Previous Page Table of Contents Next Page

The benefits of investment in land and water - K. Yoshinaga

K. Yoshinaga, Director, Land and Water Development Division
FAO, Rome


Agriculture and the rural sector remain vital to pursuing the related goals of food security, poverty alleviation and sustainable development.

Increased agricultural output will have to come mainly from intensified rather than extensive production as per capita land and water resources diminish. This implies continued productivity gains in the use of these two primary resources and factors of production.

Such increases in productivity will require increased investment in agriculture, and especially in land and water development. However, investment in these areas is decreasing or at best stagnating. Governments, authorities and development practitioners are thus facing the paradox of having agreed to development goals requiring increased production with diminishing per capita resources, but without the concomitant investment to do this.

This paper examines this apparent contradiction from a perspective of land and water. It focuses on land and water as finite resources and factors of production on which productivity - increasing technology in agriculture depends. While dealing with land and water in parallel, it also recognizes their interrelationship and complementarity. The emphasis is on irrigation because of its prominent role in food production under intensive systems and because it is the largest consumer of water in agriculture and in overall water use. The paper also examines ways in which land and water interrelate under less - favoured rainfed conditions to improve productivity. The overall theme is that of why investment in land and water development is essential for food security, poverty alleviation and balanced development in developing countries.


Together with labour and capital, land and water constitute the aggregate resource base for agricultural production. Their association with appropriate types and levels of labour, capital and technology enhances their productivity in agriculture. Thus, their availability is central to development, food security and poverty alleviation.

Land availability

According to FAO estimates, about 30 percent of the world’s land surface is suitable for rainfed agriculture. Of this area, some 2.8 billion ha in developing countries have the potential for growing rainfed crops above an acceptable minimum level. With 960 million ha already cultivated, this leaves 1.8 billion ha for further expansion (FAO, 2000a).

However, the utility of this reserve is limited as about 90 percent of it lies in seven Latin America and sub - Saharan countries. Furthermore, much of the land suffers from constraints such as ecological fragility, low fertility, toxicity and lack of infrastructure. Human induced land degradation such as soil erosion and salinization is also a factor.

The projected expansion of arable land for crop production in developing countries by 2030 is about 120 million ha, with the bulk of it in sub - Saharan Africa (57 million ha) and Latin America (41 million ha).

FAO estimates that between 1995/7 and 2030 about 80 percent of the projected growth in crop production in developing countries will come from intensification in the form of higher yields (69 percent) and cropping intensities (11 percent), with the remaining 20 percent coming from arable land expansion. The share due to intensification will exceed 90 percent in land - scarce parts of the Near East, North Africa and South Asia. In the preceding 34 years 76 percent of the growth in crop production was due to intensification (71 percent from higher yields and 5 percent from higher cropping intensity), and 24 percent from arable land expansion. Intensified production occurs mainly on land already under cultivation (FAO, 2000a).

Water availability

The major problem with water is not its quantity but its uneven distribution in time and space. The combination of uneven distribution and expanding population is increasing the pressure on water resources in various countries, mainly in Africa and the Near East. In 1995, 29 countries with populations totalling 436 million experienced water stress or scarcity. By 2025 the corresponding figures will be about 48 countries and more than 1.4 billion people, most of them in the least developed countries (World Bank, 2001). Moreover, such data do not show how countries with ample supplies of water relative still experience shortages in many localities, e.g. China and India.

Increasing water scarcity will result largely from rapidly growing demands for agricultural, industrial and household purposes. At the same time, the potential for expanding supplies in many countries and localities is diminishing. Deteriorating water quality and environmental conditions, degradation of irrigated land, insufficient river flow, upstream land degradation and seasonal flooding will aggravate water shortage problems. Unless there is prompt action, developing countries risk severe water shortages that could depress agricultural production and limit industrial and household use (IFAD, 2001).

The threat to agricultural production is particularly severe because this sector accounts for 80 percent or more of total water use in many developing countries (Yudelman, 1994). As irrigation is the largest user of water (often at highly subsidized rates), attention needs to focus on improving its generally low water use efficiency levels.


By ensuring a regular and timely supply of water, irrigation reduces the risk of crop losses from uncertain rainfall and enables production in areas or at times without rainfall. There are strong synergies between irrigation and other principal sources of agricultural growth such as fertilizer, improved plant varieties, better husbandry, upgraded infrastructure and better integration into markets. These encourage farmers to invest in land improvements and in other inputs.

Irrigation is difficult to analyze or to generalize about because irrigation systems are extremely diverse in terms of size, technological sophistication, crops produced, agronomic practices, economic and financial viability, reasons for existence, institutional organization and social context. However, their common denominator is that they all provide water to enable farmers to increase output per hectare.

In 1995/97, the total irrigated area in developing countries amounted to about 197 million ha (three - quarters of the world’s irrigated area). Seventy - four percent of this irrigated land is in Asia, 14 percent in the Near East/Africa, 9 percent in Latin America and 3 percent in sub - Saharan Africa. In view of this and the fact that the annual growth of irrigated area in developed countries fell to 0.2 percent in 1990 - 1997, it is reasonable to conclude that events in developing countries will continue to dominate the world irrigation scene (FAO, 2000a).



