Moz public invst-agriculture


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Moz public invst-agriculture

  1. 1. IFPRI-Maputo Workshop Maputo, Mozambique 18 October 2012 Public Investments in and for Agriculture in Mozambique: Tentative Insights to What They Have Achieved, and What Determines Them Tewodaj Mogues and Samuel BeninInternational Food Policy Research Institute (IFPRI)
  2. 2. Impacts and Determinants of Public Investments in Agriculture PublicDetermining Investments in Outcomes factors and for Agriculture
  3. 3. Impact of Public Investments in Agriculture PublicDetermining Investments in Outcomes factors and for Agriculture
  4. 4. Goal and Objectives of Study of Public Investment Impacts• Conceptualized initially: • Assess impact of and returns to public investment in the agricultural sector • Estimate public investment required to achieve specific development objective—e.g. 7% ag. GDP growth per year (recent goals)• First objective is methodologically challenging; made even more difficult by data constraints • We use descriptive and trend analyses of available public spending and TIA data to get a sense of likely influence• Second objective depends on first objective and solid M&E data • Mozambique’s CAADP Investment Plan may face similar constraints given the data scarcity • We use parameters estimated for other countries to assess public investment requirements
  5. 5. High overall agricultural performance • Agricultural sector performance has been impressive. Annual average growth rates b/w 2000 and 2011: • AgGDP=8.4%; total public agricultural spending=12.2%; public agricultural investment=13.2% • Public spending and investment has, however, slowed down since 2005 Agricultural GDP and public spending Agricultural GDP and public spending (billion Meticais, 2003 constant prices) (annual average growth rate, %) 60 5 40 AgGDP (left axis) 35 50 34.9 4 Expenditure (right axis) 30 40 25 27.2 Investment (right axis) 3 20 30 15 2 20 10 12.2 13.2 8.4 9.6 1 5 7.3 10 5.7 5.3 0 0 0 2000-11 2000-05 2005-10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 AgGDP Expenditure InvestmentSources: Authors’ calculations based on MOF (CGE) and World Bank (agricultural PER 2011; WDI)
  6. 6. Is the high performance sustainable?• Agricultural sector has performed beyond targeted growth rates (CAADP 6% and PEDSA 7%); suggesting that continuing business-as-usual may be desirable• Key question: is the high performance sustainable? ̶ Indications are that it is not Total factor productivity and technical change sustainable because: (Index, 1961=100)  it is starting from a 1.2 small base after the 1 civil war  there has been very 0.8 little or no technical 0.6 change  TFP growth is driven 0.4 by improvement in 0.2 efficiency of factor use only 0 1961 1966 1971 1976 1981 1986 1991 1996 2001 TFP Efficiency Technical change Source: Benin et al. (2011)
  7. 7. Land and labour productivity have stagnated or declinedSources: Cunguara and Kelly (2009)
  8. 8. Low use of ag. services and technologies• Low and declining land and labor productivity are a reflection of low use of productivity-enhancing agricultural services and technologies • particularly for combined use of improved seeds, fertilizers and irrigation (less than 2% of households)• Except for irrigation, access to public services and use of technologies have stagnated or declined Access to services and use of technologies (percent of households)20%15%10% 5% 0% 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 2002 2003 2005 2006 2007 2008 Extension Improved seed Chemical Irrigation Improved seed Improved seed Fertilizers & Animal traction fertilizers & fertilizers & & fertilzers irrigation irrigationSource: Authors’ calculations based on TIA data
  9. 9. Positive impact of services and technologies (I)• Greater access to public services and use of technologies have contributed to higher productivity among households using them, especially those using fertilizers Maize productivity (kg per capita) 180 150 166.8 120 90 100.7 100.2 60 82.8 82.5 82.8 30 0 no yes no yes no yes Received Used chemical Used animal extension? fertilizers? traction? Source: Cunguara and Kelly (2009)
  10. 10. Positive impact of services and technologies (II)• Greater access to public services and use of technologies have also contributed to greater food security Average number of months of surplus production of staple10 8 6 4 2 0 no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Received extension? Used improved seed? Used chemical Irrigated fields?Source: Authors’ calculations based on TIA data fertilizers? However, the proportion of household farms using these public services and technologies has remained too low over time to bring about any technical change.
