No. 17 - November 2000
No. 17 - Novembre 2000
No. 17 - Noviembre de 2000

In this issue:

Subsistence farming, in the strictest sense, is becoming increasingly rare. The most isolated small farmers seek cash income by selling a portion of their output, even if this means that they have to purchase food later in the season. The rapid pace of globalization is accelerating the monetization of such "subsistence" producers and, at the same time, is often contributing to reduced prices for the traditional staples that they have relied on for income. Faced with increasing demands for cash and declining earnings from conventional products, small farmers must find viable alternatives if they are to avoid sinking deeper into poverty.

Diversification into new, high-value crops, although desirable, is possible only for some producers who have good access to markets and know-how. Migration to urban centers creates enormous social costs and may merely transfer the poverty elsewhere. Where employment is available, small producers can supplement their food production with off-farm income. This option is common in peri-urban areas and can also be triggered by tourism or offshore assembly operations. For most rural areas though, the main potential sources of off-farm employment are small enterprises and agro-based activities. FAO’s Investment Centre is increasingly helping member countries mobilize investments to facilitate the growth of rural enterprises and employment. Measures include:

• Decentralization of public revenue use, providing resources for local priorities;
• Developing rural infrastructure to meet the needs of rural enterprises;
• Facilitating flexible financing for new and growing enterprises;
• Strengthening local organizations dedicated to rural enterprise development;
• Supporting export and marketing associations that operate in rural areas;
• Developing guidelines for small enterprise management and administration; and
• Providing planning tools to increase the quality of small- and medium-scale investment proposals.

Such support requires close cooperation between local governments, the private sector and development agencies, and a recognition that off-farm employment and agriculture are mutually dependent, not competitive. The trend towards community-based rural development projects has shown the feasibility of supporting municipal and local objectives, but these have tended to emphasize social and community-managed investments at the expense of private enterprise - the main potential source of rural employment and income creation.

This issue of UPDATE looks at several programmes supporting the development and expansion of income-generating activities. In Central America, "RURALINVEST", a small-scale investment planning and evaluation package, has demonstrated the feasibility of preparing high quality investment proposals at a local level, and is gaining acceptance with commercial banks as an aid to loan assessment. In Bolivia, rural and indigenous communities are being helped to manage their own investments and development. In Indonesia, new self-help groups are launching rural income-generating activities, while, in Africa, there is a move underway to privatize irrigation. This issue also highlights support to agribusinesses seeking to increase agricultural production income in Eastern Europe and the Commonwealth of Independent States.

 
"RURALINVEST": Un Paquete de Herramientas para Pequeñas Inversiones Rurales

Recientemente, el rol de las comunidades y asociaciones de productores en la determinación de su propio patrón de desarrollo socioeconómico ha aumentado mucho en importancia, a través de acciones como: el fortalecimiento de instituciones locales; la elaboración participativa de planes de inversión locales y la selección de prioridades de inversión.

Sin embargo, el fortalecimiento de grupos locales exige la disponibilidad de herramientas que les permitan asumir plenamente sus responsabilidades y derechos en este proceso. El paquete de herramientas interactivas de "RURALINVEST" fue creado específicamente para posibilitar la participación de beneficiarios y sus organizaciones de base en la toma de decisiones criticas sobre las inversiones a ser realizadas en su entorno y sobre su participación financiera: sean inversiones comerciales, de propósito social, ambiental o de infraestructura de apoyo. RURALINVEST surge de la experiencia del Centro de Inversiones de la FAO en el diseño, validación y enseñanza de metodologías apropiadas para el análisis de inversiones mucho más pequeñas que aquellas tradicionalmente consideradas en los textos de formulación de proyectos disponibles.