Agricultural productivity, growth and development

There is general agreement that increases in agricultural productivity are central to growth, income distribution, improved food security and poverty alleviation in rural economies. There is strong evidence that it is essential to accelerate agricultural growth if poverty is to decline rapidly.

Increased farm production improves farmers incomes, generates on - farm employment and lowers food prices, all of which reduce poverty as the poor typically spend 60 - 70 percent of their income on food. Recent studies suggest that an even more significant effect on rural poverty derives from increased farm incomes stimulating demand for the goods and services offered by the small - scale enterprise sector. Where labour is abundant, agricultural growth generates significant income and employment multipliers within the local non - farm economy. Where such large multipliers exist, technological change in agriculture has the potential to generate significant new non - farm earnings for the poor. Continued agricultural growth, and hence more water for irrigation, is essential if this subsector is to play its role in reducing poverty (Mellor, 2000; IFAD, 2001).

Irrigation increases cropping intensity and contributes to expansion in cropped areas. It increases yields, stabilizes output, enables crop diversification, reduces risk and increases farm incomes and employment. Through its influence on agricultural incomes, irrigation has a multiplier effect on non - farm incomes. It contributes to food security and poverty alleviation. By improving agricultural productivity, irrigation contributes significantly to overall growth and development (Box 1).

While determining the precise share of production gains attributable to irrigation is almost impossible, without the advances in irrigation technology and extraordinary investment in irrigation expansion by both public and private sectors, the Green Revolution would probably have had a much smaller impact (Barker and Van Hoppen, 1999). With the exception of the most favoured rainfed areas, the Green Revolution occurred only on irrigated land (Seckler, 1999).

The Green Revolution helped more than double the aggregate food supply in Asia over a 25 - year period, with only a 4 percent increase in the net cropped area (Rosegrant and Hazzell, 1999). It also contributed to significant national economic growth and saved large areas of forests, hillsides and other environmentally fragile lands from conversion to agriculture.

Perhaps the greatest benefit of irrigation has been in keeping food affordable to the poor. Between the 1960s and the 1990s real grain prices fell by approximately 50 percent as production growth continued to exceed population growth. Although subsidization of food grain production by developed countries played a part, the Green Revolution was largely responsible for this decline (Barker and Van Hoppen, 1999).

The Green Revolution also sustained employment (IFAD, 2001). Where an area doubled grain yields in the 1970s, employment per hectare normally rose by 40 percent, with a further 30 percent due to extra - farm demand for rural non - farm products (Hazzell and Haggeblade, 1993). The incidence of poverty in affected rural areas fell, typically from 30 to 50 percent to 5 to 15 percent (IFAD, 2001). In the 1970s agriculture accounted for 25 to 40 percent of GDP in the Green Revolution countries, which contributed substantially to their GDP and consumption growth.

In India, the multiplier effect of higher incomes in agriculture creating off - farm employment opportunities helped decrease the number of people below the poverty line from 50 percent to approximately 35 percent between the mid - 1970s and 1990 (Datt, 1998).

Irrigation has good distributional effects as most irrigation projects have targeted private farmers (mostly smallholders) and its benefits accrue mainly in rural areas. Two - thirds of the income of the rural poor comes from farming and most of the rest depends for growth on linkages to farming (IFAD, 2001).

In developing countries irrigation serves about one - fifth of all arable land, accounts for some 40 percent of all crop production and almost 60 percent of cereal production. Recent analyses suggest irrigated agriculture will account for 38 percent of the total increase in arable land and for more than 70 percent of the increase in cereal production between 1995/1997 and 2030 (FAO, 2000a).


Between 1961/1963 and 1995/1997 the irrigated area in developing countries increased at an annual rate of 1.9 percent to 197 million ha. Asia registered the largest increase: 70 million ha (mainly in India, Pakistan and China); while in sub - Saharan Africa the increase was 2 million ha. The prediction is for the area of irrigated land to increase by 0.6 percent per year to 242 million ha in 2030. Declining and insufficient investment in agriculture, the broader water sector and irrigation reflects this decrease in irrigation expansion.

In developing countries there are signs of underinvestment and underperformance in agriculture. When measured in constant 1995 prices, official development assistance from bilateral and multilateral donors is 8 percent below 1990 levels. Throughout the 1990s the flow of funds to primary agriculture declined while there was increasing attention on other areas, in particular environmental protection, rural development and infrastructure (FAO, 2000b). The proportion of sectorally allocable aid reaching agriculture, forestry and fisheries fell to 20 percent in 1987 - 1989 and then to 12.5 percent in 1996 - 1998. The real nature of net aid disbursed to agriculture in the late 1990s was 35 percent of its level in the late 1980s (IFAD, 2001). In financial year 2000, World Bank lending for agriculture and rural development was its lowest ever in both percentage terms and absolute amounts (World Bank, 2000).

