SCALE AGRICULTURE Fuelled by a combination of: (i) a boom in biofuels; (ii) high (and more volatile) commodity prices, and (iii) a desire for food self-sufficiency by import-dependent countries, particularly in the MENA region, foreign investor interest (including multinationals, sovereign wealth funds, or government-owned corporations) in land and large scale agriculture has increased significantly. For example, about 2.5 million hectares of land allocations in five countries (Ethiopia, Ghana, Madagascar, Mali, and Sudan) have been concluded since 2004, at an ac- celerated pace, with a dominance of foreign investors (according to a recent IIED, FAO, and IFAD report*). This trend creates opportunities and risks for recipient countries. Increased investment may spur growth, fiscal revenues, employment, and local incomes, but may also result in local people losing land on which their livelihoods depend. The extent to which land deals seize opportunities and mitigate risks depends on their terms and conditions. A range of issues need to be explored: How can governments be helped to identify land available for beneficial investments that minimize adverse impacts on land rights? What safeguards should both governments and investors be applying to ensure a sustainable outcome? How can local land rights be better secured to ensure that communities and small-scale farmers are capable of protecting their interests in negotiations with outsiders? How can govern- ment capacity be strengthened to broker deals in a way that is transparent and beneficial for the country? The World Bank will assist in addressing some of these questions and will support, with other partners, the development of a code of conduct for these transactions, which includes significant background work to: · Quantify major trends in these land transactions based on country-level inventories. · Review the policy frameworks, drawing on best practice to identify areas for improve- ment. · Undertake an in-depth economic analysis and assessment of the impact of the changing opportunity cost of land on financial/economic viability of different types of projects. · Review and identify contractual arrangements that are most likely to result in an equi- table sharing of benefits. · Analyze the way social and environmental safeguards are dealt with and identify best practice in dealing with secondary rights and indirect environmental impacts. · Use results from the above analysis as a basis for assisting the development of a code of conduct that both investors and countries could subscribe to. * Cotsula, L., Vermeulen, R, Leonard, R., and Keeley, J. (2009). Land Grab or Development Opportunity? Agricultural Investments and International Land Deals in Africa. IIED, FAO, IFAD. continue to reflect these principles in will also be given to education and train- program and project design to contrib- ing, including tertiary education. Support ute to enhanced use of new agricultural will be provided to national, regional, innovations in improving rural liveli- and international research efforts, the hoods and income generation. Attention latter mainly through the Consultative A G R I C U LT U R E AND RURAL DE VE L OP ME NT 20 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 Group on International Agricultural Re- crops adoption has been much slower search (CGIAR) (Box 3) as well as other due to: (i) neglect of pro-poor traits and regional bodies (e.g., the Forum for Agri- orphan crops in transgenic develop- cultural Research in Africa). ment; (ii) limited access to proprietary technologies with increased coverage of 32. Support consideration of new intellectual property rights; (iii) continued technology tools. The new tools of concerns about possible food safety and biotechnology can potentially deliver sig- environmental risk in some countries; nificant yield gains to address our global and (iv) weak regulatory capacity to as- food challenges. One form of biotech- sess risks and approve releases of trans- nology, transgenic seed, is already used genics. Where requested, the World on about 800 million hectares. Adoption Bank Group will support actions such rates for Bt cotton, a transgenic crop as: (i) country capacity development for for insect resistance, have increased assessing the potential risks and ben- rapidly in both China and India and both efits of transgenics; and (ii) development examples show increased income due of cost-effective and transparent regu- to less need for pesticide and insec- lations and production programs with ticide applications. But effects vary expertise and competence to manage across years, institutional settings, and their adoption and use. agro-ecological zones. Progress on food Box 3 A MORE RESPONSIVE CONSULTATIVE GROUP ON INTERNATIONAL AGRICULTURAL RESEARCH The Consultative Group on International Agricultural Research (CGIAR), with its 15 interna- tional research centers, offers much needed economies of scale in research. Many devel- oping countries may be too small to achieve efficient scale in research and development, except in adaptive research. In addition, private sector research often doesn't focus on crops most important for the poor (e.g., cassava, millet, and beans). The CGIAR continues to offer significant knowledge and expertise for increasing agricultural productivity and environmental sustainability in developing countries. The ongoing reorgani- zation of the CGIAR also offers the potential to improve the relevance and responsiveness of their research effort. Performance contracts between a new CGIAR Fund hosted by the World Bank and the Consortium of CGIAR Centers will provide opportunities for increasing World Bank investment in this global partnership. Performance contracts binding the CGIAR Centers to the Consortium, and the Consortium to the Fund, will include mega-programs expected to bring about increased coordination among donors. They, together with other stakeholders, will be actively engaged in the formulation of the research strategy through various means, including a biennial Global Conference on Agricultural Research for Develop- ment. An Independent Science and Partnership Council will provide advice to the Fund. A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 21 33. Consider opportunities for mecha- markets likely requires different inter- nization. Mechanization is a potential ventions by market. This differentiation source of improved labor productivity in is reflected in each of the intervention land abundant countries. An important areas highlighted in this section. The area of support for improved access to focus is primarily on output markets, and use of mechanization is through with input markets emphasized in the leasing markets (to reduce the lumpi- previous section. ness of machinery investment, and 35. Continue support for the Doha help facilitate machinery services de- round, South-South, and intrare- velopment). The World Bank Group will gional trade: Doha failure will reduce continue to pilot support to establish developing country agricultural exports leasing markets. by about 12 percent (assuming an in- crease in protection to maximum rates II. Link Farmers to Markets and applied over the last 13 years, following Strengthen Value Chains the Uruguay round)10. The current trade 34. The demand for high-value primary and regime imposes significant costs to de- processed products is rapidly increas- veloping country producers, particularly ing, driven by rising incomes and faster for cotton, oilseeds, and dairy products. urbanization. These higher value mar- The World Bank Group will continue its kets offer expanding market opportuni- analytical work on: (i) global, regional ties but have more exacting standards, and national agricultural trade reform, timeliness in delivery and economies (ii) national and local agricultural taxa- of scale, posing special challenges tion, and (iii) macro-economic price ef- to smallholder farmers. Food staple fects on agricultural competitiveness. markets remain important but are often While there have been significant im- hampered by poor infrastructure, inad- provements to farmer price incentives equate support services, weak institu- in developing countries over the last tions, which push up transaction costs two decades, there still remains scope and price. Traditional bulk commodi- for efficiency gains from further policy ties still account for a significant share reforms. Continued analytical support of exports from some of the poorest will be provided for global trade reforms countries. Market structures can have a discussed under the Doha round, for significant impact on country competi- policies to facilitate more intraregional tiveness. Linking farmers to the range and intranational trade, for less distorting of market opportunities across food sta- ples, traditional bulk commodities, and 10 Bouët, A. and Laborde, D. (2008). The Potential Cost of a Failed Doha Round. Issues Brief 56. International higher value domestic and international Food Policy Research Institute. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 22 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 national and local taxation, and for 37. Improve food safety, market informa- competitive macroeconomic policies tion, and standards. Timely access (particularly exchange rate impacts). Ad- to market information can dramatically dressing the use of standards as a non- improve the price discovery process of tariff barrier to South-South trade, and farmers, fishers, and traders--reducing support for improved regional agree- local market volatility and post harvest ments, can unlock trade opportunities. losses. Improving capacity to com- ply with export market standards can 36. Identify and scale-up business mod- improve market access, and vigilance els for market integration. The ability in food safety can reduce health risks. of smallholders to compete in growing The World Bank Group will support: higher value markets will likely deter- (i) development of market information mine the poverty reducing effect of systems, including ICT, to improve ac- future agricultural growth, particularly cess; (ii) improving implementation of in South Asia, Latin America, and East Sanitary and Phyto-Sanitary Standards, Asia. Some smallholder farmers have and other food safety standards (for managed to integrate into some of these crops and livestock products); and (iii) markets and have benefited from higher training, knowledge sharing and analyti- incomes. The World Bank Group will do cal research on standards, including more cross-regional learning on which e-learning courses (with the World Bank business models are working, identifying Institute) on good practice in develop- entry points for our support. In addition, ment assistance standards. accession into economic unions and common markets, often requires better 38. Strengthen market institutions. All alignment of domestic agricultural poli- forms of markets--wholesale, traditional cies, particularly important for Eastern open air retail food