RURALINVEST ofrece manuales, materiales didácticos y programas de software, que conjuntamente pretenden contribuir a este objetivo. El primer módulo se enfoca al proceso de diagnóstico comunitario y a la identificación participativa de conceptos preliminares de proyectos de inversión. En el secundo módulo "Formulación y Evaluación de Pequeños Proyectos de Inversión Rural", se detallan los aspectos fundamentales del proceso y la importancia de la demanda para cualquier tipo de inversión, la selección de tecnología, la sostenibilidad financiera y ambiental, la determinación de costos e ingresos y se evalúan las diferentes medidas utilizadas para determinar la calidad de un proyecto.

La metodología y los diferentes instrumentos han sido probados en varios países de América Central con el apoyo de la Unidad Regional de Asistencia Técnica en América Central (RUTA), siendo aceptados y valorados por los usuarios como muy útiles para el proceso de formulación y evaluación de proyectos. Con base en las sugerencias y opiniones de los participantes en los cursos, se han venido introduciendo mejoras en los diferentes instrumentos, de forma que se obtenga un producto que responda efectivamente a las necesidades de los usuarios.

Expanding Agribusiness Opportunities for Eastern European and CIS Entrepreneurs

For many transition economies, the growth of sustainable economic activity in the rural sector is a top priority. A challenge for governments has been to develop policies, institutional structures and effective mechanisms to support such growth. In addition, some transition countries have given high priority to devolving the management of infrastructure and services to the private sector, introducing land reform, and making available credit particularly to assist the financing of small- and medium-scale economic activities, both agricultural and off-farm. The healthier macroeconomic environment that is emerging in these countries has created new investment possibilities in rural and peri-urban areas, and the increasing financial liberalization is enabling banking institutions to make their lending operations more cost-effective.

The FAO Investment Centre is helping transition countries to strengthen their capacity to identify investment opportunities and promote private enterprise growth in rural areas, through its cooperative programmes with development financing agencies. A major collaborator is the European Bank for Reconstruction and Development (EBRD), which is working to promote private investment in the agribusiness sector in countries of Eastern Europe and the Commonwealth of Independent States (CIS). The main objective of the EBRD's Agribusiness Team is to provide financing to industrial and marketing projects promoted by international or local private partners in the agribusiness sector. EBRD often acts as a catalyst by assuming part of the financial risks. Through its network of contacts in the agribusiness sector, the Bank is also working to attract other financial partners into Eastern European agribusiness ventures.

These investments are helping to open up expanded income-earning opportunities for local farmers. In a number of sectors, agribusiness projects depend heavily on the supply of locally-produced agricultural raw material, such as grapes for wine, barley and malt for beer, and milk for dairy industries.

Support to such agribusiness projects is also helping to set higher quality product and service standards for local producers. In an increasingly competitive environment, local CIS and Eastern European farmers will have to progressively improve the quality and marketing of their products.

The Investment Centre is providing support to EBRD to analyze the risks related to raw material supplies for their agribusiness ventures and the relationship between local industries and local farmers. The analyses carried out by the Centre often take a broader sector perspective, that may lead to recommendations on government policy aimed at defining and implementing new standards, and improving relations between local processors and farmers.

A new area of work, for which the EBRD has been utilizing Investment Centre expertise, is the cofinancing of European Union (EU) structural funds in Eastern European accession countries. A pilot facility has been designed in Poland to upgrade local dairies, based on a joint EU grant/EBRD loan financial scheme. Broader cooperation between the EBRD and the EU on the cofinancing of such agricultural funds is currently being explored, with the assistance of the Centre.

During the last three years, the Centre has been active in the region in: screening investment opportunities for EBRD in the Ukraine and the FYR of Macedonia; helping to accelerate implementation of EBRD agribusiness projects, including grain receipt programmes in Bulgaria, the Russian Federation and the Slovak Republic; and in assisting implementation of wholesale markets projects in Romania, Bulgaria and Poland. The Centre has also participated in carrying out subsector reviews for milk production in Bulgaria and Croatia, for grain and milling in Bulgaria, Georgia and Romania, for grape and wine in Bulgaria and Croatia, and for barley and malt in Ukraine.

