APR Workshop 2010- S&S Cooperation-Public Services and Agricultural Development-IFPRI

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APR Workshop 2010- S&S Cooperation-Public Services and Agricultural Development-IFPRI

  1. 1. Public Services and Agricultural Development: Challenges, Policy Options, and a Case Study Kevin Z. Chen, Ph.D Senior Research Fellow & China Program Leader International Food Policy Research Institute (IFPRI) Presented at Seminar on Comprehensive Agricultural Development and Poverty Reduction China-IFAD South-South Cooperation Nanning, Guangxi, China, November 4-6, 2010
  2. 2. Agricultural Development Challenges and Inadequate Public Investment on Agriculture
  3. 3. Feeding the Hungry People - Are We on Track? Source: Fan (2010)
  4. 4. Malnourished People Source: FAO (2009)
  5. 5. Rising Global Food Demand <ul><li>FAO projects that food production needs to almost double by 2050 to feed a world population of 9 billion </li></ul>Source: Chen (2010)
  6. 6. Agricultural Success Is Essential <ul><li>Rising Productivity in agriculture provided the foundation for economic success in the vast majority of the economies </li></ul><ul><li>The World Bank’s World Development Report 2008: Agriculture for Development points out that GDP growth from agriculture has been shown to raise the incomes of the poor 2-4 times than GDP growth from non-agriculture </li></ul>
  7. 7. Past Methods of Production - Not Sustainable <ul><li>Past Growth of Population and Agricultural Production </li></ul><ul><li>Production Increases of the last half century have been achieved at considerable ecological cost and only with heavy use of energy and oil inputs </li></ul><ul><ul><li>A report by the Centre for Food Policy at City University, London, Towards a National Sustainable Food Security Policy </li></ul></ul>Source: Chen (2010)
  8. 8. Investment Gap on Agriculture Source: Fan (2010)
  9. 9. Public Expenditure on Agriculture Source: Fan (2006)
  10. 10. Priority Setting on Public Agricultural Investment
  11. 11. Rationales of Public Investment <ul><li>Market Failures </li></ul><ul><li>Distribution and Poverty Reduction </li></ul><ul><li>Enabling the Investment Environment </li></ul>
  12. 12. Yield Gap Source: Chen (2010)
  13. 13. Food Waste <ul><li>The Stockholm International Water Institute recently estimated that the world wastes about half the food it grows. </li></ul><ul><li>For poor countries, waste could be curbed through investment in transportation, storage and distribution systems. </li></ul><ul><li>For rich countries, it is about our habits as consumers: buy only what we need, eat less, and move away from the built-in waste endemic in our food distribution systems. </li></ul>Source: Science (2010)
  14. 14. Changing Diets Source: Chen (2010)
  15. 15. Rural Urban Disparity in China (Income and Health)
  16. 16. Nonfarm Income in China, 1983-2008 <ul><li>The total amount of labor force on nonfarm activities is estimated to be 230 million in China in 2009, which is about 47% of the total labor force in rural China </li></ul>Source: China Annual Statistic Book (2009)
  17. 17. Growth and Rural Poverty Pathways of Public investment
  18. 18. Impact Pathways for Specific Public Service <ul><li>Agricultural research and extension services </li></ul><ul><li>Irrigation </li></ul><ul><li>Rural roads </li></ul><ul><li>Rural transportation and telecommunication </li></ul><ul><li>Markets </li></ul><ul><li>Rural financing </li></ul><ul><li>Rural electrification </li></ul><ul><li>Agricultural subsidies </li></ul><ul><li>Agricultural and rural education </li></ul><ul><li>Rural health </li></ul><ul><li>Safety nets and targeted transfers </li></ul>
  19. 19. Returns to Rural Investment, India Returns in Rupee per Rupee Spending Number of Poor Reduced per Million Rupee Spending
  20. 20. Effects of Rural Investment, China yuan per yuan spending No. of poor reduced /10,000 yuan R&D Education Roads Phone Irrigation Power Loans
  21. 21. Regional Effects, China Returns in Yuan per Yuan investment Number of poor reduced per 10,000 Yuan invested
  22. 22. Effects of Rural Investment, Uganda Returns in shilling per shilling Investment Number of poor reduced per million shillings investment
  23. 23. Ranking of Investment Effects
  24. 24. Effects of Low and High Quality Roads, China No. of Urban Poor Reduced per 10,000 Yuan No. of Rural Poor Reduced per 10,000 Yuan