Estimates of current annual investment in the water sector range from approximately US$60 - 80 billion (DFID, 2000; Elz, 2000; World Bank, 2001). Of this amount approximately 90 percent comes from domestic resources and the rest from international donor aid and multilateral funders, of which the World Bank is the principal source (DFID, 2000; World Bank 2001). The World Commission on Water considers investment levels to be less than half of that needed (about US$180 million per year) to meet minimum water, sanitation and nutrition requirements, mostly in developing countries, by 2025. On a global level there is a substantial shortfall, both for capital investment and for the operation and maintenance (O&M) of existing infrastructure. The tendency is to allocate most money to new capital works with insufficient funding for operation, maintenance and system rehabilitation. Recent studies indicate that the amounts allocated for irrigation scheme O&M are typically less than 50 percent of those required (DFID, 2000).

From 1950 to 1993, 7 percent of World Bank lending went to irrigation, more than any other subsector (Jones, 1995), but fell to about 4 percent for the period 1990 - 1997 (DFID, 2000).

This decline in investment in agriculture and irrigation does not augur well for the anticipated increase in irrigated land between 1995/1997 and 2030.


The decline in investment in new irrigation projects is leading to a paradoxical situation where although meeting the increasing demand for food will require more irrigated land, the investments may not be forthcoming. Given the long lead time between planning and implementing irrigation projects, failure to reverse the downward trend in investments could soon lead to food shortages with direct consequences for many developing countries and particularly for the poor.

One way of starting to resolve this paradox is to examine the reasons and related circumstances for the reduced investments in irrigation and to put the factors involved into perspective within the challenges facing the agricultural and food sectors in developing countries.


Agricultural development strategies emphasizing irrigated agriculture have increased food production and stimulated economic growth. At the same time large areas of less - favoured rainfed lands suffer from neglect and lag behind in their economic development. These lands are characterised by low agricultural potential, often because of poor soils, steep slopes, short growing seasons and lower and uncertain rainfall, but also because neglect has left them with limited infrastructure, weak institutions and poor access to markets. As population densities grow with no matching increases in production, food insecurity and poverty worsen and widespread degradation of soil and water resources tends to occur.

On development and environmental grounds alone, there will need to be a greater focus on less - favoured areas in setting priorities for policy and public investments. In some cases land expansion can contribute to increased agricultural production. However, in many less - favoured areas, social and environmental crises are already common sometimes soliciting more investment in crisis relief than in development from governments and donors. There is evidence that strategic investments in the economic development of less - favoured areas can be more cost effective than relief even in a relatively short period of time (Owens and Hoddinott, 1998). Increased public investment in technology and infrastructure in less - favoured areas may yield higher marginal returns than comparable additional investments in irrigated agriculture (Fan and Hazzell, 1997).

This does not mean that there should be less public investment in irrigated and high - potential rainfed areas in developing countries. It signifies that there should be a better investment balance between irrigated and less - favoured areas because reclamation and/or further development of the latter can benefit the large numbers of poor people living there. The amount of economically justifiable public investment in any locality should depend on the net social returns from productivity growth, poverty reduction and the containment of environmental degradation.


Land improvement in Santa Catarina state, Brazil

From 1991 to 1999 the World Bank provided a loan of US$33 million to Santa Catarina state to reverse ongoing land degradation and to increase agricultural production, productivity and farm incomes for 81 000 mostly small - scale farmers in 520 of its 1 700 microcatchments.

The main thrust of the project was to introduce and develop conservation tillage. Accompanying elements were: the upgrading of extension and training adaptive research, control of erosion runoff from rural roads and an incentive programme to encourage the adoption of conservation practices.

Production of the main crops - maize, wheat and soybeans - increased by an estimated 20 to 35 percent. Farmers adopted improved land management practices including conservation tillage on some 400 000 ha in 434 assisted microcatchments. The project reached about 35 percent of the state’s farmers and reduced soil loss by 10 to 50 percent. Runoff water in streams contained fewer suspended solids, coliform bacteria and pesticide residues thus reducing silting and water treatment costs and lowering the incidence of water - borne diseases and pesticide poisoning.

The project’s estimated rate of return at appraisal was 20 percent.

The investment needs of less - favoured rural areas often involve improving health and education, infrastructure and agricultural production in different combinations and in an integrated manner. Farming systems in less - favoured areas typically include mixed farming and other practices that contribute to soil, nutrient and water conservation. Thus, while some types of commodity improvement are relevant for less - favoured areas there is growing consensus that major productivity improvements will have to come from improved natural resource management practices and technologies tailored to the ecological, social and economic circumstances of rural communities, e.g. conservation tillage and integrated watershed development.

Land improvement techniques

Conservation or minimum/zero tillage is a practice that replaces conventional ploughing with adapted planting equipment and appropriate crop rotation. By protecting soils from erosion, improving soil structure, raising soil fertility, increasing water retention on cropland and reducing land preparation costs, conservation tillage helps increase yields and profitability.

Following its successful application in the central and southern parts of Brazil (Box 2), parts of Paraguay adopted conservation tillage to counter widespread soil degradation and erosion. As the result of an almost threefold increase in net farm income and average rates of return on marginal investment in equipment of from 6 percent (medium farms) to 14 percent (large farms), conservation tillage spread to 250 000 ha (19 percent of land cultivated mechanically) between the late 1970s and 1995/1996 (Sorrensen, 1997).