markets, commodity European countries seeking accession exchanges and institutional food pur- and integration into the European Union. chasing programs--require rules which The World Bank Group will support define the risks and obligations of buy- countries seeking EU accession to bet- ers and sellers. This is particularly the ter align domestic agricultural policies, case for traditional commodities which including shifts to decoupled methods still play a predominant role in many of agricultural support. Finally, improved developing country economies where coordination across the value chain can they still offer substantial opportunities improve market integration and com- for future growth and value addition. We petitiveness. The World Bank Group will will support analytical work and legal and continue to learn from emerging good policy reforms on: (i) market structure practice examples for scale-up. and degree of private sector competition; A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 23 and (ii) intellectual property rights (e.g., urban bias in development policy. In brands and trademarks, geographic iden- economies where producers have tification, and genetic material). much more influence, having advo- cated and secured large and inefficient 39. Expand infrastructure: The Agriculture subsidies, the challenge is to support and Rural Development Family in the negotiated compromises for shifting to World Bank Group will work jointly with more efficient forms of support. Our other sectors across the institution to support to strengthen producer organi- scale up our support to improve: (i) the zations will be two pronged: (i) technical reach and quality of rural roads; (ii) avail- assistance to improve their function ability of storage (including cold storage (mechanisms to resolve conflict, deal at sea and airports); (iii) access to electrifi- with heterogeneous membership, de- cation; (iv) communication infrastructure; velopment of managerial capacity, and and (v) market infrastructure to reduce participation in high-level negotiations), post harvest losses. All will help reduce and (ii) financing for demand driven transaction costs and risks and promote funds, with producer organizations se- faster growth. Focus will be given to im- lecting activities and needed services. proving geographic prioritization and tar- geting of rural infrastructure investments 41. Increase access to finance: Rural finan- to better link areas with high agricultural cial services are critical to developing the potential to markets. The implementation rural economy, and for helping the rural of the World Bank Group Infrastructure poor build assets that can decrease their Action plan, and support through the vulnerability to shocks. The World Bank Infrastructure Recovery and Assets (IN- Group is examining ways of delivering a FRA) Platform can speed support to this broad range of financial services to the area--specifically the implementation of rural poor. We will scale up support to ex- the transport business strategy. panding multiple sources of rural finance, as well as savings mobilization. These 40. Strengthen producer organizations: include: (i) microfinance; (ii) interlocking Effective producer organizations can financing arrangements through contract reduce transaction costs, overcome farming; (iii) "smart" subsidies, with exit economies of scale constraints, and strategies linked to creating bankable advocate for improved service delivery. clients; and (iv) piloting support to However, the challenges vary signifi- establishing leasing markets. IDA/IBRD cantly by country context. In agriculture will continue support to service provi- based countries, increasing the voice sion, market facilitation, and the enabling and influence of producer organizations environment, and also build on cell can act to counterweight the historical phone and other relevant technological A G R I C U LT U R E AND RURAL DE VE L OP ME NT 24 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 Box 4 MULTILATERAL INVESTMENT GUARANTEE AGENCY SUPPORT FOR AGRICULTURAL INVESTMENT MIGA mitigates noncommercial risks by insuring investments against the risk of: (i) currency inconvertibility and transfer restrictions (preventing earnings repatriation); (ii) expropriation (government take-over of assets, such as land, farm machinery, or food processing plants); (iii) war and civil disturbances (causing direct destruction of assets); and (iv) breach of con- tract (where governments are the contractual partners). MIGA also provides dispute resolu- tion services for guaranteed investments to prevent disputes from escalating. MIGA is currently providing guarantees for $126 million in private investment in agriculture, mainly in Sub-Saharan Africa. Agro-industry coverage includes sugar production, cotton seed production and processing, coffee processing, and cocoa production and processing in Mozambique, Kenya, Afghanistan, Madagascar, Uganda, and Cote d'Ivoire. These invest- ments spanned from 1999 to 2007, with a guaranteed duration of about 10 years in each case. Two additional investment guarantees have been approved in 2009 for a palm and soya bean oil investment in the Democratic Republic of Congo and for a commercial fishing and fish processing investment in Sierra Leone totaling $15m. advances to spread access. Improved ac- livestock pests and disease, the Action cess to finance can facilitate use of pur- Plan emphasizes both short and longer- chased inputs, including mechanization, term actions to address these risks, and and help cushion income shocks. IFC continued targeted support for vulner- will: (i) continue to offer working capital able groups. Financial instruments avail- facilities to help private sector agribusi- able to address price and weather risks ness clients prefinance inventories, are a complement to improved farm seeds, fertilizers, and fuel in response to and firm management practices and the food price and financial crises; and managing physical goods­they are not (ii) continue to scale up direct financing a substitute. While risk and vulnerability in agribusiness firms along the supply cut across many of the action areas, chain. MIGA will continue to offer guar- several are emphasized in this section antees to private investments for those in the context of recent events and seeking to insure against noncommercial uncertainty over the next three years. risks in developing countries (Box 4). 43. Safety nets and fiscal support: The Global Food Crisis Response Program III. Reduce Risk and Vulnerability (GFRP), with $1,156 million in projects 42. Given the heightened price uncertainty, already approved under the fast-track the ongoing financial crisis, and contin- facility, will continue to be implemented ued risk of major outbreaks of crop and over the next three years. The ceiling on A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 25 the fast-track facility has been raised to countries (where they request our allow for accelerated processing of an assistance) with the development of addition $800 million under the GFRP risk management strategies to identify, over the next year (FY2010). In addition, mitigate, minimize or hedge their risk trust fund resources are also available profiles. Some of the assistance con- to support new operations in several cerns the use of physical storage and countries. The overall aim of the GFRP contracting tools to address physical is to minimize the threat posed by high availability of food stocks, and improved food prices and sharply rising agricultural strategies to manage the use and re- production and marketing costs to the stocking of such facilities. Other activi- livelihoods of both poor urban and rural ties seek to address the potential price residents in developing countries. GFRP risk through both physical and financial interventions complement the short- hedging strategies. For those countries term emergency humanitarian respons- that are potentially exposed to contin- es of the World Food Program (WFP) and gent import requirements (at the macro other donors. The program is an umbrel- level) driven by weather related failures la facility offering access under fast-track that affect their domestic production, procedures to IDA/IBRD grants, credits the World Bank also has the ability to and loans for both investment lending, work with them to provide weather risk and development policy operations. All transfer products (Box 5). World Bank-member countries adversely 45. Further explore policy options to ad- affected by the food crisis are eligible to dress price volatility: Designing appro- participate in the GFRP. priate policies to respond to food price 44. Better manage national food im- volatility requires a solid foundation of ports: Countries that are either food in- empirical knowledge at the global and secure or have exposure to contingent country level. In this respect, the World imports driven by domestic production Bank's analytical focus will cover three shortfalls are currently exposed to a areas: (i) analysis of the extent of grain price risk and a more general risk of price volatility changes, including the ex- lack of available food. Many countries tent of volatility convergence across com- are likely to remain net cereal import- modity markets; (ii) the drivers of volatility ers, particularly where local condi- change, including analysis on the relative tions are not conducive to significantly importance of biofuels, commodity index expanding agricultural production, as funds, trade policy, weather shocks, in some of the Middle East and North and grain stocks on volatility change; (iii) Africa (MENA) countries. The World policy options at global and national levels Bank Group continues to assist such to reduce negative impacts. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 26 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 Box 5 INSURANCE INNOVATIONS The food price spike has raised awareness of the need to develop strategies to help low income countries mitigate the impact of external shocks. Two of the most severe external shocks--commodity price and weather shocks--are particularly problematic for low income countries since they are already highly vulnerable to price and weather volatility. Since June 2008, the World Bank Group has offered intermediation services on index-based weather derivatives. World Bank intermediation allows clients to access the financial markets and transfer weather-related risk to market counterparts. The weather hedging product is a complement to the broad range of catastrophe financing solutions to help countries plan proactive responses to natural disasters. In September 2008, Malawi used the World Bank as an intermediary to access weather de- rivatives. The contract was structured as an option on a rainfall index. The index links rainfall and maize production so that, if precipitation falls below a certain level, the index will reflect the projected loss in maize production. Under the contract, if the maize production in the country, as estimated by the rainfall index, falls significantly below the historical average, Malawi will receive a payout. The World Bank's participation in this new area may reduce the initial investment for market players to expand into developing countries and help build capacity in beneficiary countries for future hedging business done directly with the markets. 