  25. 25. Highlights of Results <ul><li>The three most effective public spending items of promoting agricultural growth and reducing poverty: </li></ul><ul><ul><li>Agricultural research and extension </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Rural infrastructure </li></ul></ul><ul><li>Government spending on antipoverty programs such as safety nets or food subsidies generally has a small impact in reducing poverty and growth mainly because of inefficiencies in targeting and misuse of funds. </li></ul><ul><li>Initial subsidies in credit, fertilizer, and irrigation might have been crucial for small farmers to adopt new technologies . But as more and more farmers have adopted new technologies, continued subsidies have led to inefficiency of the overall economy . </li></ul>
  26. 26.   Reforming Institutions: PPP <ul><li>Public and Private Partnership (PPP). Public sector will be still the major player in providing infrastructure services in rural areas </li></ul><ul><li>But privatizing certain component can improve efficiency and service </li></ul><ul><li>“ Unbundling” is a necessary part of privatization </li></ul>
  27. 27. Feasibility of Private Sector Delivery Sector/type of service Potential for competition Characteristics of good/service Potential for cost recovery Equity concerns Marketability index Telecommunications Local services Long distance   medium high   private private   high high   medium few   2.6 3.0 Power Thermal generation Transmission Distribution Gas production/ transmission   high low medium high   private club private private     high high high high   few few many few   2.6 2.4 2.4 3.0 Transport Rural roads Primary/secondary Roads   low medium   public club     low medium   many few   1.0 2.4 Irrigation Primary/secondary networks Tertiary (on farm)   low   medium   club   private   low   high   medium   medium   1.4   2.4
  28. 28. Unbundling and Degree of Competition Industry Generation/ storage Transmission Distribution/retailing   Power / energy   Competitive   Monopolistic   Competitive   Large scale irrigation   Monopolistic/ oligopolistic   Monopolistic   Competitive Medium scale irrigation   Competitive   Monopolistic   Competitive Small scale irrigation   Competitive   Monopolistic   Competitive   Telecommunications   Competitive   Monopolistic   Competitive   Rural roads   Monopolistic      
  29. 29. Centralization vs. Decentralization <ul><li>Scale of economy </li></ul><ul><li>New technological innovations </li></ul><ul><li>Community and user’s association </li></ul><ul><li>Strengthening public institutions </li></ul><ul><li>Improving human capitals </li></ul>
  30. 30. Policy Options – Business Unusual Source: Fan (2010)
  31. 31. Public Service Delivery in Rural China <ul><li>Agriculture: To reach a grain output of 500 million tons by 2010 through government subsidies, agricultural construction and industrialisation projects. A particular focus is put on the construction of water-saving farmland irrigation systems. </li></ul><ul><li>Rural infrastructure: providing safe drinking water for all by 2013. Additional 1.2 million kilometers of rural roads aims to connect all townships and villages. Internet access in all townships. </li></ul><ul><li>Health care: The new rural co-operative medical scheme (NRCMS) to 730 million residents and 86% of counties. By 2010, the standard for financing might be raised to CNY 100 per person, with central and local government contributions to be raised to CNY 80. </li></ul><ul><li>  </li></ul><ul><li>Social security: a rural social security system to cover all needy people in rural areas under a subsistence allowance programme ( dibao ). </li></ul><ul><li>Education and training: the realisation of free nine-year compulsory education in rural areas by exempting rural primary and junior high school students from tuition fees and other educational expenses. </li></ul><ul><li>Financial services: strengthening the role of the Agricultural Bank of China (ABC), the Agricultural Development Bank of China (ADBC) and the China Postal Savings Bank (CPSB) in serving the sannong sectors as well as promoting new types of rural financial institutions and reforming rural credit co-operatives (RCCs). </li></ul>
  32. 32. A Case Study – Delivering Agricultural Extension Services in China