INDONESIA: Broadening Rural Income Choices

Since 1975, the sustained growth of Indonesia’s economy has made it self-sufficient in its basic food requirements and substantially reduced the number of very poor people. Nevertheless, more than 22 million Indonesians still live below the poverty line. Options for poverty alleviation through traditional agricultural growth in densely populated countries such as Indonesia are reaching their limits. Recognizing that farming alone cannot solve the poverty problem, the Government is also promoting alternative income-generating opportunities to improve the welfare of its rural poor.

The Rural Income Generation Project in Indonesia is developing a sustainable mechanism for poverty reduction through micro-enterprise develop-ment. Its objective is to assist the poor by establishing self-help groups and providing micro-finance support services to enable participants to mobilize their savings and to access credit to improve their livelihoods. The project has targeted 800,000 families in the 12 provinces where over 70% of Indonesia’s poorest people live. Some 80,000 self-help groups (60% women) are currently being formed. Training to improve self-confidence and skills to run enterprises, including preparation of group business plans, will be tailored to the needs expressed by the beneficiaries. Expanded micro-finance and credit services will aid a wide range of individual and group-operated enterprises such as street trading, food stalls, production of bamboo snares and grass mats, and shrimp farming.

Credit will be made available with no collateral and at prevailing market interest rates without subsidy, but subject to a saving requirement by each group member. There will be a gradual increase in the maximum loan size per borrower, with a strategy to promote successful groups to higher level credit programmes catering to small borrowers, such as Bank Rakyat Indonesia’s Rural Lending Programme. Support will also be provided in building rural institution management capacity at all levels. The project aims as well to expand the success of the P4K credit programme, established in Indonesia with support from the UN Development Programme and the International Fund for Agricultural Development (IFAD).

The seven-year project, prepared by the Government of Indonesia with Investment Centre help, is estimated to cost US$137 million. It has received substantial external financing from the Asian Development Bank (AsDB) and IFAD.

BOLIVIA: Fortaleciendo a las comunidades rurales

Un programa para el desarrollo de comunidades rurales, apoyado por el Banco Mundial, está ayudando a las comunidades más pobres de Bolivia a lanzar y manejar microempresas agropecuarias y agroindustriales sostenibles, con vistas a incrementar los ingresos de los hogares y crear nuevas oportunidades de empleo.

El objetivo del programa, cuya formulación e implementación se han llevado a cabo con la participación activa de los beneficiarios, es el de prestar asistencia a las poblaciones de 200 municipios pobres - muchos pertenecientes a distritos indígenas - para diversificar los sistemas de producción, incrementar la protección de los recursos naturales e impulsar la generación de empleos e ingresos no agrícolas. El programa tiene dos componentes: 1) capitalización de las comunidades rurales a través de mecanismos de cofinanciamiento dirigidos a fomentar la capacidad productiva y 2) fortalecimiento de las capacidades tanto de las instituciones públicas descentralizadas como de los operadores locales del sector no gubernamental y empresarial privado, para apoyar eficazmente a las comunidades y asociaciones de productores en el diseño, la ejecución y el manejo de proyectos de inversión que generen efectos positivos duraderos sobre los ingresos y las condiciones de vida de los beneficiarios.

El Centro de Inversiones de la FAO participó con aportes metodológicos originales al diseño y la puesta en marcha del programa. Por un lado, ha desarrollado el esquema del sistema de elegibilidad y de evaluación de la viabilidad financiera-económica, social y ambiental de las propuestas de proyectos de inversión preparadas por las comunidades, y por el otro, contribuyó al fortalecimiento de la institución nacional ejecutora mediante la elaboración de un marco conceptual para la reorganización de su estructura organizacional y sus procedimientos operativos, enfocando en particular la revisión del sistema de información gerencial, con fines de planificación de las actividades y monitoreo de avances y resultados de la implementación del programa.

