UPDATE No. 1, November 1994 / UPDATE No. 1, Novembre 1994 / UPDATE No. 1, Noviembre de 1994 /

As FAO approaches its 50th anniversary, the launching of a newsletter highlighting the Organization's important contribution towards mobilizing agricultural investment, much of this in support of food security, seems timely. It is also relevant, given the current restructuring which will enhance FAO's investment support by linking it more systematically with country level policy and planning advice, and capacity-building.

In over 30 years, FAO's Investment Centre Division, drawing on the expertise of FAO as a whole, has played a catalytic role in raising over $50 billion for funding food and agricultural projects. For some time, we have felt the need to take periodic stock of the variety of tasks undertaken in order to share information more generally with others throughout FAO, our counterparts in the development finance institutions, and our partners in member countries. This is the aim of UPDATE, which we intend to issue three times a year.

While this first edition covers representative aspects of our work, there is much more to report, for instance on stakeholder involvement in project design--which will feature in the next issue.

I hope that readers will find UPDATE of interest and we are of course open to suggestions for improvement.

In the wake of the Paris Peace Agreements of late 1991, Cambodia is gradually rebuilding its economy with international assistance. A natural recipient of this assistance - beyond the rehabilitation of essential physical infrastructure, the removal of land mines and the reintegration of war-affected populations - is agriculture. The sector, including forestry and fisheries, is still the backbone of Cambodia's frail economy and offers the single largest potential for national reconstruction and development.

After two decades of strife and social upheaval, however, information on the sector is scarce and sketchy. Also conspicuously lacking is a coherent set of policies and strategies for agricultural development which are consistent with Cambodia's recent transition from a command to a market economy.

Responding to an FAO proposal, UNDP and the Asian Development Bank (AsDB) funded an Agricultural Development Options Review to update and expand the knowledge of the conditions and state of use of Cambodia's natural resources, to enhance the understanding of agricultural development options and to contribute to the determination of sectoral policies.

The recently completed Agricultural Options Review is the most exhaustive technical and institutional study of the agricultural sector in Cambodia undertaken for over 20 years. Phase I, funded by UNDP and executed by the Investment Centre, was resource-oriented and identified a range of technical options for the sustainable development of Cambodia's agriculture. The constraints and potential of the various sub-sectors were examined and a range of options was explored for rice (the main food crop), rubber (the main cash and export crop), irrigation, livestock, fisheries, forestry, institution-building and human resource development. Technical backstopping was provided by other FAO units, including the Economic and Social Policy Division and the Fisheries Department.

A rice country par excellence, Cambodia has two major options for increasing production of this crop: reclamation of paddy land cultivated before the war and crop intensification. Up to 280,000 hectares of former floating rice areas and 370,000 ha of rainfed lowland rice areas could be brought back into cultivation, but with possible negative environmental impacts on forest cover and fisheries. Intensification of rice systems is possible in areas which already have supplementary irrigation or reasonable water control - in total about 330,000 ha of rainfed lowland rice and 130,000 ha of dry season flood recession rice.

Priority actions for consideration by donors build on initiatives already undertaken by the public sector and NGOs and are not dependent on progress in the essential process of institutional restructuring, but will be supportive of it. They include capacity-building programmes, farmer support programmes focused on participatory extension and research, and programmes for rubber rehabilitation (with smallholder development) and for improved forest management.

As part of Phase I, FAO's Remote Sensing Centre oversaw the production by the Mekong Secretariat and the Land Use Mapping Office of the Ministry of Agriculture of a land cover atlas which indicates how land is being utilized and how usage has changed in the recent past. Phase II, financed by AsDB, has aimed at building a consensus with Government on agricultural policies through a participative review process.

L'importante production rizicole et maraîchère de la zone d'intervention de l'Office du Niger, au Mali, en fait une zone privilégiée. En outre, grâce à la récente dévaluation du franc CFA, la riziculture malienne peut désormais être aussi compétitive que les importations en provenance d'Asie.

C'est dans ce cadre que le Centre d'investissement (CI) de la FAO a préparé, à la requête de l'Office du Niger et de la Banque mondiale, un projet de réhabilitation d'un "casier" de l'Office.