46. Protect assets against catastrophic initiatives in Thailand, Bangladesh, Sen- loss. Selling assets to survive shocks can egal, Burkina Faso, Kenya, Jamaica, and have long-term costs because decapital- potentially Fiji. The World Bank and the ization (distress sales of land, machinery IFC are working together to complete a and livestock) creates irreversibities or feasibility study on a crop insurance pilot slow recovery in ownership of agricul- for smallholder farmers in Indonesia. In tural assets. In addition, child education addition, IFC is supporting the creation of and health can suffer long-term conse- a Global Index Reinsurance Facility which quences when children are taken out will support crop and livestock insurance of school in response to shocks or are for smallholders in developing countries. exposed to early periods of malnutrition, These products are a complement to leading to intergenerational transfers of other forms of risk management. For poverty. The World Bank Group is work- example, drought early warning systems, ing on the use of parametric insurance early destocking, feed management, and products to try and develop more afford- subsequent restocking strategies can also able and transparent forms of insurance help reduce significant loss of livestock to expand reach. In this respect, the Bank during severe droughts. is supporting weather index insurance A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 27 47. Reduce risk of major livestock dis- tural growth. Where there is excess ease outbreaks. Major outbreaks of labor in agriculture, a lag in urban job livestock disease such as Avian Influ- creation, and urban congestion, a enza pose significant risk to assets and priority is to promote rural non-farm public health. The rapid rise in demand employment in secondary towns and to for livestock products in developing strengthen rural-urban linkages. Effec- countries has been associated with the tive functioning of land markets is nec- growth of unprecedented concentra- essary to facilitate both entry and exit. tions of animals in the urban and peri-ur- Investments in the investment climate, ban areas of developing countries, with infrastructure and skills are priorities. major implications for human and animal 49. Improve the rural investment climate: health. Of 1,415 species of infectious The World Bank Group will undertake organisms known to be pathogenic to more rural investment climate assess- humans, 61 percent are zoonotic, or ments to develop a better and more transmissible from animals to humans. systematic understanding of location And of the 175 pathogenic species of specific interventions needed to spur infectious organisms considered to be rural nonfarm incomes. The completed "emerging" (or reemerging) in humans, rural investment climate assessments 75 percent are zoonotic.11 The poor show most businesses buy and sell lo- are especially exposed because of the cally, so rely almost exclusively on local proximity of their living spaces to farm demand and the local business environ- animals. The World Bank Group will ment. They also offer insights into how support the strengthening of livestock to better geographically target infrastruc- disease surveillance in client countries, ture investments to maximize rural em- and provide rapid response if outbreaks ployment growth. In addition, the World occur, as was done with the Global Bank will pilot in 12 Sub-Saharan African Program for Avian Influenza. countries a set of indicators reflecting the cost of doing business in agriculture. IV. Facilitate Agricultural Entry and Exit, and Rural Nonfarm Income 50. Expand rural infrastructure: The World Bank Group will invest in infrastructure, 48. Rural nonfarm income is increasingly particularly in densely populated lag- important in many countries and often ging areas to support mobility. In lagging provides important linkages for agricul- areas were mobility is low, such as India (and where language and cultural differ- 11 Taylor, L. Latham, S, and Wollhouse, M. (2001). "Risk ences are considerable) complementing Factors for Human Disease Emergence." Biological infrastructure investment with incentives Sciences 356: 983­989. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 28 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 for enterprises to locate in these lagging incomes and urbanization, livestock areas/states can help raise rural em- systems have become more intensive. ployment (as suggested by WDR 2009, This intensification has produced some Reshaping Economic Geography). These environmental challenges linked to the actions will link with the implementation move from dispersed production in rural of the World Bank Group Infrastructure areas to specialized livestock units in ur- Action Plan. ban and periurban areas, now happening on a significant scale in much of Asia. 51. Upgrade skills: Moving out of agri- The major environmental threats are the culture, whether to the rural nonfarm pollution of water and soil with animal sector or by migrating to urban areas, waste, especially nitrogen, phosphorous, depends on more and better quality and toxic heavy metals such as cad- education. Vocational training can help mium, copper, and zinc. Dense livestock upgrade skills. Programs that have populations also add significantly to the private participation in managing institu- risks of spreading animal diseases and tions (as in Brazil's National Rural Train- incurring subsequent economic losses. ing Service [SENAR]), and designing Some of these diseases are also a threat curricula (as in Namibia's Community to humans, especially where dense pop- Skills Development Centers) have been ulations of animals and humans come most effective in meeting labor market in close contact (see section on III). A demands. Enterprises also provide train- blend of instruments are needed for ing but usually only to those with formal managing intensive livestock systems jobs, usually with higher income levels. (Box 6). The World Bank Group will dis- The World Bank Group will support skills courage urban concentration of livestock development, including vocational train- intensification to better manage environ- ing, and seek opportunities to link with mental and health problems (encourage the private sector to ensure skill rele- incentives to livestock enterprises to re- vance. Programs that provide condition- locate to environmentally more suitable al cash transfers, such as cash grants areas). In addition, to reduce greenhouse conditioned on school attendance, can gas emissions (e.g., methane) the World increase demand for education. Bank Group will support improvements of nutrition and genetics of ruminant V. Enhance Environmental Services livestock, storage and capture technolo- and Sustainability gies for manure, and conversions of 52. Manage intensive livestock systems: emissions into biogas. Driven by the growth in demand for 53. Improve rangeland management. livestock products, with rising per capita Pastoralist account for a large share of A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 5 -- WHAT WE WIL L HE L P OUR CL I ENTS D O 29 ciations; (iii) improvements in land and Box 6 water rights; (iv) better management of BLEND OF INSTRUMENTS TO MANAGE INTENSIVE LIVESTOCK SYSTEMS livestock watering points; and (v) more resilient livestock systems. Inducing livestock enterprises to relocate to an environmentally more suitable area 54. Reduce forest degradation. As much requires both "command and control" as 14 percent of global carbon emis- and "market-based" instruments. Com- sions are estimated to come from all de- mand and control measures might include limiting the size of livestock farms (Nor- forestation and forest degradation (from way), limiting the livestock density per all causes, not just from and expansion farm (Germany), and introducing mini- of agricultural area). Finding pro-poor mum distances between farms (Spain) or solutions to mitigating climate change between farms and the nearest waterway should address this problem. Over the (Brazil). Market-based instruments in- clude tax rebates for relocation (Thailand), next year, the World Bank will opera- environmental taxes on urban livestock tionalize a forest program [under the farms, and investment support for on-farm Strategic Climate Fund of the Climate infrastructure to reduce nutrient leaching Investment Funds] to finance transfor- (countries of the Organisation for Econom- ic Co-operation and Development [OECD]). mational investments that address the Tradable manure quota systems, with a drivers of deforestation and degradation. government buy-back system to reduce These include incentives for commu- overall animal pressure, have worked in nity certification, improving institutional the Netherlands. One cause of recently emerging diseases such as avian influenza capacity, forest governance and informa- is production systems in areas densely tion; and complementary investments in populated by both people and livestock, as non-forest-sector programs (agriculture, occurs in urban and peri-urban areas. infrastructure, etc.) to include provisions Source: World Development Report 2008 for forest protection. the rural population in many countries 55. Harvest agricultural carbon for a (e.g., in the Sahel, and parts of East potential triple win. The triple win Asia). The quality of rangelands has is increased productivity and income, often declined, impacting the livelihoods enhanced climate resilience, and effec- of pastoralist communities. In an effort tive GHG mitigation. Enhancing organic to improve rangeland management, the carbon contents of soils can improve World Bank Group will support: (i) reduc- land productivity. Soils with increased ing pasture degradation, and upgrading carbon stocks have better retention of grasslands to more productive grass water and, hence, climate resilience. species (including grass-legume mixes); Increased soil carbon sequestration can (ii) environmental and pastoralist asso- make farming a net carbon sink and A G R I C U LT U R E AND RURAL DE VE L OP ME NT 30 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 hence mitigate GHGs. Improved land to help develop common standards for management had only limited eligibility prototype projects. under the Kyoto protocol, but inclusion 56. The five focal areas of the Agriculture of soil carbon sequestration in future Action Plan are often interlinked. For compliance markets could offer the example, strengthening linkages to mar- triple win. However, farmers need as- kets can help raise technology adoption, sistance to overcome barriers to entry dampening price volatility can reduce the into carbon markets. Priorities