  11. 11. Policies and public spending have promoted area expansion Cultivated area• The rapid growth in public 6.0 (in million ha) spending (12.2% per year in 5.5 2000-2011) seem to have 5.0 promoted rapid expansion of 4.5 agricultural area. 4.0• Between 2002 and 2007, total 2002 2003 2004 2005 2006 2007 cultivated area expanded by 5 Source: AgPER and TIA data percent per year on average• The slow down in area expansion in more recent years shows that this type of agricultural growth may not be sustainable.• Accelerating technical frontier is essential to compensate for rapid growth in rural population and to improve rural incomes
  12. 12. Public investment required for technical change (I)• Because the current performance in growth has surpassed the targets (CAADP 6% and PEDSA 7%), the critical issue is changing the sources of growth as illustrated: Illustration of desirable change in sources of agricultural output growth (%), 2012-2017 9 6 3 0 2012 2013 2014 2015 2016 2017 (annual average Factors and Inputs 1993-2004) TFP-Technical change TFP-Efficiency Sources: Authors’ illustration based on World Bank (WDI) and Nin Pratt and Yu (2009)
  13. 13. Public investment required for technical change (II)• Approach and assumptions (based on Benin, Fan and Johnson 2012) • Overall agricultural growth remains unchanged at 2000-2011 average 8.4% per year • Substitute growth due to factors of production (low rate=0.50 and high rate=0.75 percentage points per year) with growth due to TFP (allocate 1/3 to efficiency and 2/3 to technical change) • Simulate using high (0.10) and low (0.05) scenarios for the elasticity of TFP with respect to public investment in agriculture • Other complementary expenditures (agricultural and non- agricultural) or capacity of implementing agents expands appropriately to absorb increased public investment • Simulate over ten years: 2012 to 2022, with 2012 as base
  14. 14. Public investment required for technical change (III) • Public investment Public agricultural investment 30 must grow from requirement, 2012-2022 (Bil. Meticais, 2003 prices) 25 baseline rate of 13.2 % Investment per year to 18.2 and 20 Base low conversion-low elasticity 28.2 % per year under 15 high conversion-low elasticity low conversion-high elasticity low and high 10 high conversion-high elasticity investment scenarios, 5 respectively 0 2012 2014 2016 2018 2020 2022 Base High elasticity Low elasticity (in billion Meticais; 2003 prices) low high low high conv conv conv conv Total amount 45.6 60.1 69.2 79.6 105.4 Additional amount (over base) Total n.a. 14.5 23.5 34.0 59.8 Annual average n.a. 1.3 2.1 3.1 5.4Sources: Authors’ simulation based on Benin et al. (2012), World Bank (WDI) and Mozambique CGE and AgPER
  15. 15. Conclusions from Preliminary Analysis of Investment Outcomes• Recent high agricultural growth performance in Mozambique represents catching-up with the levels achieved in the early 1990s.• The growth is driven largely by expansion in area cultivated, and to a more limited extent use of fertilizers, and increased efficiency in use of many inputs. There has been little or no technical change.• The slowdown in area expansion and the rapid growth in rural population necessitates technological change.• This will require large incremental investment in agricultural R&D, human capital, infrastructure, and institutional development.• The types of agricultural investments and policies are important because they are not growth neutral; those that deliver location- differentiated technologies and that account for diversity of farmers are likely to be critical.
