ASTI/IFPRI-FARA Conference Cost-Benefit Analysis of Restructuring NARS in Kenya   Chris   Ackello-Ogutu and John Mburu Dep...
Background <ul><li>Moving the national economy forward – Vision 2030 pillars </li></ul><ul><li>Without mineral and other n...
Structure  of the current  NARS <ul><li>NARIs coordinated and regulated under the Agriculture Act (Cap 316) and the Scienc...
The proposed structure-KARO <ul><li>Key organs  of Kenya Agricultural Research Organization (KARO) will be: Council (polic...
Objectives <ul><li>Assess costs and benefits of the  organizational reform  of the existing National Agricultural Research...
Methodology   <ul><li>Net benefit values (NBV) are calculated for ‘with’ and ‘without’ the proposed NARS scenarios and the...
Assumptions for the CBA <ul><li>A discounting period of 30 years </li></ul><ul><li>A discount rate of 9.7% per annum  </li...
Costs (Ksh million) of KARO and proposed semi-autonomous Institutes Organizations Period (actual years) 2011 2012 2013 201...
Costs (Ksh million) of current research institutes   Organization   2011   2012   2013   2014   2015   2016   -------- 204...
Benefits (Ksh million) of the proposed NARS system <ul><li>Research productivity due to increased efficiency </li></ul><ul...
Benefits (Ksh million) of the current NARS system <ul><li>Research productivity  </li></ul><ul><ul><li>Assuming a rate of ...
Is the proposed NARS  Policy   economically  viable? Year   2011   2012   2013   2014   2015   2016   --- 2040  Net benefi...
Conclusions <ul><li>Implications for capital flows into agriculture:  - impetus for government funding under  CAADP </li><...
Upcoming SlideShare
Loading in …5
×

Cost-Benefit Analysis of Implementing a Centralized National Agricultural Research System Policy in Kenya

1,442 views

Published on

By Chris Ackello-Ogutu and John Mburu.
Presented at the ASTI-FARA conference Agricultural R&D: Investing in Africa's Future: Analyzing Trends, Challenges, and Opportunities - Accra, Ghana on December 5-7, 2011. http://www.asti.cgiar.org/2011conf

Published in: Technology, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,442
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
19
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Cost-Benefit Analysis of Implementing a Centralized National Agricultural Research System Policy in Kenya

