Reaching the rural poor

World Bank to boldly go into ''rural space'', ending the decline in rural development funding

ROME, 1 July 2002 -- Like most donors, the World Bank has cut commitment to rural development in the last ten years. Its new Rural Development Strategy reverses the trend, but calls for big changes in emphasis -- and depends on changes in behaviour of donor and target countries.

The Bank's Vice-President for Sustainable Development, Ian Johnson, told a crowded and attentive meeting at the World Food Summit: five years later that poverty has traditionally been defined by per capita income, but the Bank now sees it also as a lack of access to services (such as health and education) and influence. This change in perspective helped define the new strategy, which will be presented to the Bank's Board of Executive Directors this summer.

David Forbes-Watt, who heads FAO's own Investment Centre, welcomed the proposed policy. "It's got fresh ideas, and it's very dynamic and result-oriented," he said later. The greater stress on rural development is also timely. "There had been a significant reduction in funding to rural development, but I think they have now accepted that you have to work in the rural environment if you're going to fight poverty -- because that is where many of the poor live." The Investment Centre, which has been facilitating funding for rural development since 1964, works closely with the Bank.

Presenting the proposed strategy at the Summit, the Bank's Director of Rural Development, Kevin Cleaver, stressed key shifts of emphasis:
  • A stronger voice for the rural poor -- demand-driven projects

  • A focus on all of rural society and all economic sectors

  • Broad-based growth -- in agriculture, agro-industry, non-food enterprises and services such as health

  • Less duplication of effort.

Less hungry but still poor
Since 1970, said Mr Cleaver, food production has outstripped population growth, and the malnourished have declined as a percentage of total population. But the rural poor in low-income countries are still just as poor as before. To meet the Bank's poverty reduction targets for 2015, these countries need to increase their gross domestic product (GDP) by 3.5percent annually. Given that 24 percent of GDP worldwide is agriculture-related, the rural poor must get access to whatever makes their agriculture sector more productive, such as education, water, technology (including biotechnology) and markets.

But rural development has been neglected -- because of the high risk of failure, environmental concerns and regulatory environments in developing countries. These constrain profitability of agriculture, as do developed countries' subsidies to their own producers, which make products in poorer countries uncompetitive.

Shifts of emphasis won't change all that. What will, says MrCleaver, are changes in behaviour. For example, agricultural subsidies in developed countries total about US$300-350billion. No one has really quantified their impact on developing countries, but he estimated that the subsidies cost roughly US$50billion in agricultural income. And agricultural development aid amounts to only US$8billion worldwide. That must rise and subsidies must be cut, according to MrCleaver.

Other reforms the new strategy calls for are:
  • Greater focus on sub-Saharan Africa

  • More support for technology transfer

  • Better coordination of aid -- in the past, competition between donors has led to duplication of effort, with incompatible equipment and systems.

But developing countries must also act with:
  • Less taxation on inputs such as fertilizer

  • Open markets, creating a positive climate for agro-industry

  • More investment in research, extension and rural infrastructure

  • Freedom for producer organizations such as cooperatives

  • Land reform.

Asked if investment would depend on structural reform,MrCleaver said the two could take place simultaneously.

The Bank's strategy document says: "To reduce rural poverty, the Bank must address the entire rural space -- all of rural society and both the farm and non-farm aspects of the economy. While past approaches identified most pieces of the puzzle, they failed to put them together."

Has this one assembled them? Mr Forbes-Watt thinks so. "While agriculture is its principle focus, it encompasses rural development more broadly than in the past."

The Bank's new voyage into rural space is about to begin.
While agriculture is key, the World Bank's strategy focuses on all of rural society.

While agriculture is key, the World Bank's strategy focuses on all of rural society.

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FAO, 2002