  16. 16. Public Investment Decisionmaking and its Determinants PublicDetermining Investments in Outcomes factors and for Agriculture
  17. 17. Why Seek to Understand Determinants of Agricultural Investments?• Public investments in agriculture—as well as for agriculture—can have profound contributions to  productivity, nutrition, reduction of poverty• Much evidence on the impacts of different types of  investments in and for agriculture (Mogues et al. 2012)• However, in some cases, strong research consensus on high  impact areas have not translated in higher investments on  the ground (and vice versa). Example: agricultural R&D.• Must begin to ask why, by undertaking serious investigations  of what are the drivers of public investment decisionmaking• Purpose of such investigation is to support policy‐ and  decisionmakers on how to encourage high‐impact  investments and scale back ineffective ones
  18. 18. Public Investment Decisionmaking and its Determinants – A Conceptual FrameworkBased on Mogues (2012)
  19. 19. I. The Budget Process as a Driver of Agricultural Public Investments
  20. 20. Theories on Processes of Budgetary Decisionmaking• Formal procedures underlying the budget process• ‘Garbage‐can budgeting model’: Allocations are random  (Cohen et al. 1972)• Budgetary model of incrementalism: Inertia and path‐ dependency in investment decisionmaking (Davis 1971; Cowart et  al. 1975; Ostrom 1977) … or continuity / stability• Budget implementation (vs. approved budgets) • E.g. in Nigeria, on average 21 % of agricultural budget never spent  (Mogues et al. 2012) • Sudden revenue short‐ (or wind)falls; use of funds for other  purposes; leakages; etc. • Striking results from public expenditure tracking survey (e.g.  Uganda: 13 % of expenditures in education reached intended  services) (Reinikka & Svensson 2004)
  21. 21. Planning, Budgeting, Reporting in Mozambique
  22. 22. Planning & Investment Strategies over Time
  23. 23. Formal Budget Process in Mozambique
  24. 24. Studies on the implications of the budget process in Mozambique• De jure vs. de facto planning & budget process— both must be understood• Correspondence between the agricultural budget  and the PAAO, given process of PAAO’s creation• Change in nature of intergovernmental co‐ ordination in the budget process: • Shift from weight on vertical co‐ordination between agricultural  offices at central, provincial and district level, to horizontal co‐ ordination between agricultural and finance/planning offices • Trade‐off between national agricultural priorities and local priorities  across sectors
  25. 25. II. Actors, their Incentives and Constraints:Consequences for Agricultural Investments
  26. 26. Theories on Role of Various Actors in Public Investment Decisionmaking• Policymaker as ‘benevolent and unencumbered’ social planner  (Tridimas 2001; Reddick 2002)• Politicians vs bureaucrats (Niskanen 1971)• Strength of economic groups to lobby for provision of public  investments benefiting them is larger when: • more spatially concentrated  dispersed agricultural households vs.  concentrated urban residents (Olson 1985) • better transport and communications infrastructure  urban vs rural • Size of group small  agricultural population much larger in many  developing countries, reverse in rich countries (Olson 1965) • Average income and education of group member is higher  low  among smallholder agricultural households (Binswanger & Deininger 1997;  Krueger 1996)• Donors’ contribution to ag. investments: • Direct vs. indirect; fungibility; etc.
  27. 27. Role of Actors in Ag. Investments: Recent Studies on Mozambique• Ag. industry and policymakers: Embeddedness  improves policy support (Buur and Whitfield, 2011)• Diverse interests among the key actors with  proximity to policymaking (Buur, 2012)• Inter‐party competition and agricultural investments  (do Rosario 2011)• Role of Donors: • Underestimation of the influence of domestic institutions vis‐à‐vis that  of donors (Buur et al. 2011) • Donor influence on aggregate ag. investments: Limited due to partial  crowding‐out of domestic agricultural investments? (Cabral, 2009) • Strong influence on composition of ag. expenditures (for institutional  strengthening vis‐à‐vis direct production support) (Cabral et al. 2007)
  28. 28. III. How Attributes of Services and Goods Influence Resource Allocation
  29. 29. Characteristics of Public Investments and their Influence on Resource Allocation• Attributability of investments to conscious decisions  made by politicians (e.g. visibility, “markability”) (Keefer  & Khemani 2005)• Temporal features of public investments • Long lag perturbs attributability • Lag of investments vs. political cycle • Time may allow for “things to go wrong”—greater uncertainty
  30. 30. Characteristics of Public Investments: Studies on Mozambique• Heightened visibility of “promotional activities” as  opposed to “core services” (World Bank 2011)• Attributability an important element in trade‐off b/w  projectised aid and sector budget support (Hodges &  Tibana, 2004)• Lag between expenditures and outputs/outcomes:  Influence on irrigation investments (World Bank 2011)• Lag of effects of investments in institutional  strengthening: Lessons from ProAgri I (Cabral et al. 2007)
  31. 31. IV. Economic and Political Institutions
  32. 32. CAADP Process in Mozambique 8. Stake-1. Sensi- holder 9. Round- Workshop 16. Execution tisation table June 2010 7. 10. Donor2. Focal 15. Operatio- Analytical Confe- Point nal Design Work rence 9. Dec. 13. Dec. 2011 2010 6. Stock- 11. 14. Business3. Launch taking Compact Meeting Being drafted as we speak! 13. 5. Cabinet Technical4. Com- Memo 12. Invest- Reviewmittees ment Plan
  33. 33. Evidence on How CAADP Processes Influence Agricultural Investments• Very little research evidence on this to‐date for any  part of Africa! • Partly because of recent nature of implementation, and only in some  countries have final stages been reached• Three studies in other African countries give a mixed  review • On Ghana: Already advanced policy process meant CAADP had little  added‐value (Kolavalli et al. 2010) • On Kenya, Ghana, Uganda: Narrower breadth of participation than  initially anticipated (Zimmermann et al. 2009) • On 15 countries: CAADP very relevant, but misperceptions about CAADP  led to deflated interest at national level (Ackello‐Ogutu et al. 2010)
  34. 34. How will CAADP Process in Mozambique Influence Investments?• Proposal to undertake rigorous study to support the CAADP  Process in Mozambique • By providing information on which factors could help and which could be  a bottleneck in achieving intended investments• Important to initiate this investigation at this early stage, as  baseline data are critical to being able to attribute evolution of  investment portfolio to CAADP • Followed up by midline and endline data collection• Qualitative research method appropriate to disentangle  complex pathways leading to investment choices • although both qualitative and quantitative data needed)• Draw on the most relevant theoretical frameworks regarding (i)  processes, (ii) actors, and (iii) characteristics of publicly provided  goods, as as the drivers of public investments
  35. 35. We are very interested in your feedback at the early stage of this set of studies!