Various forms of land reclamation and development by means of manually and mechanically induced soil and water conservation have also proved successful. For example, in low rainfall areas of Senegal and Burkina Faso widely spaced small shallow basins, or furrow lines created with tractor drawn equipment captured sufficient runoff to establish islands or strips of tree and shrub species. This in turn led to more widespread improvement in soil physical characteristics and increased fodder production. Livestock carrying capacity improved and in some areas better soil moisture regimes nearly doubled the yields of millet and niébé (Dutraux and Keita, 1999). In another project in Burkina Faso and Niger a combination of small stone bunds and hand - dug holes filled with manure helped treble millet and sorghum yields and restore about 100 000 ha. Food availability in participating households rose by 20 - 40 percent. The average family using these technologies moved from an annual cereal deficit of 644 kg to a surplus of 153 kg (IFAD, 2001).


Because of the interrelationships between ecological, social and economic factors that cause soil and water degradation and because of the need to include these factors when reclaiming and improving land and water, integrated watershed development has become the preferred approach for developing rainfed areas in many countries. In general such projects have two major objectives:

Typically, the largest component of such projects comprises physical investments in soil and water conservation technologies and practices, which provide the basis for improved agricultural productivity. The second largest element is to establish and/or strengthen institutional arrangements and the human skills needed to ensure the implementation and sustainability of projects. Watersheds or subwatersheds have proved to be practical units for the implementation of this type of project. Such projects usually achieve their conservation and production objectives. The key aspect is the institutional and financial sustainability of these and future investments. Experience points to a number of basic determinants for success in this regard. These include: the importance of ownership of the project by beneficiaries; the need for beneficiaries to realize some short - term benefits from project interventions; the need to provide integrated support services; and the importance of monitoring and feedback mechanisms to periodically evaluate progress and make any necessary corrections.

Three World Bank - funded integrated watershed development projects (representing some US$133 million in loans) implemented in India and Indonesia during the 1980s yielded economic rates of return at completion of 17, 14 and 13 percent respectively. These conservative calculations consider only quantifiable benefits such as increased crop yields and do not include non - quantified benefits such as reduced erosion, siltation and pollution.

This indicates that agricultural intensification mainly through land and water development should be a key component of development strategies in less - favoured rainfed areas in certain countries. Such investments can yield acceptable economic rates of return with direct benefits for participants. Where the evaluation takes their social and environmental impacts fully into account their returns may exceed those of other agricultural investments. Nevertheless, because the shortage of water limits the production potential of most less - favoured areas, their contribution to overall food grain production and food security in most countries will remain relatively modest. High - potential areas with irrigation will continue to be the breadbaskets for most developing countries.


Investment in developing land and water resource offers long - term benefits that may elude quantification by conventional analysis. Beyond a project’s immediate rate of return, developing countries need to consider the wider benefits in terms of increased domestic production, enhanced food security, reduced market fluctuations, and foreign exchange savings. Moreover, such investments involve many interrelated factors with a range of potential direct and indirect effects. Although it may not be possible to legislate for successful investment, countries can pursue policies that are conducive to creating the conditions for greater market efficiency and higher farm - gate prices.

As the preceding chapter provides an indication of the returns and long - term benefits from investing in land development projects, the following sections concentrate on the impacts and benefits of investment in irrigation.

Returns on investment

Returns on investment in irrigation are comparable to alternative investments (Carruthers, 1996). The most comprehensive evaluation of irrigation project performance is the World Bank study of 208 World Bank funded irrigation projects implemented and evaluated between 1950 and 1993. It also examined a further 614 projects with irrigation components, more than 100 irrigation projects at various stages of implementation and non - World Bank studies that enriched the exercise. World Bank lending for irrigation during the period was US$31 billion (Jones, 1995).

Of 192 projects subjected to both appraisal and evaluation, 67 percent rated satisfactory and their average estimated economic internal rate of return (IRR) at evaluation was 15 percent. After allowing for inflation, this level of return is impressive especially as most projects require large initial investments and have a long gestation period before net benefits materialize. The comparable satisfactory rates for agriculture as a whole and the all - project average are 65 and 76 percent respectively. The IRR for agriculture as a whole is 13 percent and the all - project average is 16 percent. Weighting irrigation projects by size of area served raises their average IRR to 25 percent with 84 percent of the projects rating satisfactory.

These overall ratings are surprisingly good as typical irrigation projects are extremely complex. They involve engineering, agronomic, sociological and organizational changes that render implementation and sustainability difficult. A positive element is that irrigation projects have quantifiable objectives which facilitate establishing their degree of success or failure by measuring them against no - project situations. In addition, the projects achieved their average evaluation IRR of 15 percent in an era when overvalued exchange rates and a variety of indirect taxes or subsidies to competing urban interests penalized agriculture (Carruthers, 1996).

Implementation Completion Reports on 11 World Bank financed irrigation projects in Asia and Latin America (mainly in the 1990s) for a total loan amount of approximately US$1.973 billion had an average economic rate of return at completion of 17 percent.

A strong indication that irrigation pays is the amount of private investment it attracts. Private investment provides all the financing for about 20 percent of the total area currently irrigated (about 264 million ha in 1995/97). The share of private investment in the remaining 80 percent is approximately half of the total investment. Furthermore, there is an estimated additional 70 million ha of land under informal private irrigation that falls outside government control.