  1. 1. ASTI/IFPRI-FARA Conference Cost-Benefit Analysis of Restructuring NARS in Kenya Chris Ackello-Ogutu and John Mburu Department of Agricultural Economics, University of Nairobi
  2. 2. Background <ul><li>Moving the national economy forward – Vision 2030 pillars </li></ul><ul><li>Without mineral and other natural resources such as oil, agriculture is the foundation for achieving Kenya’s Vision 2030 – GoK policy reforms especially since 2004 signify a renewed commitment to the sector </li></ul><ul><li>Main challenges and opportunities to agricultural growth – the need to do things differently </li></ul><ul><li>Technological innovation and commercialization as the main drivers of agricultural transformation – role of NARS </li></ul>
  3. 3. Structure of the current NARS <ul><li>NARIs coordinated and regulated under the Agriculture Act (Cap 316) and the Science and Technology Act (Cap 250); KARI is the main one but others focus on forestry (KEFRI), fisheries (KEMFRI), coffee (CRF), tea (TRF) and sugar (KESREF), etc </li></ul><ul><li>System-wide problems: budgetary allocation and utilization; staff training and retention; resource mobilization and use of physical infrastructure </li></ul><ul><li>Efficiency issues: technology generation; impact on crop and livestock productivity; pressure to cover more research fields; coordination of outreach programs; small sizes limit mounting multi-disciplinary teams to tackle problems thro commodity value chains </li></ul>
  4. 4. The proposed structure-KARO <ul><li>Key organs of Kenya Agricultural Research Organization (KARO) will be: Council (policy making body); Secretariat (executive arm) will have 8 operational units supporting 6 new semi-autonomous institutes organized along commodities and value chain lines (food crops, livestock, forestry, fisheries, horticulture and industrial crops) </li></ul><ul><li>Advantages of KARO: more effective collaboration with universities, private research institutes and CGIAR; lower transactions costs; a uniform mission and vision; attract more funds from government, private sector and donors; is expected to be more vibrant and responsive to policy issues and agric sector problems </li></ul>
  5. 5. Objectives <ul><li>Assess costs and benefits of the organizational reform of the existing National Agricultural Research System (NARS) and compare them with those of the proposed NARS </li></ul><ul><li>Assess economic feasibility/viability of implementing the proposed NARS as an alternative to the existing NARS in Kenya </li></ul>
  6. 6. Methodology <ul><li>Net benefit values (NBV) are calculated for ‘with’ and ‘without’ the proposed NARS scenarios and the net present value (NPV) of the difference in the two, referred to as the Incremental Net Benefit (INB), calculated </li></ul><ul><li>INB = NBV (with policy) – NBV (without policy) </li></ul><ul><li>Positive NPV for INB means the roposed NARS policy is economically feasible as alternative to the existing struucture </li></ul><ul><li>Internal rate of return (IRR) is also generated </li></ul><ul><li>Sensitivity analysis for selected assumptions </li></ul>
  7. 7. Assumptions for the CBA <ul><li>A discounting period of 30 years </li></ul><ul><li>A discount rate of 9.7% per annum </li></ul><ul><li>Both investment and recurrent costs for KARO; but recurrent costs of the existing NARS cease after the first two years of implementation of the new NARS policy </li></ul><ul><li>KARO will be 100% more efficient in producing benefits of research and in service delivery than the current NARS – economies of scale and improved collaboration with universities </li></ul><ul><li>GDP will pick up in 2010 and maintain a steady growth to attain an average growth rate of 10% per annum during the period 2030- 2040 </li></ul><ul><li>Non-diminishing global funds for agriculture, generally and for agricultural research in particular – to facilitate resource mobilization (KARI example) </li></ul><ul><li>Economic stability for the entire period of analysis </li></ul>
  8. 8. Costs (Ksh million) of KARO and proposed semi-autonomous Institutes Organizations Period (actual years) 2011 2012 2013 2014 2015 ...……… 2040 KARO Secretariat 1,064 536 275 274 310 .........… 1,619 Water Resource Management Institute 785 527 600 684 780 …… .…. 5,568 KIRDI 105 121 140 163 188 ……… .. 1,972 ASAL Research Institute 665 574 654 746 850 … .……. 6,068 Industrial Crops Institute 828 944 1,076 1,226 1,398 ……… .. 9,978 Horticulture Institute 453 516 589 671 765 ……… .. 5,461 Marine & Fisheries Institute 424 477 537 604 679 ……… .. 3,955 Forestry Institute 687 756 833 918 1011 ……… .. 4,317 Livestock Institute 591 673 767 875 997 ……… . 7,119 Food Crops Institute 866 987 1,125 1,282 1,462 ……… .. 10,435 Public and Private Universities 2,716 3,096 3,529 4,023 4,587 ……… .. 32,740 Private Research Organizations 295 309 325 341 358 ……… . 862 Total costs 8,202 7,949 8,542 9,502 10,619 ……… .. 61,980 Total Costs – million US$ 113.9 114.3 125.6 141.9 160.8 ……… .. 90,246
  9. 9. Costs (Ksh million) of current research institutes   Organization   2011   2012   2013   2014   2015   2016   -------- 2040  KARI 4,091 4,663 5,316 6,060 6,909 7,876 -------- 56,220 KEFRI 895 986 1,086 1,196 1,318 1,452 6,198 KMFRI 554 623 701 788 886 997 -------- 5,808 KIRDI 70 81 94 108 125 145 -------- 1,315 KESREF 308 338 372 409 449 493 -------- 2,028 TRF 177 205 239 278 323 376 -------- 3,640 CRF 292 320 350 384 420 460 -------- 1,795 Universities 1,810 2,064 2,353 2,682 3,058 3,486 -------- 21,827 Private organizations 97 102 107 113 118 124 -------- 259 Total costs 8,294 9,383 10,618 12,019 13,608 15,410 -------- 99,090 Total costs million US$ 99.7 112.7 127.6 144.4 163.5 185.2 -------- 1,190.6
  10. 10. Benefits (Ksh million) of the proposed NARS system <ul><li>Research productivity due to increased efficiency </li></ul><ul><ul><li>Currently technology generation and adoption in Kenya are mainly attributed to operations of KARI and collaboration with CGIAR – returns are about 0.2% of GDP </li></ul></ul><ul><ul><li>KARO is likely to double the current research returns to 0.4% of the GDP by the year 2021 </li></ul></ul><ul><ul><li>The returns are about Ksh 5.6 billion in the third year of KARO’s existence </li></ul></ul><ul><li>Increased funding </li></ul><ul><ul><li>KARI used as the point of reference </li></ul></ul><ul><ul><li>Ksh 2.7 billion likely to be generated by the year 2013 (increases by 12% every year) </li></ul></ul><ul><li>Sharing of facilities: KARO to save about Ksh 240 million by 2013, the time it becomes fully operational </li></ul>Research productivity due to increased efficiency
  11. 11. Benefits (Ksh million) of the current NARS system <ul><li>Research productivity </li></ul><ul><ul><li>Assuming a rate of return of 47% to agricultural productivity monetary benefits are 0.2% of GDP annually </li></ul></ul><ul><ul><li>This is about Ksh 4.447 billion in 2011 </li></ul></ul><ul><ul><li>Magnitude of benefits depends on growth of GDP– assumed to be an average of 6% over the investment period (grows to 10% by 2030 and maintained at this level thereafter) </li></ul></ul>Research productivity due to increased efficiency
  12. 12. Is the proposed NARS Policy economically viable? Year   2011   2012   2013   2014   2015   2016   --- 2040  Net benefits of ‘with policy scenario’ -9,476 -9,516 -1,849 -2,009 -2,205 2,368 ---- 33,683 Net benefits of ‘without policy scenario’ -3,847 -4,647 -5,512 -6,606 -7,822 -9,190 ---- -47,304 Incremental net benefit -5,629 -4,870 3,663 4,598 5,617 6,822 ---- 80,988 Decision Criteria NPV = 142,584 (US$ 1,713 million); IRR = 47.4 percent
  13. 13. Conclusions <ul><li>Implications for capital flows into agriculture: - impetus for government funding under CAADP </li></ul><ul><ul><ul><li>KARO will be more credit worthy </li></ul></ul></ul><ul><li>Increased efficiency arising from integration of NARIs with universities </li></ul><ul><li>But rolling out KARO is likely to face initial challenges: funds disbursement delays, logistics, vested interests and political commitment </li></ul>

×