to be ad- risks associated with productivity invest- dressed include: (i) identifying and test- ments, and improving land productivity ing lower-cost methods of measuring can help reduce deforestation. These and monitoring carbon sequestration; (ii) linkages need to be recognized in pro- reducing the risk of reversibility of GHG gram design, and sequencing of support. emission through subsequent adop- tion of poor management practices; (iii) 57. Successful implementation of the further understanding the biological and above agenda across the five focal ecological processes involved in GHG areas will require addressing the gov- emissions and carbon storage; (iv) iden- ernance challenges in the agriculture tifying ways to lower transaction costs sector--including better balancing pub- to create the carbon asset (reporting, lic-private roles that is more challenging verification, aggregation, and sale); and in agriculture than in others sectors, (v) reducing uncertainty concerning the improving local and national state ca- ownership of carbon revenues (which pacity, strengthening voice (particularly is linked to ensuring clear land rights). of marginalized and vulnerable groups), These challenges can be overcome and improving efficiency of agricultural with strong support from governments public spending. In addition, challenges of developing and developed countries, and responses vary across postconflict development partners, and the scien- (and fragile) states. We will support tific community. The World Bank Group governance improvements through will: (i) work with other partners to as- capacity building of local government sist in improving carbon measurement and Ministries of Agriculture, strength- methodologies; (ii) strengthen technical ening producer organizations, support expertise to measure agricultural car- community driven development, techni- bon in developing countries; (iii) support cal assistance, analytical work to better capacity building for service providers understand trade-offs of policy reform, to generate, monitor, verify, aggregate, and public spending reviews. The extent and sell the carbon asset; and (iv) draw of support will vary by context (e.g., par- on lessons from early carbon projects ticularly in postconflict (fragile) states). A GR ICULTURE A ND RURA L D EVELOPM ENT CHAPTER 6: How this Translates into the FY2010­2012 World Bank Group Program I. Aggregate Program 58. Current composition of spending: Across three of the focal areas--agricultural pro- ductivity, linking farmers to markets, and rural nonfarm income--agricultural productivity dominates (accounting for 74 percent of the IDA/IBRD undisbursed balance, of which irrigation alone accounts for 22 percent) [Figure 5]. Linking farmers to markets is also a significant focal area (accounting for 18 percent of the IDA/IBRD undisbursed balance), while rural nonfarm support accounts for a smaller share (8 percent). Support to reduce risk and vulnerability, and to enhance environmental services and sustainability cut across the previous three areas. Various aspects are highlighted in this Action Plan as explicit areas of focus over the next three years, including addressing price, weather, and disease risk, and better linking farmers to carbon markets. 59. Current composition of Analytical and Advisory Activities (AAA): The allocation of the World Bank's AAA maps fairly closely to the undisbursed balance allocation with about 63 percent focusing on agricultural productivity, 30 percent focusing on linking farmers to markets, and 7 percent on rural nonfarm income and exit. In addition, a number of AAA focused on cross-cutting areas including gender, climate change, governance, public expen- diture management, and food prices. FIGURE 5 Ongoing Program: Composition of 60. Areas of emphasis in FY2010­2012: Undisbursed US$ over the next three years: Agro-industry Other non-farm 2 percent 6 percent · New investment commitments: At Finance Agric extension 4 percent an aggregate level, IDA/IBRD invest- and research Infrastructure 7 percent ment support will give more attention 11 percent to various aspects of raising agricultural Agric markets Crops and trade 5 percent productivity, specifically extension, 3 percent Irrigation and land, and agricultural research. On link- Other public drainage admin, law 22 percent ing farmers to markets, IDA/IBRD will 13 percent focus on doing more on identifying and Animal Land production administration scaling up market integration business 3 percent 3 percent models, infrastructure, and market Gen agric, fishing, Forestry forestry sector 4 percent information. On rural nonfarm, IDA/ 17 percent A G R I C U LT U R E AND RURAL DE VE L OP ME NT 32 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 IBRD will draw on lessons from both · New AAA: the World Bank's analytical the WDR 2008 and 2009 to do more work will give more emphasis to public in specific regions. We will continue to expenditure analysis, to managing risk focus on reducing risk and vulnerability, (including the extent and drivers of vola- particularly in the context of the ongo- tility, insurance markets, climate change, ing financial crisis and the uncertainty and trade), to improve the investment of food prices. climate (doing business in agriculture) to productivity growth (Box 7), as well IFC will scale up support for agribusi- as on better governance of forestry ness. IFC will continue to scale up and fisheries. More work will be given investments and advisory services; to improving the mechanism of linking expand activities in IDA countries, par- research effort with resource allocation ticularly in Africa; and integrate adviso- decisions in the World Bank's investment ry services with investments to better program. serve clients. The scope and scale of development impact in agribusiness 61. Level of spending: This new three- will be increased. Wholesaling through year World Bank Group Agriculture financial intermediaries such as finan- Action Plan (FY2010­2012) projects an cial institutions, traders and suppliers increase in support (from IDA, IBRD, will be used more to reach small and and IFC) to agriculture and related sec- medium-sized entrepreneurs. Compli- tors from a baseline average support menting IDA/IBRD support for public in FY2006­2008 of $4.1 billion annually investment in agriculture, the IFC will to between $6.2 and $8.3 billion an- continue direct support for private nually. This would be between 13 and sector activities across the value chain, 17 percent of projected World Bank including: (i) efficient use of water Group commitments. Figure 6 reflects through water-efficient irrigation tech- the activities described under each of nologies and practices; (ii) logistics/ the five focal areas. These include both infrastructure to enhance access to support for agriculture production and inputs and markets; (iii) access to fi- marketing, as well as agriculture related nance, particularly for small to medium investments (e.g., land tenure, rural enterprises and farmers; (iv) advisory finance, market infrastructure). services for food safety and standards; 62. The low case projection reflects a (v) linking smallholders and entre- 50 percent annual average increase in preneurs to the value chain; and (vi) support to agriculture and related sectors knowledge and technology sharing and over the next three years (FY2010­2012) transfer between players and markets. relative to the annual average over the A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 6 -- HOW T HIS T RANSL AT E S INT O TH E FY 2010­2012 WORLD B A NK GROUP PR OGR A M 33 Box 7 NEW RESEARCH ACTIVITIES IN THE DEVELOPMENT ECONOMICS GROUP OF THE WORLD BANK Complementing the analytic work to be carried out by the regions and networks, are knowledge-based efforts housed in the Development Economics Group. Some of these activities are on-going, including the monitoring of commodity markets and the provision of basic economic and sector data. These ongoing activities are subject to review to ensure continued valued added of research. There are several new research efforts organized around the following topics: · Better understanding why farms in Africa, on average, are less productive than farms in Asia · How to strengthen land markets to improve productivity and reduce rural poverty · How to better use credit and insurance markets to improve the lives of rural households · Better understanding the biofuels link with energy and food markets · Prospects for new trade agreements and what they will mean for agriculture · How farmers can better adapt to climate change · Building better measures of rural welfare in Africa (in collaboration with Gates Foundation) · Better understanding the returns to investment in rural infrastructure, such as roads and electrification. FIGURE 6 World Bank Group Agriculture and 2006­2008 period. The projection is Related Sector Financing consistent with the current FY2010 Annual Average project pipeline (firm and likely commit- 9 8 8.3 ments). With the 40 percent increase 7 6.2 in IDA resources from IDA14 to 15 6 and an increase in overall IBRD lend- US$ Billions 5 4.1 ing, the share of Bank support going to 4 3.0 agriculture and related sectors would 3 2.3 2 increase from 17 percent to 20 percent 1 for IDA, and would decline slightly from 0 2000­02 2003­05 2006­08 2010­12 2010­12 8 to 7 percent for IBRD, equating to an Low case High case overall net increase in the share of IDA/ Other agriculture related investments IBRD resources from 12 to 13 percent. Agricultural production and markets IFC A G R I C U LT U R E AND RURAL DE VE L OP ME NT 34 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 (US$ billions) Annual average Annual projections 2000­02 2003­05 2006­08 2010­12 Low High IDA/IBRD (by sub-sector) Agricultural production and markets* 1.1 1.6 1.8 3.4 4.8 Agriculture, fishing & forestry** 0.9 1.5 1.6 3.0 4.3 Agriculture markets, trade, & agro-industry 0.2 0.1 0.1 0.4 0.5 Other agriculture related investments 0.9 0.9 1.2 1.1 1.6 IFC 0.3 0.5 1.2 1.7 1.9 Total 2.3 3.0 4.1 6.2 8.3 *Is the sum of Agriculture, Fishing & Forestry, and Agriculture Markets, Trade, and Agro-industry. ** As reported in the World Bank Group Annual Reports. The Agriculture Action Plan includes IDA, IBRD and IFC financing. IDA/IBRD, including Special Financing, reflects: (i) project components specifically coded as Agriculture, Fishing and Forestry as well as those coded as Agriculture Markets and Trade, and Agro- industry; and (ii) in order to capture important related investments such as land administration, agricultural agency reform, agricultural and rural finance, market roads etc, other investments directly related to agricultural production under the oversight of the Agriculture and Rural Development (ARD) Sector Board. The disaggregation across agriculture production, marketing and other agriculture related investments is reflected in the table above. For IFC, it includes: (i) agribusiness production and processing, (ii) agri-related trade finance, (iii) fertilizers, (iv) agrilogistics and infrastructure, and (v) food retail. Trust Funds are not included but are relatively small in comparison: $73 million in 2000­02; $110 million in 2003­2005, and $132 million in 2006­08, of which GEF accounted for about 70 percent. The Africa region and LCR accounted for 34 and 28 precent of trust fund commitments in FY2006­2008. FIGURE 7 IDA/IBRD Commitments to (from FY2006­2008 to FY2010­2012). Agriculture 2006­08 Demand for IBRD loans may rise as a result of the financial crisis, if they AFR SAR 24 percent continue to be a much cheaper source of 31 percent borrowing than alternatives. If this is the MNA case, then a doubling of lending is fea- 3 percent EAP sible, with perhaps a greater share of the 16 percent LCR increase coming from IBRD countries. 