This information indicates that it would not be rational to avoid investing in irrigation projects on the grounds of low investment returns.


Irrigation often has negative environmental impacts such as waterlogging and associated salinization of soils due to overirrigation and inadequate drainage. Overextraction of groundwater is also widespread in many developing countries. In some areas, particularly in the Near East/North Africa, irrigation draws on fossil aquifers that receive little or no recharge and is therefore not sustainable. The environmental and economic consequences of such practices are serious and will grow worse in the absence of appropriate responses (FAO, 2000a).

Because of its role in agricultural intensification, irrigation contributes to the pollution of surface and groundwater with nitrates, phosphates and ammonium compounds. The latter can cause excessive algal growth, proliferation of aquatic weeds and eutrophication in irrigation canals and downstream waterways thereby damaging fragile ecosystems. Irrigation can contribute to the increased incidence of water - borne and water - related diseases, and to problems associated with the resettlement of displaced people.

However, irrigation also has very important and pervasive positive environmental impacts. For example, the high population absorptive capacity of irrigation limits the migration of growing populations to areas of greater environmental risk. If additional water for irrigation (17 percent by 2025) is not forthcoming, the increased burden on rainfed agriculture to meet demand will be enormous and detrimental to the environment, with far more land clearance than is currently the case (Elz, 2000).

Furthermore, there are technical, economic and social solutions for most of the negative effects of irrigation (Carruthers, 1996; FAO, 2000a). For example, there is major potential for meeting future agricultural and overall water needs by raising water use efficiency, thereby reducing environmental damage in many cases. It is possible to repair much of the damage already done and avoid similar problems in the future. Many of these solutions are likely to require a management rather than an investment approach.

Irrigation is a factor in global environmental issues such as climate change as irrigated rice production contributes about 20 percent of global methane emissions. This is causing increasing concern as methane is 20 times more powerful than carbon dioxide and atmospheric levels are rising fast. However, even with a projected expansion in the area under rice of about 6.5 percent by 2030, methane emissions could decrease as farmers grow more low - methane rice under controlled irrigation with better nutrient management (FAO, 2000a).

In addition, the potential exists to transform cultivated land from a net source to a major net sink of carbon. Any practice which improves plant cover and yields such as irrigation contributes to this process.

The fact that irrigation is facing a number of challenges is not a reason for withdrawing from it but rather a reason for engaging in a search for solutions (Carruthers, 1996).

Scheme size

Little has damaged the image of irrigation as much as the negative impacts (land inundation, population displacement and ecological disruption) of large irrigation schemes, especially those with large dams. However, any balanced assessment should also include their positive effects (Seckler, 1998). Moreover, much irrigation does not involve large dams, whose prime function tends to be more for electricity generation and flood control rather than for irrigation.

In many developing countries large - scale irrigation schemes remain essential for food production, employment generation and development (Elz, 2000; Gleick, 2000; IFAD, 2001; Seckler et al., 1998). The World Commission on Dams is evaluating dam projects using an objective approach to incorporate more accurate estimates of their true costs and benefits (Gleick, 2000; IFAD, 2001).


Efficiency of water use

The concept of efficient water use in irrigation includes the conveyance efficiency, field efficiency, water use efficiency and economic efficiency of water (water productivity) amongst others. There is a tendency to consider water use and allocation in a holistic manner because of the highly integrated nature of water use systems involving different users. This entails establishing the water balance of river basins. This may require analyzing systems’ efficiency at different levels. Thus, measuring water use efficiency can be complex and the high degree of external effects may make it more difficult.

The evaluation of World Bank financed irrigation projects shows a strong correlation between project size and satisfactory performance: the larger the command area, the higher the likely economic returns. This is true for surface and groundwater projects and applies to all regions. The economies of scale stem from engineering and management efficiencies (Jones, 1995).

However, small - scale schemes do have definite advantages under particular circumstances. Because of their limited more cohesive membership and simple institutional arrangements, such member - controlled schemes generally enjoy more efficient and flexible distribution and maintenance regimes. However, their limitations often include: no outside agency to bear risk; lack of financial or borrowing capacity; uneconomic irrigation design and management. Another problem is that negotiations with other upstream and downstream users to maintain equity of water use within watersheds or aquifers can be difficult (IFAD, 2001).

Water use efficiency

Irrigation accounts for 80 percent of freshwater withdrawals in developing countries. One way for such countries to expand their irrigation is by improving water use efficiency.

While the concept of efficient water use is complex (Box 3) and difficult to achieve in practice, improving the efficiency of irrigation water use can contribute significantly to meeting growing demands. Seckler (1998) estimates that the amount of water saved by achieving an irrigation effectiveness of 70 percent in total gross irrigated area by 2025 could meet about one - half of the increased demand for additional water supplies in the 1990 - 2025 period. However, the conceptual and practical challenges to achieving such efficient water use are equally large because water has multiple users, uses and externalities. Better irrigation scheme organization and management and the rehabilitation and upgrading of existing schemes are generating real gains.