  33. 33. Agricultural Extension in the World <ul><li>The large population countries, such as China and India, established their agricultural extensioto realize their national food security goals (Swanson, 2006; Umali and Schwartz, 1994; 1997; Hu et. al ., 2009). n system </li></ul><ul><li>Government support for public research and extension in most developed and developing countries began a slow decline since the late of 1980s (Swanson, 2006; Huang et. al., 1998; 2003).   </li></ul><ul><li>The budgetary challenge made many countries start to reform their public agricultural extension system during the 1990’s (Feder et. al ., 1999; Umali and Schwartz, 1994). </li></ul><ul><li>While privatizing agricultural extension services was conducted in some industrialized countries in Europe, North America, and Oceania counties, the decentralization or commercialization of agricultural extension services had been conducted in some developing counties (Feder, 2001; Umali and Schwartz, 1994; 1997; Anderson and Feder, 2003; Rivera, 2001; Hu et. al., 2009). </li></ul><ul><li>However, a number of studies indicated that the privatization reform made agricultural extension services inaccessible for smallholder farmers (Cary, 1998; Lindner, 1993; Umali and Schwartz, 1994; 1997; Feder et. al ., 1999). </li></ul>
  34. 34. Agricultural Extension in China <ul><li>A rather ‘complete’ national agricultural extension system </li></ul><ul><ul><li>The number of public extension staff is 1,008,000 </li></ul></ul><ul><ul><li>China has 720,000 villages </li></ul></ul><ul><li>Top-down model and government-led agricultural extension service </li></ul><ul><li>Government failures led to ineffectiveness </li></ul><ul><ul><li>Information inadequacy, incentive measure, competency, political interests and bureaucratic system </li></ul></ul><ul><li>Led to a number of extension reforms in the country </li></ul><ul><ul><li>A concern over exclusion of small farmers in the reformed extension system has been raised </li></ul></ul>
  35. 35. Challenges in China’s Agricultural Extension <ul><li>Dominance of scattered small farmers </li></ul><ul><li>Rapid rise of urbanization and agricultural industrialization </li></ul><ul><li>Demands for sustainable agricultural development </li></ul><ul><li>Ongoing reform of government structure and administration </li></ul>
  36. 36. “ Three Dissatisfactions” with the Current Public Agricultural Extension Service <ul><li>Farmers’ dissatisfaction: close to 80% farmers surveyed in ten villages at two counties in Sichuan and IMAR had never seen extension staff in 2005 </li></ul><ul><li>Government dissatisfaction: extension staff don’t do or cannot do the extension job but get the salary </li></ul><ul><li>Extension staff: low salary, no incentive for good performance, no adequate operating budget </li></ul>
  37. 37. Intervention Strategies <ul><li>Set up an inclusive public agricultural extension system which meets demands of farmers </li></ul><ul><li>Promote the establishment of market-driven agricultural extension system </li></ul><ul><li>Adopt participatory agricultural extension approach to improve the efficiency </li></ul>
  38. 38. Policy Experiment on Public Agricultural Extension Reform <ul><li>Objective is to introduce and experiment a farmer need based extension system </li></ul><ul><li>Key organizations involved: </li></ul><ul><ul><li>Agricultural Committee, the People’s Congress </li></ul></ul><ul><ul><li>National Agricultural Technology and Education Service Center (NATESC), Ministry of Agriculture (MOA) </li></ul></ul><ul><ul><li>Center for Chinese Agricultural Policy (CCAP), Chinese Academy of Science (CAS) </li></ul></ul><ul><ul><li>Agricultural bureaus at counties </li></ul></ul><ul><ul><li>Township level extension workers </li></ul></ul><ul><ul><li>China Canada agriculture development program </li></ul></ul><ul><li>Initial Pilot sites: 5 villages at Wuchuan, IMAR and 5 villages at Pengzhou, Sichuan </li></ul><ul><li>Duration: from April 1st 2005 to August 30th 2008 </li></ul>
  39. 39. Characteristics of Policy Initiative <ul><li>Changing role: a shift from meeting demands from government to farmers’ needs </li></ul><ul><li>Bottom-up model: to deliver technologies demanded from farmers instead of government </li></ul><ul><li>Responsibility system: one staff in charge of 1 or 2 villages </li></ul><ul><li>Accountability: to respond to the requirements from farmers </li></ul><ul><li>Incentive-based: to be more pro-active </li></ul>
  40. 40. Key Approaches <ul><li>Identification of experiment villages and selection of township level responsible extension workers </li></ul><ul><li>Identify the responsibility of the chosen extension agents and link the performance with the payroll </li></ul><ul><ul><li>The number and extent of visits to farmers, the number of problems solved, deal with emergent issues, farmer field schools conducted, nurturing the lead farmers, and performance related bonus </li></ul></ul><ul><li>At village level </li></ul><ul><ul><li>Identify the technique needs from farmers, new technique workshop, new technique experience sharing, and farmer field school </li></ul></ul>
  41. 41. Rapid Rural Appraisal
  42. 42. Responsibility System for Township Level Agricultural Extension Agent