13 percent ECA 13 percent 64. Risks: Achieving the projected scale- 63. The high case projection reflects a up will be dependent on: (i) continued doubling of support to agriculture and strong client demand to borrow IBRD related sectors by 2012. A pro-rata resources and use of IDA concessional doubling across IDA and IBRD would financing for agricultural development; increase the respective shares from (ii) adequate staffing and budgets; 17 to 26 percent and from 8 to 9 per- (iii) limited financial crisis impacts on cent, respectively, and an overall net implementation quality of our ongoing increase in the share of IDA/IBRD program and the FY2010­2012 pipeline; resources going to agriculture and and (iv) IDA16 replenishment is at least related sectors from 12 to 17 percent as large as IDA15, and is available to A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 6 -- HOW T HIS T RANSL AT E S INT O TH E FY 2010­2012 WORLD B A NK GROUP PR OGR A M 35 support the latter years of the action subsidy transfers to earned income plan (IDA15 covers the FY2009­2011 (in higher value markets, productive period). Many of these factors are ex- growth, and the rural non-farm). For ogenous, and will need to be monitored more urbanized countries, the chal- closely, and responded to accordingly. lenge is to balance support for rapid growth in medium to large farms and social safety nets for the poor, with a II. Regional Differentiation focus on helping smallholders compete 65. Sub-Saharan Africa and South Asia, the in modern food markets and non- regions of highest poverty, will continue traditional exports (Box 8). While the to be priority regions. Together the re- WDR 2008 highlights the agenda for gions accounted for 55 percent of new the "three worlds of agriculture," the IDA and IBRD commitments to agricul- regional priorities are also presented in ture in FY2006­2008 (Figure 7) and will this document. continue to account for about half of 67. Sub-Saharan Africa: The dominant our agricultural program over the next focus of the scaled-up support for Sub- three years (FY2010­2012). Similarly, Saharan Africa will be on raising agricul- these regions accounted for about half tural productivity growth, especially for of all analytical work done on agricul- smallholders. Thanks to reduced con- tural related issues. flict, greater macroeconomic stability, 66. There is wide heterogeneity across and lower taxation, the enabling envi- and within regions. The WDR 2008 ronment for agriculture in Sub-Saharan disaggregates this heterogeneity into Africa has improved considerably "three worlds of agriculture" based on leading to a growth response. Annual agriculture's role in overall growth and agricultural production (GDP) increased poverty reduction with the following from 2.3 percent in 1980­89 to 4.5 per- messages: For agriculture-based coun- cent in 2003­2007. With progress on tries, the focus needs to be on agri- policy reform, future growth will need cultural productivity growth and food to rely more on agricultural productivity security, balancing support to both gains. The Africa region of the World entrepreneurial actors and favored Bank has aligned its support around the regions, and subsistence farming four complementary areas emphasized through resilient farming systems and in the recent Africa Union's Compre- safety nets. For transforming coun- hensive Africa Agriculture Development tries, the focus in agriculture needs to Program (CAADP): (i) land and water be on reducing the rural-urban income management, (ii) markets and infra- gaps through a shift in support from structure, (iii) risk and vulnerability, and A G R I C U LT U R E AND RURAL DE VE L OP ME NT 36 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 Box 8 THE THREE WORLDS OF AGRICULTURE AND IMPLICATION FOR OUR MIX OF SUPPORT The Three Worlds of Agriculture: The World Development Report 2008 highlights that agriculture's contribution to development differs across three distinct agriculture worlds-- agriculture-based, transforming, and urbanized. In each case the agriculture-for-development agenda differs. · Agriculture-based economies--Agriculture is a major source of growth, and most of the poor live in rural areas. This group accounts for about 420 million rural inhabitants, mainly, but not exclusively, in sub-Saharan Africa. In these economies, agriculture and its associ- ated industries are essential to growth and to reducing mass poverty and food insecurity. The focus needs to be on agricultural productivity growth and food security, balancing support to both entrepreneurial actors and favored regions, and subsistence farming through resilient farming systems and safety nets. · Transforming economies--Agriculture is no longer a major source of overall economic growth, but poverty remains overwhelmingly rural. This group, typified by economies of China, India, Indonesia, Morocco, and Romania, has more than 2.2 billion rural inhabit- ants. In these economies, rapidly rising rural-urban income disparities and continuing extreme rural poverty are major sources of social and political tensions. Rising income disparities cannot be sustainably addressed through agricultural protection that raises the price of food (because a large number of poor people are net food buyers) or through subsidies. A comprehensive approach is needed--shifting to high value agriculture with continued support to lagging regions, decentralizing nonfarm economic activity to rural areas, and providing assistance to help move people out of agriculture. · Urbanized economies--Agriculture contributes directly only a small share to overall eco- nomic growth and poverty is relatively urban. Even so, rural areas are often still home to half the poor, and poor rural areas can be especially sensitive socially because of issues of marginalization. Moreover, agribusiness and the food industry and services account for as much as one third of economic output. Included in this group are 255 million rural in- habitants. Agriculture can help reduce the remaining rural poverty if smallholders become direct suppliers in modern food markets, good jobs are created in agriculture and agro- industry, and markets for environmental services are strengthened. These agriculture worlds differ both across and within countries. For example, India states reflect all three worlds (e.g., Uttar Pradesh and Bihar are "agriculture-based", Arunachal Pradesh and Kerala are "transforming," and Chandigarh and Goa are "urbanized"), as do states in Mexico (e.g., Zecatecas and Sinaloa are "agriculture-based", Querétaro and Oxaca are "transforming", and Yucatán and Jalisco are "urbanized"). Implications for our mix of support: Our support will reflect the differences in the agricul- ture agendas across the three worlds of agriculture, both within and across countries and regions. The table provides an indicative, but not exhaustive, differentiation of focus across the three worlds, with further program specificity developed on a case-by-case basis. A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 6 -- HOW T HIS T RANSL AT E S INT O TH E FY 2010­2012 WORLD B A NK GROUP PR OGR A M 37 Emphasis of Support Will Differ Across the Three Worlds of Agriculture Action Plan Focal Areas Agriculture-based Transforming Urbanized Agricultural productivity Close the crop yield and Improve productivity in Improve equality in land ac- livestock productivity gap, higher value markets (in- cess, invest in agricultural expand irrigated areas and cluding livestock products research, focus on grains improve rain-fed systems, and aquaculture), and in and oilseeds, as well as improve security of land lagging regions, strengthen higher value markets rights, invest in agricultural land rental and sales research markets, improve water use efficiency Link farmers to markets Improve market information, Improve food safety, Improve international trade, infrastructure, strengthen standards, market integra- food safety, standards, and producer organizations, and tion business models, and market integration business finance finance models Risk and vulnerability Provide safety nets, asset Better manage food imports, Provide safety nets, reduce protection against cata- reduce risk of livestock dis- risk of livestock disease strophic loss ease, provide safety nets outbreaks Rural non-farm income Improve the rural invest- Upgrade skills, decentralize Upgrade skills, expand ter- ment climate, expand nonfarm activities, expand ritorial development infrastructure rural livelihoods approaches Environment services, Improve rangeland manage- Manage intensive livestock Reduce deforestation, ex- and sustainability ment, support for carbon systems pand payment schemes for market access environmental services Source: The World Development Report 2008 (iv) agricultural technology. The ongo- The country level analytical program will ing IDA/IBRD program (undisbursed focus on public expenditure reviews (to balance) focuses on these areas with support improved resource use effi- priority given to agricultural research and ciency), and the remaining policy agenda extension (15 percent of program), crops (which differs by country but includes development (14 percent of program), poverty and social impact assessments, and irrigation and drainage (9 percent sector reviews, and investment climate of program) (see regional allocations in assessments). At the regional level, the Figure 8). The focus over the next three analytical program will focus on policy years will be to do more on improving issues related to cotton, rice, regional land tenure security, scale-up support for trade, biofuels, and global food prices. irrigation, and technology adoption. Only 68. South Asia: Rapid economic growth 18 percent of arable land with irrigation with widening rural-urban income dispari- potential in Sub-Saharan Africa is actu- ties and continued rural poverty has been ally irrigated. Better adoption and use of a source of social and political tension existing seed varieties can double yields. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 38 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 in this region. The focus of our support (see Box 9). The focus will be on build- will be on rural income growth to both ing and aggregating rural institutions to address the widening rural-urban income achieve scale and make rural producers gap and rural poverty. Food security attractive to private enterprise and able also remains important with immediate to leverage resources, improve access to pressing questions such as--how is Ban- services (including financial) and gladesh going to get its 330,000 metric demand better governance and ac- tons of additional rice each and every countability in public service delivery. year for the next 20 years, within a con- Continued support will also be provided text of rapid population growth and com- to scaling up public services (agricul- petition for natural resources? To address tural technology and innovation) and to these types of challenges, the region expand investments along various value will continue its engagement on critical chains (for fish, dairy, high-value crops, policy issues, technical assistance, and and forest products) with an increased innovative public-private partnerships focus on agricultural markets and trade, in three interlinked lines of business: the livestock sector, and animal health, in productivity growth (including irrigation terms of both added value and agricultur- and drainage), livelihoods, and agriculture al support services to increase small and competitiveness. Irrigation and drainage, marginal farmers competitiveness. which currently dominates the current 69. East Asia and Pacific: Economic trans- IDA/IBRD program with 38 percent of form is driving resources (labor, land, the ARD investments in South Asia water, food, and public budgets) to ur- (see regional allocations in Figure 8), is ban areas. Agriculture needs to facilitate expected to continue to play an impor- this transformation, while still providing tant role with further investments in food security, poverty reduction, and irrigation infrastructure and services, environmental services. In addition, im- water resources, and decentralization of proved agriculture performance can help system management services to Water reduce the widening rural-urban income Users Associations. Yet broader efforts gap, and associated political and social to raise agricultural productivity growth tensions. There is wide heterogeneity are also needed and will be scaled-up. In across EAP countries requiring differenti- the next three years South Asia will also ated approaches. In line with the World significantly upscale its successful liveli- Development Report 2008 typology for hoods and community-based program by investments, the focus for the emerging building the institutions of the poor that middle- and high-income countries can articulate their demand and interact (China, Indonesia, Malaysia, Thailand, with the public and private sectors Vietnam) will be on improving the A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 6 -- HOW T HIS T RANSL AT E S INT O TH E FY 2010­2012 WORLD B A NK GROUP PR OGR A M 39 Box 9 RURAL LIVELIHOODS PROJECTS Rural livelihoods projects address the challenges of reducing rural poverty and promoting inclusive growth by supporting representative institutions of the poor in rural areas. These projects use the community driven development approach, but their focus does not end at small scale service delivery. Rather, livelihoods projects start by helping to form affinity- based groups that begin accumulating assets through savings and group lending or through matching grants for productive purposes. The projects provide capacity building in areas such as bookkeeping and planning and technical assistance in economic activities to ensure the quality of activities at the community level. Groups receive help to aggregate into federa- tions that have greater voice and leverage with outside service providers. The affinity based federations are linked with banks--based on clear criteria of creditworthiness--for addi- tional credit resources. Experience has shown that members invest the majority of funds in agricultural enterprises (e.g., dairy, goats, crops, etc.) and nonfarm enterprises (e.g., trading, retail, service sector). Beneficiaries can also then form activity based groups and/or com- modity based groups that focus on improving the backward and forward linkages needed by producers to extract maximum profit from their enterprises. The major outcome of rural livelihoods projects is an institutional platform of the rural poor that · is organized to engage with, and even partner with, the public sector for better services; · creates bankable clients for the financial sector; and · generates forward and backward linkages with the private sector for contracts, partner- ships, and co-management arrangements for goods and services. Impact assessments of completed projects in Andhra Pradesh, Madhya Pradesh, and Rajasthan show that a total World Bank investment of US$322 million mobilized 2.9 million people into just under 250,000 community level groups that accumulated savings in excess of US$400 million, leveraged nearly $3 billion in loans from commercial banks, achieved US$1 billion turnover in collective marketing of farm and nonfarm produce, and leveraged well over US$60 million in resources from other public programs. efficiency of agricultural product markets Papua New Guinea, Timor-Leste), the and food safety, improving social equal- focus will be on improving the productiv- ity and lagging regions through better ity of primary agriculture, the stability of infrastructure and services, releasing food markets, agriculture-led growth and agricultural resources to urban uses, poverty reduction, and targeting emerg- improving environmental management ing opportunities for agricultural exports. of agricultural resources, and supporting For the Pacific Islands, the focus will be climate change mitigation and adapta- on niche opportunities in agriculture, tion opportunities. For the low-income and assistance to cope with climate countries (Cambodia, Lao, Myanmar, change. The ongoing IDA/IBRD program A G R I C U LT U R E AND RURAL DE VE L OP ME NT 40 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 (undisbursed balance) focuses on these as the Caribbean countries. Inequality is areas with priority given to infrastruc- very high, especially in rural poverty, and ture (21 percent of program), irrigation persists in land distribution (Argentina, and drainage (17 percent of program), Paraguay, Peru, and Venezuela). The and finance (10 percent) (see regional focus in LCR will be to increase trade of allocations in Figure 8). The focus over agricultural products in countries with the next three years will be to do more competitive advantage, increase small on land markets (currently 5 percent of holder participation in value chains, and program), on agricultural markets and reduce the environmental foot print of trade (currently 1 percent of program) to agriculture (increasing output per unit of better integrate smallholders into higher water, reducing the rate of deforestation, value chains, and on rural nonfarm in- and reducing soil fertility loss). Emphasis come to support employment creation in will vary by country context. For coun- lagging regions. The analytical program tries with large pockets of rural poverty will focus on rice policy and production (Haiti, Bolivia, Honduras, and Nicaragua (Indonesia, Philippines, Vietnam and and in poorer regions of larger countries Cambodia), climate change (China, Phil- such as Northeast Brazil) the focus will ippines, Indonesia, PNG, Pacific Islands, be on strengthening the role of small- and Mekong Sub-region), rural nonfarm holder farmers in domestic markets and income (Indonesia, Philippines, Vietnam, domestic value chains, securing liveli- PNG, Malaysia, Cambodia, and Lao), and hoods and food security of subsistence agricultural public expenditure reviews. farmers, facilitating labor mobility and rural non-farm and community develop- 70. Latin America and the Caribbean: ment, and facilitating access of small While the region is more urbanized than farmers to productive resources (land, others, it has favorable natural resource finance, water, etc). For the slow grow- endowments, providing the potential ing countries (Mexico and Colombia), to not only meet domestic demand but the focus will be on transforming public to expand agricultural exports. Some spending (from subsidies to invest- countries such as Argentina, Brazil, ments), inclusion of smallholders in new Uruguay, and Chile are already produc- food markets, strengthening resilience ing food competitively for the rest of the of subsistence agriculture, and territo- world and are leading net food exporters. rial development and skills for the rural Other countries have not yet fulfilled non farm economy. For the agricultural their potential (e.g., Nicaragua), while powerhouses (Argentina, Brazil, and Uru- third group have limited food production guay), the focus will be on better aligning potential for exports (e.g., Mexico) or are public support for agricultural production likely to remain net food importers, such A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 6 -- HOW T HIS T RANSL AT E S INT O TH E FY 2010­2012 WORLD B A NK GROUP PR OGR A M 41 to the current context (SPS, innovation, crops and livestock production (to assist trade policies), enhancing resources to in meeting global food demand), to over- reduce vulnerability, improving trade come the negative environmental legacy infrastructure, and minimizing the envi- of the Soviet system, and to support ronmental foot print. The ongoing IDA/ rural nonfarm incomes and eventual exit IBRD program (undisbursed balance) fo- from agriculture. The ongoing IDA/IBRD cuses on general agriculture (43 percent program focuses on these areas with of program), and forestry (16 percent priority given to irrigation and drainage of program) (see regional allocation in (13 percent of program), public admin- Figure 8). The focus over the next three istration (26 percent of program), and years will be to give greater emphasis infrastructure (12 percent) (see regional to strengthening smallholder inclusion in allocations in Figure 8). The focus over agricultural markets, and continued ex- the next three years will be to continue port growth. The analytical program will support for key productivity and com- focus on agricultural public expenditures, petitiveness investments such as irriga- and vulnerability to climate change. tion and drainage (only 10­12 percent of arable land is properly drained) and land 71. Europe and Central Asia: The focus of administration; continue support for EU support will be to assist completion of approximation, accession, and integra- the transition towards a market econo- tion; continue support to rural non-farm my and international integration, to make income and exit; and to do more on better use of under-utilized high potential environmental services. The analytical land for rain-fed production of temperate FIGURE 8 Regional Composition of Current Program: Undisbursed Balance* AFR EAP Agro-industry Other non-farm Agro-industry Other