Policy and sector analysis

Policy and sector analysis includes analytical work as well as a process of consultation and dialogue to forge consensus between different stakeholders on opportunities and constraints for agriculture investments and ways to address them. Governments need to evaluate and design policies to mobilize investments for steady economic growth and sustainable development. Attracting investments in agriculture requires a wide set of policies beyond agriculture, including macroeconomic policies and policies that guide other sectors. Sectoral policies influencing the business climate in agriculture include policies on trade and investment, education, research and development, infrastructure, financial markets, environment and tax policies. Policy analysis should further identify the potential impacts of policy reforms options on the agriculture sector and the incentives faced by individual players within that sector, as well as the country’s overall investment climate, which will also have significant implications for agricultural investment (see box below).

Sector reviews and diagnostic studies, using a variety of methodologies, aim to support governments in identifying the sector’s main strategic issues and constraints, as well as opportunities and drivers for achieving development goals. Sector analyses also highlight priority areas for interventions to ensure the highest return on agricultural investments in terms of growth, food security and poverty reduction.   Sector analysis findings can guide and inform investment project identification, making investment choices more credible, robust and realistic. They provide indications on where and how resources should be allocated in order to most effectively and efficiently achieve policy objectives for agriculture, food security and nutrition.

When planning for the future it is important to review past performance of the sector overall and of specific interventions within it, assessing what has worked in achieving desired outcomes, and how good practice can be scaled up. An assessment of past performance will also assist in determining whether the assumptions underlying the sector performance targets are realistic and provide baseline elements for assessing progress.  A review of practical implementation experience and lessons learned from past or ongoing investment projects can complement more formal analytical work to promote good practices in investment.  

A Public Expenditure Review (PER) is a powerful tool for understanding past patterns of public expenditure. It maps areas and relevant budget votes to a particular sector, which can be defined narrowly or broadly, depending upon the purpose of the review. PERs can provide indications of the degree to which public funds are allocated in line with stated policy objectives and in support of investments with highest returns. PERs also highlight how much of budgeted amounts are actually spent, providing an indication of implementing capacity. Depending upon the specific PER methodology applied, they can also highlight complementarities and trade-offs between different categories of spending. 

An Investment Plan is a country-wide plan that maps the investments needed to achieve national development targets over a defined time frame. It is a strategic tool for policy implementation and the scope of coverage – from a narrow focus on productive agricultural activities to a broader scope that includes natural resources management, rural development and value addition, as well as food security and nutrition and social and health aspects – depends upon the country’s policy and institutional environment. The name of the plan in a given country will reflect its scope and other national considerations. IPs are developed and managed by governments in consultation with national stakeholders from the private sector and civil society. For an IP to be successfully implemented, all relevant stakeholders must be engaged in its development. Sector goals can only be achieved through a combination of public and private investment and IPs are an opportunity to forge greater synergies. IPs should be anchored in country systems, structures and procedures, especially the budgeting process. They can be a useful tool in the implementation of sector-wide approaches (see box below). 

Projects are important implementation mechanisms for priority investments. Projects can be funded by domestic public or international resources or by the private sector. In some countries all implementation of public investment occurs through projects. The first step in setting up a project is identification. The purpose of project identification is to develop a preliminary proposal for the most appropriate set of interventions and course of action, within specific time and budget frames, to address a specific development goal in a particular region or setting. This is presented in a concept note prepared in line with the specifications and requirements of the intended financing source. Investment ideas can arise from many sources and contexts. They can originate directly from a country’s sector plan or investment plan, programme or strategy, as follow-up to an existing project, or from priorities identified in a multi-stakeholder sector or local development dialogue. Proposals for public investment should be screened against and aligned with national strategies, plans and programmes to ensure that their implementation will be coherent with broader efforts and contribute to overall development goals. Proposals should also be screened against Principles for Responsible Investment in Agriculture and Food Systems, to ensure that they guard against and mitigate risks to food security and nutrition, while promoting food security and nutrition benefits. Identification involves: a) a review of alternative approaches or options for addressing a set of development problems and opportunities; b) the definition of project objectives and the preliminary scope of interventions and expected outcomes at pre-feasibility level, noting the major issues and questions to be addressed and studies to carry out during preparation before design can be finalized and any funds can be committed.