  43. 43. Farmers New Technique Sharing – Farmer Field Schools
  44. 44. Outputs of the Policy Initiative <ul><li>Learn farmers’ diversified needs, met farmers’ needs and benefited farmers </li></ul><ul><li>Improved role of extension staff </li></ul><ul><li>Setup of a functional incentive mechanism </li></ul><ul><li>Introduced an effective monitoring & evaluation system </li></ul><ul><li>Proposed a way to deal with issues of incapable staff </li></ul>
  45. 45. Initial Evaluation: Farmers’ Access to Extension Staff in Pilot Villages <ul><li>2006 </li></ul><ul><ul><li>Pengzhou: 100% in two villages , 95% in another two villages and one village 50% </li></ul></ul><ul><ul><li>Wuchuan: 100% in one village, 95% in two villages, and 90% in another two villages </li></ul></ul><ul><li>2007 </li></ul><ul><ul><li>Pengzhou: 100 % in one village, 94 % in another village, 80 % in five villages and 70 % in two villages </li></ul></ul><ul><ul><li>Wuchuan: 100 % in one village, 93 % in two villages, 85 % in three villages, and another 68 % </li></ul></ul>
  46. 46. Scaling Up <ul><li>The number of villages was increased from 5 villages to 15 villages for the INC initiative </li></ul><ul><li>The Government of Pengzhou extended the modified model to 130 villages in 2006 </li></ul><ul><li>The MoA also extended the modified model to 25 counties in 25 provinces in 2006 </li></ul>
  47. 47. Differences between Pengzhou and INC Initiatives <ul><li>First, the extension agents are responsible for identifying the farmers’ needs based on their own individual informal survey rather than the use of RRA. </li></ul><ul><li>Second, the target group is farmers selected for technology-demonstrating purpose. </li></ul><ul><li>Third, the maximum year-end bonus is 3,000 yuan . </li></ul>
  48. 48. Differences between the MOA and INC Initiatives <ul><li>First, an attempt is made to include the county level extension agents in the reform initiative. Separate service contracts are designed for the county and township level extension agents with the MoA initiative. </li></ul><ul><li>Second, a questionnaire is designed to identify farmers’ technology needs in the beginning of the year rather than the RAA method. </li></ul><ul><li>Third, the target group is the model farmers selected for technology-demonstrating purposes. </li></ul><ul><li>Forth, local government provides extra operation funds to encourage agricultural extension agents to go to the villages. In Pixian, for example, an operational fund in the amount of 5,000 yuan per year is provided for each responsible agent. </li></ul><ul><li>Fifth, extension agents are assessed jointly by their work units and the selected farmers. </li></ul>
  49. 49. Questions <ul><li>Whether farmers see more agricultural extension agents due to the reforms; </li></ul><ul><li>Whether farmers accept more services from the agents due to the reforms; </li></ul><ul><li>Whether the number of farmers who accept the services is increased due to the reforms; </li></ul><ul><li>Whether farmers adopt the services from the agents due to the reforms; </li></ul><ul><li>Whether the number of farmers who adopt the service from the agents due to the reforms. </li></ul>
  50. 50. Our Own Policy Experiment - INC <ul><li>Treatment </li></ul><ul><ul><li>The “INC initiative” reform programs were initially introduced in Pengzhou county, Sichuan and Wuchuan county, IMAR in 2005. In each county, five villages were randomly selected as pilot sites in 2005, additional five villages were added in 2006, and additional five villages were added in 2007. </li></ul></ul><ul><ul><li>Five technicians at the township level for a given county are randomly selected to as the RESPONSIBLE AGENTS. As a result, one technician is responsible for one village in 2005, for two villages in 2006, and for three villages in 2007. </li></ul></ul><ul><li>Control </li></ul><ul><ul><li>In order to evaluate the effects of INC reform initiatives, 15 non-reform villages in the neighbor of the reform policy pilot villages as a control group each county. </li></ul></ul><ul><ul><li>The neighboring villages were chosen to control the effect of other factors than the reform program. </li></ul></ul>
  51. 51. Pengzhou Government Initiative <ul><li>Treatment </li></ul><ul><ul><li>Fifteen villages out of the total 130 villages under the Initiatives were randomly selected by researchers to assess its effectiveness. </li></ul></ul><ul><li>Control </li></ul><ul><ul><li>Because Pengzhou government reform initiative are located at the same county as our INC reform initiative, Pengzou initiative based on the same 15 villages as a control as the INC Initiative. </li></ul></ul>