Les aménagements de l'Office remontent aux années cinquante. Ils portent sur plus de 55,000 hectares, dont 12,000 ont déjà été réhabilités et 23,000 sont en cours de réhabilitation. Depuis 1978, deux approches différentes ont été adoptées pour réhabiliter les "casiers" de l'Office. Le programme ARPON (approche néerlandaise) met l'accent sur la participation des agriculteurs, ce qui a contribué à changer les relations sociales dans la zone.

Les coûts des travaux de réhabilitation ont été limités, les aspects techniques n'occupant qu'une place secondaire dans leur conception. Le programme RETAIL (approche française) met en oeuvre des techniques avancées, mais qui entraînent des coûts à l'hectare très élevés. Dans les deux cas, les résultats obtenus sur la production agricole sont comparables, et généralement satisfaisants.

Le Centre d'investissement propose une réhabilitation simple des aménagements initiaux, qui comprendrait une remise en état complète des réseaux d'irrigation et de drainage tout en nécessitant des investissements bien moins onéreux que ceux des projets de type RETAIL.

Les travaux d'aménagements seraient accompagnés d'un programme de redistribution des terres, pratique devenue courante à l'Office, ainsi que d'octroi de permis d'exploitation, et ce afin d'assurer une certaine stabilité foncière et une distribution équitable des terres entre les agriculteurs tout en garantissant leurs investissements.

L'un des problèmes majeurs concernant l'entretien des réseaux est lié à la politique de privatisation du gouvernement. Des progrès ont déjà été réalisés dans ce domaine, mais il reste à élaborer en détail un système qui garantirait un véritable développement des entreprises privées.

La privatisation de certaines des activités de l'Office du Niger offre d'ailleurs d'excellentes opportunités pour la promotion des initiatives locales, soit dans le domaine des travaux hydrauliques, soit dans l'usinage du riz ou encore dans la fourniture des services.

La problématique de la privatisation comprend par ailleurs des questions portant sur la cohésion sociale entre les partenaires de futures entreprises privées, sur la taille de ces entreprises et sur le rôle que peuvent jouer les banques nationales dans leur démarrage. Ces divers thèmes sont actuellement examinés par la Délégation générale du Premier Ministre à la réforme de l'Office.

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Armenia: Food distribution and marketing project to boost horticulture

A food distribution and marketing project currently being prepared by the Government with IC assistance is the first FAO operation with EBRD under the newly-concluded cooperative agreement. It is also an important initiative in the application of the Bank's strategy for Armenia, which has made significant progress in macro-economic stabilisation over the last year with IMF and World Bank support.

There is now an urgent need to focus on agricultural development, particularly through the private sector. Armenia produces a variety of vegetables and quality stone fruits. With the virtual disappearance of the former state-operated centralised marketing system, marketing of agricultural produce is largely in the hands of the farmers, who take produce to urban retail markets operated by state cooperatives. Farmers and traders travel long distances to sell their produce. In an economy where fuel is scarce, transport becomes a significant component of the total cost of marketing produce.

Other problems farmers face include serious post-harvest losses, the lack of long-term production and marketing credit, and the repercussions implicit in the end of a state system in charge of large-scale bulk purchasing of produce.

Despite these constraints, Armenia sustains a vigorous horticultural sub-sector, largely due to the rapidity and success of its land privatization policy. The sector can be further supported through the establishment of a wholesale marketing network, linking small-scale producers to the urban consumption areas, and ultimately, providing some export opportunities.

The proposed Food Distribution and Marketing Project comprises two main components: a wholesale market for Yerevan (population 1.2 million) that will act as the main wholesaling facility for the entire Republic and as the main export point; and assembly markets and collection centres in the principal production areas. The project is intended to set a precedent for similar investments in the region.

Contrary to popular belief, forests in Eastern Europe are generally recording increasing stocks rather than suffering from over-exploitation, in spite of the much-publicized air pollution, according to Investment Centre findings. Eastern European forests are also better managed ecologically, in terms of diversity of species and natural regeneration, than forests in Western Europe; from a commercial point of view, however, they have not been as well managed.