FAO (2000a) estimates the irrigation efficiency of a group of 93 developing countries to range from 26 percent in areas of abundant water (Latin America) to 50 percent in the Near East/North Africa region where water use calls for higher efficiencies. The forecast is for irrigation efficiency for these countries as a group to rise from 43 percent in 1995/7 to 50 percent by 2030.

Notwithstanding wide variations between regions and countries in the group, water withdrawal for irrigation accounted for about 7 percent of total water resources in 1995/1997. The forecast is for water withdrawal to grow by 12 percent by 2030. Thus, there is sufficient water for future irrigation and other needs in these countries. Nevertheless, in most countries where irrigated agriculture is already important, water for expansion will have to come mainly from efficiency savings on existing schemes. Given the need to boost agricultural productivity and growth in these countries, the importance of investing in water saving technologies and practices is clear.

Rehabilitation and upgrading

Given the need to use irrigation water more efficiently on existing schemes, it follows that the bulk of new investment should focus on rehabilitation and upgrading rather than on new schemes. Indeed, it is now often difficult to distinguish between new development and the extension of existing schemes. Projects are usually a combination of the above aspects. This is of little consequence providing that investments are economically viable and enhance scheme functioning and sustainability. However, it is important to avoid misconstruing rehabilitation for deferred maintenance without correcting the problems causing unsustainable maintenance in the first place. If not, this could lead to repetitive funding of maintenance from external sources.

In order to maximize returns, scheme improvement should incorporate lessons from previous irrigation developments and not simply rehabilitate projects to old standards. Improving performance includes repairing and modifying structures and enhancing scheme management and associated institutional arrangements.

Good planning and implementation are prerequisites for high investment returns. This is particularly relevant for complex, multi - dimensional irrigation schemes usually involving a number of interested parties. It is counterproductive to skimp on resources needed for the preparation, appraisal and implementation of such projects. Unforeseen problems that arise during implementation should be resolved promptly even at the expense of extending implementation. Confirmation comes from the evaluation of World Bank irrigation projects which showed that variations in implementation time (whether overall time or delay) had no effect on economic returns (Jones, 1995).

The emphasis on rehabilitation and upgrading can contribute to improving returns on new investments in irrigation in a number of ways. First, efficiency gains do not only make water available for new irrigation. By reducing overirrigation, they also attenuate the principal causes of land degradation on irrigation schemes, such as waterlogging and salinization. This is important as waterlogging and salinization significantly reduce irrigation performance in some countries. Second, because a considerable part of the extensive investments in irrigation during past decades are now regarded as sunk costs, incremental investment in improving scheme performance will yield high rates of return. Confirmation of this comes from the competitive economic rates of return obtained with irrigation projects that include a substantial portion of rehabilitation. Third, increased productivity and growth resulting from improving schemes will reduce the urgency to develop new irrigation to meet growing food needs. This will provide more time to thoroughly appraise and plan new irrigation development that will become economically less attractive if development costs increase and the prices of agricultural commodities stagnate or decrease. It will also allow more time to incorporate lessons from existing projects into new development.

Another advantage of rehabilitation is that project unit costs are usually low, a fact which increases the likelihood of economic viability (Jones, 1995).

The need to fund rehabilitation from external sources reflects low economic returns from first generation projects. At the same time the large volumes of sunk costs in these schemes offers the opportunity to place them on a sound economic, social and environmental footing while assuring rates of return comparable to other investments.

Operation and management


Reform and irrigation management transfer in Mexico

Following a sharp decline both in public investment in irrigation and also in farmers’ contributions to organization and management costs, and with irrigated crop production falling 0.4 percent per year, the Government of Mexico took decisive action. It opted to transform irrigation from an engineering driven, centrally managed and government funded sector to a more decentralized system based on transparent investment selection criteria and greater participation of beneficiaries in decision making and cost recovery. Moreover, it reduced agricultural price support to market related levels.

The outcome has been that water users have increased their funding of organization and management from 20 to 90 percent, organization and management costs have fallen about 40 percent, and water use efficiency and productivity is improving by about 3 percent per year. Government financial contributions to organization and management have almost disappeared. Due to increased water - fee collection and improved management, rehabilitation, deferred maintenance and upgrading are ahead of schedule. Water table problems, salinity and other unfavourable environmental effects are diminishing. Land values in rehabilitated saline areas have increased fourfold. Because of improvements in production efficiency and productivity and the elimination of price guarantees, the value of agricultural production is growing at 4.8 percent per year. Rising agricultural exports have had a favourable impact on terms of trade.

The estimated overall economic rate of return for the project at completion is 31.5 percent over 20 years.

Two important determinants of success for the project have been strong political support for the process and appropriate accompanying macroeconomic and agricultural policy reforms.

Inadequate operation and management of irrigation schemes is often a major cause of poor project performance and weak sustainability. Many governments have found it increasingly difficult to finance the costs of irrigation operation and management as well as being effective providers of water services to large numbers of small farmers. These factors have led to infrastructure deterioration, shrinkage of area irrigated, maldistribution and wastage of water, and advancing waterlogging and salinity.