  52. 52. The MOA Policy Initiative <ul><li>Treatment </li></ul><ul><ul><li>Pixian and Kalaqing are chosen out of 25 counties under the Initiative. Pixian is chosen to match Pengzhou in Sichuan, while Kalaqin is chosen to match Wuchuan, IMAR </li></ul></ul><ul><ul><li>15 villages each were randomly selected for Pixian and Kalaqin, respectively. </li></ul></ul><ul><ul><li>For the MOA programs, no specific extension staff was allocated to specific villages. Rather a team from township extension station was made responsible for meeting the extension needs in the villages. </li></ul></ul><ul><li>Control </li></ul><ul><ul><li>Two neighboring counties - Doujiangyan in Sichuan and Songshan County in IMAR were selected as control counties. </li></ul></ul><ul><ul><li>Fifteen villages were randomly selected at each of the two counties as the control group. </li></ul></ul>
  53. 53. Data Collection <ul><li>The survey questionnaire was designed to collect information on the farmers’ access to technology services during the years 2005 to 2007. </li></ul><ul><li>A team of four trained enumerators conducted a random survey in IMAR and Sichuan at the end of 2007 and the beginning of 2008. </li></ul><ul><li>A total of 1350 farmer households from 135 villages at 6 counties were selected and interviewed. </li></ul><ul><li>Relevant information was collected for 2005, 2006, and 2007 when available (Only collected information in the reformed year). </li></ul><ul><li>As a result, the final sample consists of a total of 2,730 observations. </li></ul>
  54. 54. Table 4. Services Received and the Number of Techniques Adopted by Farmers AVAILABLE: Have met the agents (%) ACCEPTANCE: Services received ADOPTION: Techniques adopted Percents (%) Numbers Percents (%) Numbers The INC reform initiative and control non-reform comparison Wuchuan, IMAR INC initiative (reform village) 91.0 84.2 1.82 80.1 1.67 Non-reform (control village) 19.5 18.8 0.22 17.9 0.22 Pengzhou, Sichuan INC initiative (reform village) 84.0 79.0 2.30 74.3 1.93 Non-reform (control village) 36.7 34.6 0.76 35.5 0.73 The Pengzhou initiative, the MoA reform, and control non-reform comparison Pengzhou, Sichuan: INC initiative 68.3 57.2 1.28 56.8 1.23 MoA Reform county: Kalaqin, IMAR 89.7 84.5 2.57 83.2 2.25 Control non-reform county: Songshan, IMAR 67.9 64.2 1.56 63.0 1.50 Reform county: Pixian, Sichuan 43.4 36.1 0.60 35.1 0.46 Control non-reform county: Doujiangyan, Sichuan 27.0 25.0 0.39 22.7 0.33 Source: Authors’ survey
  55. 55. Key Observation <ul><li>Comparing to farmers in the control non-reform villages, it appears that more farmers in each extension reform initiative villages have seen extension agents, accepted the agent’s services, and adopted the services provided by the agents. </li></ul>
  56. 56. Major Conclusions <ul><li>First, the introduction of all reform initiatives considered under the study increases the farmers’ access, acceptance and adoption of agricultural advisory services from extension agents. </li></ul><ul><li>Second, the farmers under the small farmer inclusive reform initiative are more likely to receive, accept, and adopt the agricultural advisory services than those under other reform initiatives considered under the study. </li></ul>
  57. 57. Promoting Extension Service of the Third Parties and Private Sectors <ul><ul><li>The new system provides incentives for local extension agents to work with the third parties such as cooperatives and private sectors to deliver the extension service </li></ul></ul><ul><ul><li>Company-led agricultural extension service </li></ul></ul><ul><ul><li>Farmer organizations and cooperatives take the leading role in extension service </li></ul></ul>
  58. 58. Challenges for Scaling-up <ul><li>High monitoring cost </li></ul><ul><li>Budgetary issue with bonus payment </li></ul><ul><li>Lack of operating budget for the extension agents </li></ul><ul><li>Conflicts between the agents in the new and old systems </li></ul><ul><li>Difficulties to deal with incapable extension staff </li></ul>
  59. 59. Policy Impacts <ul><li>Provincial-wide: The revised model had been extended to 35 villages in 5 counties at Chengdu, Sichuan and 12 villages in 10 counties at IMAR in 2007 </li></ul><ul><li>National-wide: The revised model had been extended to 25 counties in 25 provinces in 2006 </li></ul><ul><li>Key elements of the model had been adopted in the National Agricultural Extension Policy issued by the State Council in 2007 </li></ul><ul><li>Policy consultation with Agricultural Committee at the People’s Congress on the revision of existing Agricultural Extension Act in April, 2008 </li></ul>

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