The Investment Centre has been assisting several former socialist countries in Eastern Europe - including Albania, Belarus, Bulgaria, Croatia, Estonia, Poland, Romania and Slovakia - in forestry sub-sector reviews and forestry investment project preparation. Valuable technical support and advice was also provided by FAO's Development Law Service on forest legislation issues.

The transition from forest management by a centrally planned and managed state enterprise to management, in a market economy, of forest partly owned by the state and partly by private or communal parties is prompting far-reaching changes. These changes imply fundamental adjustments in institutional, legal and technical arrangements.

Given the sophistication of the forestry authorities in Eastern Europe, the IC has adopted an approach to analyzing and presenting forestry policy which focuses on examining options more than on formulating recommendations.

Following a technical review and analysis of the sub-sector, problems and constraints are identified and accompanied by a number of options, for each of which the advantages and disadvantages are examined. When there are many related issues, the presentation of options is best displayed in a matrix, as shown in the example below.

Policy issue	Policy options	Likely advantages and implications	Likely disadvantages and implications	Comments
Regulation of state and non-state forestry	Control function provided by the state forest services	Utilization of an already existing service	The forest service would have to regulate its own operations, which will reduce objectivity	This should only be seen as an interim step
	Control function provided by a separate Forest Authority	Independent control of the application of forest laws and regulations in both state and non-state forestry	Increased costs of setting up a new organization

In adopting this approach, some problems have been encountered in having staff and consultants change their habits - from presenting recommendations to arguing for and against a number of different options. Even though the latter approach is more difficult and laborious, the result is often better: it is more conducive to fruitful discussions with Government and other stakeholders, and allows for better adjustments to local conditions and to political realities which are often hard to appraise by foreign teams.

Changing conditions in Eastern Europe have also encouraged the Investment Centre to maximize the use of local staff in the formulation of project proposals. In most cases, IC staff and consultants contribute to the project preparation reports completed by Government teams. Reports are finalized in the country, with or without Investment Centre support, and submitted to the lending agency. This results in improved "ownership" of project proposals, which are well adapted to local conditions.

Institutional aspects of IC forestry experience gained in Eastern Europe can be found in an IC staff paper and in a recent article in Unasylva, FAO's journal on forestry and forestry industries.

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Mexico: Mejoramiento de la competitividad de la agricultura bajo riego

En años recientes, México ha vivido un proceso de profundas reformas estructurales de su economía que ha llevado a un cambio radical en las políticas económicas y en la estructura de incentivos que enfrenta el sector privado, transformandola en una de las economías más abiertas de América Latina. El proceso de reformas se ha extendido también al sector agropecuario en el cual cúltivos tales como los granos básicos, que hasta hace poco eran factibles en gran parte gracias a los subsidios, están siendo desplazados por productos que pueden competir en el mercado mundial y que ofrecen retornos atractivos a la inversión privada.

Con miras a consolidar esta diversificación de la producción agropecuaria y fomentar la inversión privada en riego, se ha iniciado un proceso de rehabilitación y modernización de la infrastructura de riego y de traspaso de la responsabilidad de su operación y manejo a los usuarios. Dentro del marco de estos esfuerzos, el Gobierno con el Centro de Inversiones y una contribución substancial del Servicio de Recursos Hídricos y Fomento y Aprovechamiento de Aguas de la FAO, preparó un proyecto de mejoramiento parcelario y de pequeñas redes de riego en unas 400.000 hectáreas. El proyecto, que cuenta con el apoyo financiero del Banco Mundial, tiene un costo de $550 milliones y beneficiará a unos 40 mil agricultores de bajos ingresos.

Dos características innovadoras de este proyecto contribuirán a su sostenibilidad: el alto grado de participación de los beneficiarios tanto en la identificación y formulación del proyecto, como en su gestión; y el estímulo a la inversión privada a través de la distribución equitativa de los riesgos de las inversiones entre el Estado, la banca comercial y los beneficiarios.

Dada su alta rentabilidad y el ahorro de agua (estimado en unos 650 milliones de metros cúbicos anuales), se espera que el proyecto contribuya al desarrollo y a la consolidación de la agricultura empresarial de México.