Many governments are attempting to transfer management responsibility for irrigation systems from government agencies to farmers organized into water users associations (WUAS) (IWMI, 2000). Consensus is emerging that operation and management problems, scheme maintenance, irrigators’ ownership of their systems and cost recovery are interrelated. Evidence is accumulating that comprehensive yet pragmatic approaches that include the above aspects can overcome organization and management problems.

The keys to these unusually complex, interrelated problems reside in the principles of financial autonomy and irrigator participation in organization and management by means of viable WUAs. The most promising route to improvement lies in making irrigators responsible for their own organization and management and in providing them with the requisite technical support particularly regarding group formation and the skills needed for effective scheme management. There is a considerable amount of experience about the circumstances that encourage irrigators to create effective and durable groups (Ostrom, 1994, 1996). One clear lesson seems to be the importance of recognizing that group members have to bear costs as well as receive benefits.

One of the prerequisites of such an approach is government willingness to devolve. Global experience suggests that irrigation management transfer on a large scale has been most successful where: the irrigation system is central to a dynamic, wealth - creating agriculture; the average farm size is large enough for a typical or a significant proportion of the command area farmers to operate like agribusinessmen; backward linkages with input supply systems and forward linkages with output marketing systems are strong and well - developed; and the costs of self - managed irrigation are an insignificant part of the gross value farming output (IWMI, 2000). Mexico provides a successful example of irrigation management transfer (Box 4).

An important principle underlying the privatization of irrigation schemes is using water as an economic good. While water is an economic good in most cases, Perry et al. (1997) ask “whether it is a purely private good that can reasonably be left to free market forces, or a public good that requires some amount of extra - market management to effectively and efficiently serve social objectives”. The answer to this lies in value judgements and their application to different conditions of time and place. While privatizing water in the sense of giving farmers and markets a greater role in both financing and management of irrigation may be promising, it is also necessary to satisfy basic needs criteria before optimizing economic returns in terms of consumers’ sovereignty. Perry proposes sequential preconditions for the beneficial introduction of market forces in water allocation and use.

Privatization of minor irrigation in Bangladesh illustrates how policy liberalization accompanied by technical support can promote increased smallholder investment in irrigation and thereby boost agricultural production, farm incomes and employment (Box 5).

Gradual, selective privatization of organization and management and other aspects of irrigation shows considerable promise as a way of improving scheme viability and sustainability. Investment in privatization measures have produced encouraging results.


Enhanced agricultural growth through increased private sector investment in minor irrigation in Bangladesh

Implemented between 1991 and 1997, this project achieved its primary objective of faster growth in agriculture through increased private sector investment in minor irrigation by eliminating regulations, subsidies and other advantages which favoured public sector provision of minor irrigation based on deep tubewells and pumped surface water irrigation.

The project facilitated the provision of equipment by agents and provided technical assistance for training and for strengthening support institutions. It also provided assistance for a range of project support services including: planning and implementation of minor irrigation, formation of WUAs, selection of equipment, assessment of irrigation growth, hydrological exploration, and trials for irrigation technologies and rehabilitation methods.

In the six - year period, the number of shallow tubewells (STW) and the STW irrigation area increased at annual rates of 32 and 16 percent respectively. Liberalization of the sector led to: an increase in the number of equipment suppliers and equipment servicing facilities (rural workshops); a reduction in engine and other equipment prices; and an increase in the number of farmers owning tubewells. The latter included a growing number of small farmers who gained access to irrigation benefits, thereby positively influencing the equity impact of the project. Annual farm income rose by 25 and 53 percent for STWs and deep tubewells respectively. The project’s estimated economic rate of return at completion was 16 percent.

The project successfully supported government in making important policy changes to liberalize the minor irrigation sector that promoted rapid development in minor irrigation and in services catering to this technology. The overall evaluation was that the project had significant positive effects on the economy of Bangladesh.


In the coming decades irrigation will become increasingly important as it will enable intensification to generate 80 percent of overall growth in crop production and 70 percent in cereal production. While important, rainfed agriculture lacks potential to replace irrigated agriculture in any significant way. Thus, irrigation is vital to developing countries’ attempts to achieve food security and meet other growing needs and, as a whole, they do have sufficient land and water for its anticipated expansion.

Through its impact on agricultural productivity, irrigation has be neficial effects on rural incomes, rural employment, food security, poverty alleviation and overall growth and development. Moreover, it has had a significant effect in keep food affordable to the poor. Without more irrigation many countries will not attain the agricultural and overall economic growth rates required to achieve food security and reduce poverty. Irrigation also has positive distributional effects because it mainly targets smallholders living in poor rural areas.

The financial returns on investments in irrigation are generally comparable to alternative investments. Indeed, most analyses may understate their true returns by failing to consider all the positive indirect social and environmental effects of irrigation. Future investments in irrigation will be mainly for rehabilitation and upgrading and will earn higher rates of return by benefiting from the large amount of sunk costs in existing schemes. Viewed differently, a failure to maintain and improve existing schemes would result in the loss of the benefits of the investment already made in irrigation. The large amount of private investment that irrigation attracts worldwide indicates that it does yield worthwhile returns.

Technical, economic, social and environmental solutions now exist to rectify and prevent most of the problems associated with irrigation. By adhering to sound guidelines, irrigation projects can be an environmental asset. Thus, it would be a mistake to allow a perceived negative image to constrain investment in irrigation.

