Infrastructure and Agricultural Productivity in Asia: Issues and Policy Options


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As part of the Asian Development Bank Institute (ADBI) Project 'Sustaining Equitable Economic Development in ASEAN: Narrowing Income Gaps of Cambodia, Lao PDR, Myanmar and Viet Nam (CLMV) Countries' a training session covering Agricultural Reforms and Productivity in CLMV Countries was held in Suzhou, China last September.The training program was organised by the ADBI, Tokyo and the Asia-Pacific Finance and Development Center (AFDC) in Shanghai.

This presentation is from the session that covered key issues related to Infrastructure and Agricultural Productivity in Asia: Issues and Policy Options. Dr. Richard Vokes, a Senior Advisor for ACI, gave this presentation.

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Infrastructure and Agricultural Productivity in Asia: Issues and Policy Options

  1. 1. Infrastructure and Agricultural Productivity in Asia ISSUES AND POLICY OPTIONS Richard Vokes Senior Advisor Agrifood Consulting International Sept 2013
  2. 2. Infrastructure and Agriculture “ The importance of infrastructure…is widely recognized, although not easily quantified.” ADB, 1993 “…few MDGs will be reached unless the infrastructure deficit is bridged” (C. Kingombe, 2011) poor access to infrastructure services is “the greatest impediment to growth of agribusiness”. (DFID, “A major, if not the major, component of competitiveness in agriculture value chains is access to affordable physical infrastructure.” FAO/ODI, 2008)
  3. 3. Infrastructure for Agriculture Physical structures that aid the competitiveness of the productive agricultural sector- - as well as related organisational systems that support planning, design, construction, regulation, operation and maintenance. (FAO/ODI, 2008) A subset of rural infrastructure:  Supports on-farm production: irrigation, energy, transport, storage;
  4. 4. Infrastructure for Agriculture  Ensures efficient trading and exchange: telecoms, covered markets;  Adds value to domestic economy: agro-processing and packaging;  Enables rapid and efficient movement from farm –gate to processing and on to wholesalers: transport and bulk storage; Both hard physical infrastructure and the ‘software’, including regulatory framework.
  5. 5. Infrastructure for Agriculture  Irrigation: Dam and Canal, tube wells, sprinkler, drip;  Energy: For irrigation and agro processing. Grid and off-grid;  Roads: rural roads/farm to market roads + key components of national network;  ICT: Telecoms for market information; internet for extension and training;  Agro-processing and agri-business services.
  6. 6. Status of Infrastructure for Agriculture in CLMV Countries  Serious infrastructure deficit in 1990s due to war damage, neglect and lack of resources;  Progress since then in CLV-but remoter areas of Laos and Viet Nam still poorly served;  Myanmar still faces a serious infrastructure deficit across all aspects of infrastructure;  Potential for investment in infrastructure to drive agriculture development-Thailand and China
  7. 7. The Infrastructure Deficit Substantial underinvestment in infrastructure by both public and private sector, especially in rural areas. (World Bank, 20??) Reasons for underinvestment in agriculture infrastructure:  Fiscal Constraints: structural deficits, although these can be eased by external assistance;  Mis-investment: Excessive spending on private goods-e.g subsidies, including agricultural subsidies;  Urban/modern sector bias in government investment plans;  Perception of agriculture as a sunset sector;
  8. 8. Community-Based Agriculture Investment Community built and managed infrastructure can ease constraints on rural/agricultural infrastructure: Irrigation: Farmer-managed irrigation schemes; • Energy: Scope more for individual development-e.g biogas and solar, but limited use beyond household level; • Rural roads: considerable scope for community involvement in construction and management through adoption of labor intensive techniques; • ICT: Development of networks has to rely on public or private sector but scope for community management of ‘technology centers’; • Agro-processing: Cooperatives/Farm organizations quite often involved, albeit with mixed results. Range of technologies allows for SME investment.
  9. 9. Advantages of Community-Based Infrastructure Viet Nam: Community Based Rural Infrastructure Project (World Bank, 2001)- Implemented between 2002-2009. Covered water supply, schools, health stations, roads, irrigation and markets; Cambodia: Improving the Livelihood of Poor Farmers (ADB supported, 2002)- covered small-scale village infrastructure, such as community ponds and tree plantations. All helped to • build capacity of local communities in decision making and developed institutional structures for participation • Ensured infrastructure constructed met needs of community • Generated substantial local employment • Strong sense of ownership which helps to ensure sustainability •
  10. 10. Role of the Private Sector and PPPs Growing involvement of private sector in infrastructure provision. Can private sector help to ease rural/agriculture infrastructure deficit? Benefits of private sector participation: • Crowd in resources; • Responsive to local needs; • Bundling of design, construction and operation; • Cost savings; • Risk transfer; • Improved efficiency; • Strengthened human capital.
  11. 11. Factors Limiting PPPs in Agriculture Infrastructure Low population densities; Remote locations; Weather dependent production; Limited capacity for cost recovery
  12. 12. Factors Influencing Private Sector Decision-Making Sources of revenue; Scale: is it sufficient to justify sunk costs of project development and bidding; Income growth potential; Confidence in regulatory environment and sanctity of contracts
  13. 13. Policies to Attract PPPs in Agriculture Infrastructure Making the unbankable bankable: • Sharing or managing the commercial risk; • Subsidies-grants, concessional loans, guarantees; • Shadow tariffs; • Infrastructure Bundling to broaden revenue stream • Community participation; • Clear and transparent regulation
  14. 14. Public vs PPP Investment in Infrastructure Limited scope for stand alone private sector investment in agriculture infrastructure. Choice therefore between standalone public investment and PPPs. Conditions when public support to private sector is justified: • Proposed investment delivers on broader public interest; • Investment not possible in absence of private participation; • Involvement of private sector brings better ‘value for money’
  15. 15. Public vs PPP Investment in Infrastructure (con’t) Private sector participation not a panacea; Does not always yield better value; Effective regulatory framework is critical to protect public interest; Development partners have key role in supporting PPPs in agriculture; Substantial resources available to support PPPs
  16. 16. Thank You