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Summary of activities
Résumé des activités
Resumen de actividades

The impact of devaluation of the CFA franc on the prospects for rice production in countries of the West African Economic and Monetary Union was the subject of a major study (West African Development Bank); preparation was completed for two projects in Côte d'Ivoire for land management and for strengthening rural institutions (World Bank), a project for village land management in Niger (IFAD) and another to support rural organizations in Senegal (AfDB).

Further investment projects were identified for AfDB and WB in Eritrea and Senegal and project formulation work continued in Chad, Comoros, Gabon, Kenya, Lesotho, Mauritania, Mozambique, Tanzania and Togo, mainly for natural resource management, irrigation and support to agricultural services. A Project Implementation Manual was prepared for a GEF-financed Biodiversity Conservation project in Malawi and supervision of on-going UNCDF projects was undertaken in Benin and Niger.

Nepal, a project was formulated to alleviate poverty associated with landlessness in the Western Terai (IFAD); project formulation work is continuing for agricultural development, poverty alleviation and seeds in China (WB and IFAD), silk in Bangladesh (WB), irrigation in India, Pakistan and Vietnam (WB), irrigation and agricultural processing/distribution in Mongolia (AsDB), and agricultural support services in India, Nepal and Philippines (WB).

In Guyana, a project was identified to support non-traditional agriculture (WB) and preliminary discussions on development priorities were held with Government and the Caribbean Development Bank; IC staff also participated in supervision of an irrigation rehabilitation project in Colombia. Project formulation work is continuing for irrigation in Bolivia (WB and Inter-American Development Bank), forestry and provincial development in Argentina, water resource management in Mexico and natural resource development in Trinidad and Tobago (WB).

In Tunisia, a rural development project was evaluated and a second phase identified (AfDB); formulation work continued for watershed and water resources management in Morocco (WB) and agricultural services in Egypt (IFAD); further opportunities were identified for agricultural investment projects in Egypt for possible AfDB financing. Work in Iran has been focused on horticulture, irrigation and watershed management.

In Armenia, a project was identified to support agricultural reform (WB); IC staff participated in a WB mission to Lithuania and in initial visits to Croatia and Slovenia. Support was given to start up a WB irrigation project in Albania and staff participated in a workshop on commodity markets in Turkey.

Albania: Irrigation and Drainage Rehabilitation. Total investments: US$44.1 million, of which IDA $10 million, Government/beneficiaries $9.6 million; co-finance anticipated from IDB $10 million, Kuwait $7.4 million, OPEC $5 million and Italy $2.1 million.

Comores: Appui aux initiatives de base en milieu rural. Investissement total 4,2 m de $EU, dont un prêt de 3,5 m de $EU du FIDA, et une contribution de 0,72 m de $EU du gouvernement et de 0,56 m de $EU d'une ONG canadienne.

Madagascar: Réhabilitation des petits périmètres irrigués (Phase II). Investissement total 25,7 m de $EU, dont un prêt de 21,2 m de $EU de l' IDA, et une contribution de 4,5 m de $EU des gouvernement/bénéficiaires.

Mauritanie: Développement des oasis (Phase II). Investissement total 17,22 m de $EU, dont un prêt de 7,82 m de $EU du FIDA, de 7,82 m de $EU du Fonds arabe pour le développement économique et social, et 1,58 m de $EU des gouvernement/bénéficiaires.

Namibia: Northern Regions Livestock Development. Total investments: US$15 million, of which IFAD $6 million, bilateral sources $6.75 million, and Government/beneficiaries $2.25 million.

UPDATE, published three times a year, is the newsletter of FAO's Investment Centre. Queries on subjects covered may be addressed to: The Editor, UPDATE, Investment Centre Division, Food and Agriculture Organization of the United Nations (FAO), Viale delle Terme di Caracalla, 00100 Rome, Italy; tel: +39 06-5705-3568; fax: +39 06-5705-4657; e-mail: [email protected].

No. 1 - November 1994 No. 1 - Novembre 1994 No. 1 - Noviembre de 1994

No. 1 - November 1994
No. 1 - Novembre 1994
No. 1 - Noviembre de 1994