Improvements in the current low level of water use efficiency in irrigation will release large volumes for expansion, and for use by other sectors. There has been considerable progress in using technological, operational and managerial methods to improve efficiency levels. The underlying principles at work are those of irrigator participation, financial autonomy, partial and progressive privatization and corresponding government withdrawal. Their practical application will enhance the viability of future investments in both existing schemes and in developing new ones.

In addition to investment in irrigation, there is also a need for more investment to reclaim, conserve and further develop the productivity of land and rainfed agriculture in less - favoured areas. Techniques such as conservation tillage and integrated watershed development have demonstrated that investment in these areas can yield acceptable returns while achieving the twin goals of productivity growth and poverty alleviation. Marginal returns to such investment in less - favoured areas can exceed those in irrigation. A proper balance between the two will help to develop the potential of less - favoured areas and satisfy the needs of the people living there.

Investing in a land or water development project is not just an investment in one item, it entails investing in a whole range of elements such as farming practices, plant varieties and nutrients, human resources, the broader infrastructure and conducive policies.

The international community is committed to development goals with pressing humanitarian implications. However, in order to enable the vital elements of land and water to make their full contribution to achieving these goals, it is necessary to increase their productivity. This will not happen without increased investment in land and water development.


Barker, R. & Van Hoppen, B. 1999. Water scarcity and poverty. IWMI Water Brief 3. Colombo, International Water Management Institute.

Carruthers, I. 1996. Economics of irrigation. In Pereira et al. (eds.) Sustainability of irrigated agriculture.

Chaturvedi, M.C. 2000. Water for food and rural development: developing countries. Water International, 25(1). International Water Resources Association.

Datt, G. 1998. Poverty in India and Indian states: an update. FCND Discussion Paper No. 47. Washington, DC, International Food Policy Research Institute

Dutraux, M. & Keita, M.N. 1999. Etude d’impact du travail des charrues “Delfino” et “Treno” sur la recuperation des terres fortement degradees. Accra, FAO.

DFID. 2000. Addressing the water crisis: healthier and more productive lives for poor people. Consultation document. London, DFID.

Elz, D. 2000. Is the world running out of water? Quarterly Journal of International Agriculture, 39, No.2. Frankfurt/M, Germany, DLG - Verlag.

Fan, S. & Hazzell, P. 1997. Should India invest more in less - favoured areas? EPTD Discussion Paper No.25. Washington, DC, International Food Policy Research Institute.

FAO. 1993. The state of food and agriculture. Rome.

FAO. 2000a. Agriculture: towards 2015/30. Technical Interim Report. Rome.

FAO. 2000b. The state of food and agriculture. Rome.

Gleick, P.H. 2000. The changing water paradigm: a look at twenty - first century water resources development. Water International, 25(1), International Water Resources Association.

Hazzell, P. & Haggeblade, S. 1993. Rural - urban growth linkages in India. Indian Journal of Agricultural Economics, 46(4).

IFAD. 2001. Rural poverty report 2001: the challenge of ending rural poverty. Rome, International Fund for Agricultural Development.

IWMI. 2000. Can poor farmers in South Africa shoulder the burden of irrigation management? IWMI News. Colombo, International Water Management Institute.

Jones, W.I. 1995. The World Bank and irrigation. Washington, DC, World Bank.

Mellor, J.W. 2000. Agricultural growth, rural employment and poverty reduction: non - tradables, public expenditure and balanced growth. Paper prepared for the World Bank Rural Week 2000, Poverty or prosperity: rural people in a globalized economy.

Ostrom, E. 1992. Crafting institutions for self - governing irrigation systems. San Francisco, US Institute for Contemporary Press.

Owens, T. & Hoddinott, J. 1998. Investing in development or investing in relief: quantifying the poverty trade - offs using Zimbabwe household panel data. Washington, DC, International Food Policy Research Institute.

Perry, C.J., Rock, M. & Seckler, D. 1997. Water as an economic good: a solution or a problem? Research Report 14. Colombo, International Irrigation Management Institute.

Rosegrant, M. & Hazzell, P. 1999. Transforming the rural Asian economy: the unfinished revolution. Hong Kong, Oxford University Press for the Asian Development Bank.

Seckler, D. 1999. Revisiting the “IWMI Paradigm”: increasing the efficiency and productivity of water use. IWMI Water Brief 2. Colombo, International Water Management Institute.

Seckler, D., Amarasinghe, U., Molden, D., De Silva, R. & Barker, R. 1998. World water demand and supply, 1990 to 2025: scenarios and issues. Colombo, International Water Management Institute.

Sorrensen, J.W. 1997. Financial and economic implications of no - tillage and crop rotations compared to conventional cropping systems. Rome, Investment Centre Division, FAO.

World Bank. 2000. Reaching the rural poor: framework for a revised World Bank rural development strategy. Washington, DC.

World Bank. 2001. The World Bank and water. Water Issue Brief. Washington, DC.

Yudelman, M. 1994. Demand and supply of foodstuffs up to 2050 with special reference to irrigation. International Irrigation

Previous Page Top of Page Next Page