  36. 36. IFPRI-Maputo Workshop Maputo, Mozambique 18 October 2012 Public Investments in and for Agriculture in Mozambique: Tentative Insights to What They Have Achieved, and What Determines Them Tewodaj Mogues and Samuel BeninInternational Food Policy Research Institute (IFPRI)
  37. 37. Abbreviated Version of Selected References• Ackello‐Ogutu et al. 2010. CAADP Review: Renewing the commitment to African agriculture. • Benin et al. 2011. Annual Trends and Outlook Report, ReSAKSS.• Benin et al. 2012. Estimating public agricultural spending requirements. In: Diao, Thurlow, Benin and Fan, 2012. Strategies and Priorities for African  Agriculture: Economywide Perspectives from Country Studies. IFPRI, Washington, DC.• Buur. 2012. Mozambique Synthesis Analysis: Between Pockets of Efficiency and Elite Capture• Buur and Whitfield. 2011. Engaging in productive sector development: Comparisons between Mozambique and Ghana.• Buur et al. (2011): Strategic privatisation: rehabilitating the Mozambican sugar industry, Review of African Political Economy.• Cabral. 2009. Sector Budget Support in Practice: Desk Study Agriculture Sector in Mozambique • Cabral et al. 2007. Formulating and Implementing Sector‐wide Approaches in Agriculture and Rural Development • Cunguara and Kelly (2009). The impact of PARPA II in promoting the agricultural sector in rural Mozambique, 2002‐2008.• Hodges, T. and R. Tibana. 2004. Political Economy of the Budget in Mozambique.• Keefer, P., and S. Khemani. 2005. “Democracy, Public Expenditures and the Poor: Understanding Political Incentives for Providing Public Services.”  World Bank Research Observer 20 (1): 1–27.• Kolavalli et al. 2010. Do Comprehensive Africa Agriculture Development Program (CAADP) Processes Make a Difference to Country Commitments  to Develop Agriculture? The Case of Ghana. IFPRI Discussion Paper # 1006. • Mogues. 2012. What Determines Public Expenditure Allocations? A Review of Theories and Implications for Agricultural Public Investments. IFPRI  Discussion Paper, forthcoming.• Mogues et al. 2012a. “Agricultural Public Spending in Nigeria.” In: Public Expenditures for Agricultural and Rural Development in Africa, edited by T.  Mogues and S. Benin. London and New York: Routledge.• Mogues et al. 2012b. The Impacts of Public Investments in and for Agriculture: Synthesis of the Existing Evidence and New Empirical Analysis. IFPRI  Discussion Paper. Washington, DC: International Food Policy Research Institute, forthcoming.• Nin Pratt, A., and B. Yu. 2008. An Updated Look at the Recovery of Agricultural Productivity in Sub‐Saharan Africa. IFPRI Discussion Paper 787.• do Rosario. 2011. From Negligence to Populism: An Analysis of Mozambique’s Agricultural Political Economy.• World Bank. 2011. Report No. 59918‐MZ, Mozambique, Analysis of Public Expenditure in Agriculture, Volume I: Core Analysis.• Zimmermann, et al. 2009. Agricultural Policies in Sub‐Saharan Africa: Understanding CAADP and APRM Policy Processes.