non-farm 3 percent 8 percent 1 percent 6 percent Finance Agric extension Finance Agric extension <1 percent and research 10 percent and research Infrastructure 15 percent Infrastructure 6 percent 9 percent 21 percent Agric markets Crops Agric markets Crops and trade 14 percent and trade 3 percent 6 percent 1 percent Other public Irrigation and Other public Irrigation and admin, law drainage admin, law drainage 10 percent 9 percent 11 percent 17 percent Land Land Animal Animal administration administration production production <1 percent 5 percent Gen agric, fishing, 3 percent 4 percent Gen agric, fishing, forestry sector Forestry forestry sector Forestry 21 percent 2 percent 10 percent 5 percent A G R I C U LT U R E AND RURAL DE VE L OP ME NT 42 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 ECA LCR Agro-industry Other non-farm Agro-industry Other non-farm 4 percent 13 percent 5 percent 1 percent Finance Finance Agric extension Agric extension 1 percent 4 percent and research and research Infrastructure 2 percent 6 percent Infrastructure 12 percent 6 percent Crops Agric markets 0 percent Crops Agric markets and trade and trade Irrigation and 1 percent 1 percent 2 percent drainage 5 percent Other public Irrigation and Other public admin, law Animal drainage admin, law 26 percent production 13 percent 6 percent Land 5 percent Animal Land Forestry administration production administration 16 percent 8 percent 1 percent 5 percent Gen agric, fishing, Gen agric, fishing, forestry sector Forestry forestry sector 12 percent 2 percent 43 percent MNA SAR Agro-industry Other non-farm Agro-industry Other non-farm 1 percent 1 percent 1 percent 7 percent Finance Agric extension Finance Agric extension 1 percent and research 5 percent and research 1 percent Infrastructure Infrastructure 7 percent 3 percent 9 percent Agric markets Crops Agric markets Crops and trade 1 percent and trade 5 percent 1 percent 3 percent Other public Irrigation and Other public Irrigation and admin, law drainage admin, law drainage 6 percent 77 percent 16 percent 38 percent Land Land Animal administration Animal administration production production <1 percent 1 percent 2 percent 1 percent Gen agric, fishing, Gen agric, fishing, Forestry forestry sector Forestry forestry sector <1 percent 7 percent <1 percent 7 percent Raising agricultural productivity Linking farmers to markets Rural non-farm income * How projects "count" by sector can be a complex issue, since projects often have objectives and components that relate to more than one sector. The Agriculture Action Plan includes IDA, IBRD and IFC financing. IDA/IBRD, including Special Financing, reflects: (i) project components specifically coded as Agriculture, Fishing and Forestry as well as those coded as Agriculture Markets and Trade, and Agro-industry, and; (ii) in order to capture important related investments such as land administration, agricultural agency reform, agricultural and rural finance, market roads and so on, other investments directly related to agricultural production under the oversight of the Agriculture and Rural Development (ARD) Sector Board. Therefore the commitments for infrastructure, finance and administration refer only to the share of total commitments in each area which falls under the responsibility of the ARD Sector Board. Infrastructure and finance amounts are derived using the related major-sector codes: "Transport" (T codes), "Energy and Mining" (L codes), "Information and Communications" (C codes) and "Water supply and Sanitation" (W codes) for infrastructure, and; "Finance" (F codes) for rural finance. The ARD Sector Board commitments related to the "Education" major- sector (E codes); "Health and other Social Services" (J codes) and nonagricultural "Industry and Trade" (Y codes less YA and YB) are grouped as "other nonfarm." In the Bank's coding system land administration is classified as part of the "Public Administration, Law and Justice" major- sector and not coded separately. Therefore, land administration commitments are estimates based on a desk study of project documents undertaken as part of the annual ARD Portfolio Review. The remainder of "public administration" commitments under the ARD Sector Board is referred to as "other public administration." A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 6 -- HOW T HIS T RANSL AT E S INT O TH E FY 2010­2012 WORLD B A NK GROUP PR OGR A M 43 agenda will focus on public expenditure financial instruments to hedge risk, then analysis, farm-level competitiveness, to investments in agricultural research and climate change. and development and rural livelihoods. For those countries that are not highly 72. Middle East and North Africa: The dependent on cereal imports, but have dominant focus will be to improve food fiscal deficits (Egypt, Iran, Syria), the security--including improving grain first priority is to invest in agricultural re- trade, logistics, storage and handling, search and development and rural liveli- and rural nonfarm income and exit. hoods, then to advise on use of financial Countries in the region rely on food hedging instruments. Finally, for those imports for at least 50 percent of do- countries with a higher dependence on mestic consumption. As a result, they cereal imports, but with fiscal surpluses are relatively more exposed to severe (Algeria, Bahrain, Iraq, Kuwait, Libya, swings in agricultural commodity prices, Oman, Qatar, Saudi Arabia, United Arab and their vulnerability will probably be Emirates), there are requests to provide exacerbated in coming years by strong advice on issues related to longer term population growth, low agricultural sourcing requirements from developing productivity, and their dependence on countries and on the use of financial global commodities markets. Our sup- hedging instruments. MENA's binding port will focus on three elements to re- water constraint curbs the scope to ex- duce future vulnerability: (i) strengthen pand agricultural production. Its rapidly safety nets, provide people with access growing population will likely outpace to family planning services, and pro- productivity growth and raise rural pov- mote (nutrition) education; (ii) enhance erty unless there are efforts to encour- the food supply provided by domestic age rural nonfarm income. Investing in agriculture and improve rural livelihoods rural education and literacy will help fa- by addressing lagging productivity cilitate this transition. The ongoing IDA/ growth through increased investment IBRD program (undisbursed balance) in research and development; and (iii) is dominated by irrigation and drainage reduce exposure to market volatility by (77 percent of program) (see regional improving supply chain efficiency and by allocations in Figure 8). The focus over more effectively using financial instru- the next three years will be to do more ments to hedge risk. Priorities will vary on agricultural research and extension, by country. For those countries highly agricultural markets and trade, and rural dependent on cereal imports, with fiscal non-farm incomes. The analytical pro- deficits (Djibouti, Jordan, Morocco, Leb- gram will focus on public expenditures, anon, Tunisia, Yemen), priority will be and rural livelihoods. given to advice and improved access to A G R I C U LT U R E AND RURAL DE VE L OP ME NT CHAPTER 7: How We Will Do It I. Strengthen Business Lines, Maintain Quality 73. We will consolidate a set of good practice programs across the five focal areas, highlight- ing principles of design, and unit costs to guide scale-up. Areas of ongoing core business lines include irrigation, land tenure, research and extension which together account for over half our agriculture portfolio. These will continue to be important programs with continued demand for them, particularly in IDA countries. Agricultural markets and trade related programs are becoming increasingly demanded by client countries, for which there are good practice examples to be scaled up, as there are for livestock, fisheries, and forestry. We will continue experimentation and learning with insurance innovations, and technologies to spread access to finance, and explore new product development in support for environmental services. 74. The World Bank has a large ongoing program of support with about $10bn in committed support to be disbursed over the next several years. Portfolio quality has improved over the last few years, and agriculture projects are now rated slightly higher (according to the Independent Evaluation Group [IEG]) than the Bank average (with an 85 percent satisfac- tory rating compared to 80 percent for the World Bank average in 2008). However, con- tinued attention and flexibility will be needed, particularly in the context of the financial crisis, to maintain high quality levels. Attention will be given to cross-regional learning of quality monitoring and improvement, and scaling-up good practice examples. Scaled-up programs will likely take the form of larger projects, rather than an expansion in number, with greater use of streamlined procedures for follow-on programs. Instrument choice will also matter (see section IV). 75. Improved monitoring and evaluation will be a key aspect of improving our business lines and portfolio quality (i.e., to better understand what has worked, where, and why). Sound monitoring and evaluation systems are crucial for tracking progress, for identifying good practice principles of program design that enhance impact, and for guiding unit costing for scale-up. At the project level, we will continue to make progress on results measure- ment. In addition, monitoring costs and returns against environmental sustainability is becoming increasingly important. Yet there are still ongoing methodological challenges on how to do this effectively. More effort is needed on methodological improvement and training to more fully integrate these aspects in program analyses. A G R I C U LT U R E AND RURAL DE VE L OP ME NT 46 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 II. Focus on the Ultimate Client, private enterprise. We will continue Especially Women to learn lessons and draw on good 76. Greater focus and empowerment of practice design for scaling up. In many the ultimate beneficiaries of our sup- countries women dominate agricultural port (e.g., farmers, livestock keepers, production. We will give specific atten- and fishers) has been associated with tion to increasing their access to assets improved project performance. For (particularly land), finance and services. example, an increase in the number The actions will link with the implemen- of extension and research projects in tation of the Gender Action Plan (GAP), Africa giving farmers more influence with efforts to mainstream the GAP over funding allocation decisions (from into our agriculture program over the 5 percent to 35 percent of projects-- next three years. Figure 9) was associated with improved project outcomes. Similarly in Andhra III. Strengthen Local Processes Pradesh farmer empowerment through collective action improved