AFRIQUE: L'irrigation privée en Afrique

Le développement de l’irrigation en Afrique, dont le potentiel reste considérable pour lutter contre la situation d’extrême précarité économique que connaissent de nombreuses populations, continue de reposer dans une large mesure sur les institutions publiques, généralement peu efficaces mais disposant à cet effet d’attributions très étendues. Ce recours massif et systématique aux compétences publiques pour la mise en œuvre des programmes d’irrigation était justifié dans les années 60 et 70 du fait de l’étroitesse des capacités du secteur privé. La situation a depuis beaucoup changé et devrait permettre de revoir toute la logique institutionnelle du développement de l’agriculture irriguée.

Depuis quelques années, le Centre d’investissement contribue à la rénovation des politiques et stratégies d’irrigation en Afrique pour accroître l’efficacité du sous-secteur. La réorganisation institutionnelle qui est perçue comme la clé de voûte des réformes qui s’imposent comporte deux axes stratégiques majeurs: le recentrage du rôle de l’Etat sur ses missions pérennes; et le renforcement du secteur non étatique pour absorber progressivement les compétences transférables.

C’est pourquoi le Centre a apporté son concours au Niger dans la formulation et la supervision d’un projet pilote pour le développement de l’irrigation privée, financé par la Banque mondiale. La gestion de ce projet est assurée par une structure nigérienne de droit privé liée au Gouvernement par un contrat. Ce projet a enregistré d’ores et déjà des acquis palpables, valorisables à plus grande échelle, notamment dans les domaines: de la maîtrise des coûts d’intervention dans le traitement de la demande; du développement et de la diffusion d’une gamme variée de technologies adaptées; du lancement de systèmes financiers décentralisés; et des résultats économiques de l’irrigation.

D’autres projets conçus selon le même modèle sont opérationnels ou en préparation (Bénin, Burkina Faso, Mali). Un atelier régional réunira début 2001 des représentants d’opérations de développement de l’irrigation privée et de petite agro-industrie de l’Afrique de l’Ouest pour échanger leurs expériences et proposer les voies et moyens susceptibles d’amplifier les acquis et de supporter les activités non agricoles hautement génératrices de revenus.

Briefly noted . . . . . . . . ..

SUB-SAHARAN AFRICA

Identification work continued in support of the UN Response to Long-Term Food Security in the Horn of Africa (FAO for UN ACC), and on rural development in Angola (FAO), poverty alleviation in Ghana (IFAD), and food security in the Democratic Republic of the Congo and South Africa (SPFS). The Centre prepared a multi-country work plan in the context of a West African Economic and Monetary Union/FAO agreement for extending the SPFS. Project formulation was undertaken for rural infrastructure in Guinea; soil fertility and small-scale irrigation in Lesotho, PROAGRI in Mozambique; the rural sector and environment in Rwanda; agricultural statistics in Tanzania; soil fertility in Malawi, Nigeria and Uganda; agricultural sector investment in Zambia (WB); for food security in Burundi, Republic of Congo, Senegal and South Africa; and for the Onchocerciasis Control Programme in Guinea Bissau and Togo (TCP). Appraisal was carried out for rural development projects in Madagascar (IFAD) and Niger (WFP), and for agricultural extension in Uganda (WB). The Centre evaluated and supervised WB projects in Ghana, Malawi and Rwanda; an IFAD project in Nigeria, a WFP project in Mozambique; and a UNOPS project in Malawi. Sector work was carried out for the WB in Benin, Democratic Republic of Congo, São Tomé and Príncipe and Uganda. The Centre participated in a study on strengthening gender aspects of IFAD projects in Africa, and in a workshop organized by the Common Market for Eastern and Southern Africa (COMESA) in Zambia (FAO); and formulated a South-South Cooperation Agreement between Egypt and Zambia (FAO).

ASIA AND THE PACIFIC

The Centre helped identify a land tenure reform project in Cambodia (WB), and food security programmes in Indonesia, Laos and Sri Lanka for eventual funding by a Japanese Trust Fund (SPFS). It formulated irrigation and rural development projects in India (WB, WFP); a South-South Cooperation Agreement between Mongolia and India (SPFS); a natural resources management project in Thailand (WB, TCP); carried out a water sector review in India (WB); and supervised and evaluated WB projects in China, India, Indonesia and Pakistan. It also participated in a market-assisted land reform project in the Philippines; in workshops on property valuation policy in Thailand and participatory processes in project design in India (WB, FAO); in capacity-building technical assistance for a tree crops project in Indonesia and appraisal of a rural development project in Bangladesh (AsDB); and provided technical assistance to an irrigation project in Indonesia (WB).

LATIN AMERICA AND THE CARIBBEAN

Project identification was undertaken for food security in CARIFORUM countries, poverty alleviation in Chile, and rainforest management in Brazil (WB). The Centre helped formulate WB projects for forestry in Bolivia; land and natural resources management in Brazil; forest conservation, rural development, water resources management and environment in Chile; the environment in Colombia, rural development and water resources management in Ecuador; land administration in Nicaragua; irrigation in Panama and the environment in Peru. A citrus development project was designed for Central America (CFC). Staff participated in supervision and evaluation of WB projects in Argentina, Brazil, Chile, Ecuador, Mexico, Peru and Uruguay. The Centre carried out a sector review on irrigation in Uruguay (WB); appraised a food aid project in Cuba (WFP); and participated in an irrigation seminar in Jamaica (IDB), a conference on telecommunications in Brazil (FAO), and in a technical review of a rural development project in Guatemala (WFP).

NEAR EAST

The Centre identified a rural development project in Algeria, agricultural technology and irrigation projects in Yemen (WB), and an irrigation project in the Sudan (UNDP). It helped formulate an export development project in Jordan (WB); supervise WB projects in Azerbaijan, Iran and Kyrgyzstan; and evaluate a food security project in Djibouti for IsDB (FAO).

EUROPE

A fisheries project in Albania (WB) and a rural finance project in Poland (EBRD) were identified by the Centre. Project formulation work was undertaken for agricultural services and fisheries in Albania, rural finance in Bulgaria, forestry in Georgia, agricultural pollution control in Romania and an economic reform loan in Turkey (WB). The Centre participated in the appraisal of an irrigation project in Georgia and rural services project in Moldova (WB), in a land reform survey in Moldova, and carried out a forestry sector review in Turkey (WB) and a survey of the dairy sector in Lithuania (EBRD). It supervised WB projects in Albania, Armenia, FRY Kosovo, FYR Macedonia, Latvia and Lithuania. It participated in the restructuring of an agricombinat in Eastern Croatia and financed legal studies to set up grain warehouse receipt facilities in the Russian Federation (EBRD). The Centre also participated in the European Union Accession Workshop in Bulgaria (WB).

Projects approved for financing . . . . . .

Eleven projects, formulated with substantial inputs from the Investment Centre, were approved by financing institutions and governments for total investments of US$424.01 million (the balance between total project cost and loan or grant is provided by the recipient government and beneficiaries) for: BURKINA FASO: Soum Province Livestock Development Phase II $16.41m ($13.86m AfDF); CHILE: Valdivian Forest Conservation $1m ($.72m GEF); CHINA: Citrus Development $2.77m ($1.19m CFC); GAMBIA: Artisanal Fisheries $12.03m ($10.58m AfDB); GHANA: AgSSIP $123.73m ($67.0m IDA); GUINEA: Banana Rehabilitation $2.90m ($1.37m CFC); HONDURAS: Sustainable Rural Development (PRODERS) $25.70m ($16.50m IFAD, $3.0m UNDP, $1.5m CABEI); MALI: National Rural Infrastructure (PNIR) $139.3m ($115.10m IDA, $2.1m the Netherlands); LATVIA: Solid Waste Management $16.97m ($2.22m WB, $4.86m EC, $1.49m Nordic Investment Bank, $1.18m SIDA, $0.47m others); VIET NAM: Tea and Fruit Development $57.6m ($40.2m AsDB); YEMEN: Irrigation Improvement $25.6m ($21.30m IDA).