access to 77. Country-led and implemented programs services. Stronger farmer organizations offer the greatest prospect for long- can demand better governance and ac- term sustainable outcomes. The World countability for public service provision, Bank Group will focus on strengthen- and build scale in supply and demand ing local processes. Examples include and become more attractive clients for continuing to support community driven development programs, aligning with the Comprehensive Africa Agriculture FIGURE 9 Farmer Empowerment in Agricultural Development Program (CAADP), and Knowledge and Information Systems Projects, World Bank Africa Region working with the Arab Funds to initiate 80 a program of Food Security with the League of Arab States as part of the Percent of total AKIS funding 60 Arab World Initiative. We will continue to engage in the Poverty Reduction Sup- 40 port (PRSP) processes as well as work to ensure Country Assistance Strate- 20 gies (CASs) and Country Partnership Strategies give appropriate attention to 0 Financing Financing Financing for Financing agriculture. Progress has been made where farmers where participatory under a cost influence farmers approaches sharing with the Bank's Strategy of Reaching decisions control funds arrangement the Rural Poor. From 2003 to 2006, the 1990­1994 1995­1998 1999­2001 number of CASs with satisfactory 2002­2004 2005­2007 A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 7 -- HOW WE WIL L DO IT 47 attention to rural development in- Box 10 creased from 63 percent to 73 percent. LENDING INSTRUMENTS Share of Agriculture and Related Sector Lending, by IV. Better Match Instrument Choice Instrument (percent) to Need FY00-02 FY03-05 FY06-08 Development Policy 78. Specific investment loans will continue Lending 21 6 13 to account for the major share of our sup- Adaptable program port, with increased used of adaptable loans 12 6 9 program loans, and supplemental financ- Emergency recovery loans 3 5 4 ing to speed additional support, and Financial intermedia- follow-on programs. Adaptable program tion loans 3 0 2 loans offer longer-term phased support Learning and innova- with built in flexibility--particularly suited tion loans 1 0 0 to longer-term institutional development Specific investment loan 56 81 71 required in the sector. These long-term, Sector investment loan 4 1 1 more flexible instruments may be given Technical assistance more prominence in some regions. loan 0 1 0 Emergency recovery loans will be the Share of Agriculture and Related Sector Lending, main instrument to address climatic, through Development Policy Lending (precent) price, or pest and disease shocks. Devel- FY00-02 FY03-05 FY06-08 opment policy lending (DPLs) will con- AFR 28 25 24 tinue to be an additional tool in selected EAP 2 2 8 cases and we will explore options for ECA 53 4 2 using commodity linked loans as instru- LCR 3 7 14 ments to reduce commodity price risk. MNA 0 0 13 SAR 0 0 10 DPLs accounted for 13 percent of IDA/ Total 21 6 13 IBRD support for agriculture in FY2006­ 2008, ranging from 24 percent in the Africa region to 2 percent in the Europe lending instrument reform process assists and Central Asia region. The remaining the action plan implementation efforts. 87 percent was investment lending of which 71 percent was through sector investment loans, and 9 percent through V. Strengthen and Leverage Donor Partnerships adaptable program loans (Box 10). We will work with the investment lending Fragmentation of development partner proj- implementation team to ensure that the ects geographically, thematically, and in use risk-based approach proposed for the of financial management, accounting, and A G R I C U LT U R E AND RURAL DE VE L OP ME NT 48 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 to work to integrate our support into gov- Box 11 SELECTED GLOBAL PROGRAMS ernment-led efforts, including leveraging AND PARTNERSHIPS joint financing of programs by development partners, including foundations. We will Institutional collaboration Global Donor Platform for Rural Develop- also continue to support global partnerships ment (GDPRD) for agriculture (Box 11), and work to ensure Reduce risk and vulnerability these efforts integrate better with regional World Food Program (WFP) and country programs. For example, the World Animal Health Organization (OIE) United Nations Higher Level Task Force ongoing reorganization of the CGIAR offers (HLTF) the potential to improve the relevance and Raise agricultural productivity: responsiveness of their research effort Consultative Group on International through improved financing and stakeholder Agricultural Research (CGIAR) ALive: A partnership for livestock devel- accountability. The Global Donor Platform opment for poverty for Rural Development comprised of 19 The Global Program on Fisheries donor nations, development agencies and (PROFISH) international finance institutions is focused Link farmers to markets and strengthen on achieving increased development as- value addition: Communities, Conservation and Markets sistance impact and more effective invest- Support to Agricultural Value Chain ment in rural development and agriculture Development and Diversification (through shared learning, advocacy, and Trade Standards Practitioners Network aid effectiveness). We will continue to Agriculture Finance Support Facility Enhance environmental services and strengthen these partnerships. sustainability: Growing Forest Partnerships Program on Forests (PROFOR) VI. Better Organization to Deliver Alliance for Responsible Fisheries 79. We will continue to decentralize on a Agriculture Insurance for Vulnerability Reduction and Climate country by country basis as the busi- ness case dictates. The World Bank will continue to draw on the FAO Coopera- reporting systems raises transaction costs, tive Program (CP) to provide specialized diverts local capacity, and often under- expertise. Technical support for each mines the strengthening of local systems. of the five areas of focus will be pro- This effect is strongest in countries were vided by the ARD thematic groups and development partner support accounts for we will continue to capitalize on and the major share of public spending in agri- facilitate South-South learning across culture, particularly in Sub-Saharan Africa. thematic areas. In addition, the Bank Consistent with the Paris Declaration and with work to leverage synergies with Accra Agenda for Action, we will continue A GR ICULTURE A ND RURA L D EVELOPM ENT C H A P T E R 7 -- HOW WE WIL L DO IT 49 the CGIAR and Bank operations. The search agenda (Box 7), with the World integration of the Sustainable Develop- Bank Institute on training, and with the ment Network (SDN) strengthens the Legal Department on assessing national World Bank's Group capacity to support and international legal frameworks and clients address cross-cutting issues proposed reforms. that impact agriculture--particularly rural infrastructure. Implementation of 80. Following the experience gained during the action plan will also require col- the implementation of the agriculture laboration across networks, such as and rural development strategy: Reach- with the Human Development Network ing the Rural Poor 2003­07, the Agri- on training and disease control (e.g., cultural and Rural Development Sector H1N1), with the Poverty Reduction Board will provide oversight and moni- and Economic Management Network tor implementation progress. This will on risk and vulnerability, agriculture include monitoring of progress toward trade and taxation, and the Finance and lending scale-up, portfolio quality, and Private Sector Development Network supporting a more systematic process on linking farmers to markets and for better monitoring intermediate strengthening value chains. In addition, outputs, and eventual impacts. As a collaboration across non-regional Vice complementary effort to monitor perfor- Presidencies will include working with mance, the Bank is supporting an initia- Treasury on hedging instruments, with tive to strengthen agricultural statistics Development Economics on the re- (Box 12). Box 12 STRENGTHENING AGRICULTURAL STATISTICS While many developing countries have difficulty in producing accurate agricultural production and GDP data, there is a growing need for additional information to guide policy decisions in the sector. A recent assessment of national agricultural statistical systems undertaken by FAO points to an urgent need to improve the statistical capacity of countries to rebuild their capabilities to both improve data quality and meet the challenges of the changing global con- text. In response, the Bank is engaged in a global effort initiated by the UN Statistics Com- mission to improve agricultural statistics in developing countries. The purpose of the global initiative is to provide the vision for national and international statistical systems to produce the basic data and information to guide decision making in the agricultural sector. The vision of the initiative is that: (i) countries will agree upon a minimum set of core data that meet the emerging demands, and all will pledge to provide these data annually; (ii) agriculture will be integrated into the national statistical systems in order to A G R I C U LT U R E AND RURAL DE VE L OP ME NT 50 WORLD BANK GROUP AGRICULTURE ACTION PLAN: FY2010­2012 meet policy maker and other data user expectations that the data will be comparable across countries and over time; and (iii) the integration will be achieved by an agreed upon suite of methodologies that includes the development of a Master Sample Frame for Agriculture, the implementation of an Integrated Survey Framework, and with the results available in an Integrated Data Base. The initiative is a long-term effort with its implementation proceeding in stages that will depend upon each country's initial statistical capacity. The World Bank has also partnered with the Bill and Melinda Gates Foundation to improve the quality and policy relevance of household level data on agriculture in sub-Saharan Africa. The initiative involves the inclusion of agriculture into the World Bank Living Standards Mea- surement Survey (LSMS) in 10 Sub-Saharan African countries. The purpose is to fill some of the data gaps and to improve the quality, relevance, and sustainability of agricultural data systems. The set of surveys will be integrated into each country's existing system of house- hold and other surveys. They will focus on agriculture using a multitopic survey instrument as the base. Both non-farm income and agricultural activities will be captured along with mul- tisector information to provide a better understanding of what drives farm production. This integrated survey framework meets many of the goals of the strategy to strengthen agricul- tural statistics, thus will be providing a proof of concept test. A GR ICULTURE A ND RURA L D EVELOPM ENT Agriculture and Rural Development (ARD) 1818 H Street, NW Washington, D.C. 20433 USA Telephone: 202-477-1000 Internet: www.worldbank.org/ard