The World Bank’s promise

He traveled 445 km into the very heart of Oromia Regional State. Chen has witnessed how the East African Agricultural Productivity program (EAAP) and the Agricultural Growth Project (AGP) activities are handled. He was joined by Birhanu Fikade of The Reporter on his trip and told the reporter what the future holds for Ethiopia.
The Reporter: You have been in the fields of agricultural activities for two days. Have you been satisfied with the activities you saw?
Guang Z. Chen: I don’t think it’s an issue of being satisfied or not. It’s an issue of what I learn about and what we can improve. Yes, I like what I saw but I also saw some challenges faced by that particular area. Several things are there that have greatly impressed me. Despite the very basic conditions, in fact one of the agricultural research centers we have visited (at Sinana) is so isolated, but I am very impressed with the scientists and the researchers for their dedication and good work in trying to develop new varieties of seeds, providing technical assistance to farmers and wheat disease control. I think that is a good start.
EAAP and AGP programs that the bank funds are lapsing in those parts of the country you have visited. Is that right?
Under EAAP, we provide support for three research centers, of which we have visited two. I think for them to be sustainable, for them to expand the business, there has to be some adjustment in the policy environment under which they operate. For instant, they basically operate as a government department. They receive the government budget.  They do the research and provide the results to the regional agricultural bureaus. Since the government’s budget is always limited, there could be a scope in some areas where the government relaxes the policy a little bit and lets them use some sort of commercial sources to raise revenues so that they can improve the welfare of the staff, the offices and to keep people happy. One of the biggest challenges they face is the turnover of the people. That is the first observation I have.

The second observation I have is that just by driving around you can see all these large-scale farms of small and large plots of land. This is a harvest time so that harvest color is all over the place. You can ask a question how come with such a vast harvest that Ethiopia has trouble in feeding its own people. You still have an estimated range of ten to twelve million people in the country who are food insecure. The fact that you can produce so much but there are people who don’t have enough to eat. The question is about the distribution; about how these foods get to the market and the place where it is needed. I think that’s the challenge for all of us. I also noticed that after all these interventions and investments, I tend to ask what the results are. I am pleased to see, for example, before the interventions of EAAPP and AGP, which is around the baseline, we are looking at 2011. For example, this area which is the major producer of wheat, the average yield at that time was about 1.8 tonnes per hectare. Currently, my understanding is that the average has gone up to about 3 to 3.3 tonnes per hectare. This is over a three-year period and I think that’s a good result. For some farmers, the yield can even go up to six or seven tons per hectare. Of course, these are isolated; it’s not everywhere.  But the issue is that if you can sustain it, that is a very impressive result.
Is it right to conclude that both EEAP and AGP are heading in the right direction?
They certainly have the impacts from what I have seen so far. The challenge though is that under AGP we are basically supporting some 96 woredas. This is only ten percent of the total woredas in this country. These ten percent are found in relatively developed areas. I guess it’s relatively easier to improve the yields where, for example, the road is better, the logistics is better, the research centers are around. But imagine what happens to the 90 percent of the woredas, particularly in the rural areas, Gambella region, for example. The challenge is that whether you can expand and replicate the positive results, this project has achieved. I think that is a challenge for the government and for all of us working in the agricultural sector. The team is preparing for mid-term review which is to be conducted in January-February next year. We intend to systematically look at what experience we have learnt in the last three years in the implementation process of AGP. We will see what adjustments we can make. We will see ways on how we can expand the past experience to the rest of the country. That is the most important challenge facing us. Getting a success only in the ten percent woredas and relatively well-off woredas is not going to solve this country’s problems and challenges.
The researcher, the farmer and the development agents are there in the field in Ethiopia’s agriculture sector. Do you see these parties integrating and working together?
From the particular woredas we have visited, they seem to work together.  This is partly because of the fact that under the project we are able to support the development agents, which was not the case for all woredas or kebeles. However, the World Bank cannot be everywhere. We are supporting only some sort of a very few pilot projects. I think this has to become part of the government’s system to be sustainable. The fact that our researchers here every year can produce the varieties of new seeds through demonstrations but the applications of the new varieties are not the way we expected in the country, it tells you that extension service has a gap. That is not, however, unique to Ethiopia. In many countries of the agriculture sector, extension moving from the scientific research results to the actual application by farmers, particularly when you have a wide spread smallholder farmers, is challenging. The development agents are agents who are out there to spread those ideas, which I think is a good mechanism. But they can’t work on their own. They cannot be a few individuals with good hearts and a bit of training and try to spread these ideas all over the country. There has to be support and some logistics and capital. Otherwise, they might walk around without doing a thing. In fact, some development agents are able to get motorcycles and in some places they don’t. So how do we expect them to reach farmers? That is just a part of it. The other part is that since Ethiopia is still a poor country, the government has limited budget and much of the support to the extension service is essentially exhausted by paying salaries. These people have to have some money to go around and present demonstrations. That will need to be strengthened in the near future.
How did you find the actual work done compared to the reports of the government? Are they up to the level of your expectations?
To be honest with you, it is slightly better than what I saw, because, for example, I have read some implementation documents of background materials before visiting the fields.  The indicators which are focused on the percentage of increased use of varieties of seeds, like X percentage increase or so they say. I think they were talking about 30 percent increase in seed varieties. I personally think I have problems with them since these are intermediate indicators. Having improved varieties is only one thing. But what I want to see is the average yield. I am glad to see that in one of the woredas under the project we have supported, they are tracking the progress themselves. They have numbers to show me. I think in the future, we will need further track on how these improved yields get into the market and what the market prices are. That is very important. The farmer producing more is one thing. The area we have visited is not a food insecure area. When they produce more, they want to sell so that they could get good prices. If they don’t get good prices, they will not have the incentive to produce. Even if you have better varieties and better fertilizer, they will not have that motive to produce and cover costs. It is important in the future to track the price, the commercial profitability of the farmers. Compared to what I have been monitoring in terms of coming here, I do see a good indication of yield. But it is how that can be spread across the country that is the challenge.
During the visit you have seen a workshop of farm machineries producing prototypes. The challenge is how to familiarize those machineries with the smallholder farmer. How do you see that?
I did not get a chance to do survey or visit those small manufacturing plants. From my conversation with the people doing the prototype, I can tell that there is a certain gap. This is not a region where you have a long history of industries. Therefore, that is a business which needs to be cultivated. They can produce the prototype but the immediate gap is that you cannot find a network of small enterprises that could produce the machines and sell them to the farmers. First of all, these small manufacturing enterprises have to be in place. They need the capacity to produce and the ability to market the products and make money in the business. I must say I don’t know enough about that. Based on what the people say is that it is coming up slow and will take time.
You have been in many places visiting what’s going on across the country. How do you compare the complementarily of infrastructures with agriculture and other sectors?   
It is not the first time I am visiting agricultural programs.  I have visited Promotion of Safety Net Programs (PSNP) which is actually run by the Ministry of Agriculture. Even if the focus is a safety net, a lot of work has been done in the rural areas. I have visited Tigray Region. It was a tough environment compared to what I have seen here. It’s very mountainous, very dry and, of course, the condition there was much more challenging. The productivity is lower compared to what it is here in Oromia Region. You are talking about complementarity, one good example is the new road constructed by the funding of the World Bank. This is the agricultural belt of the country and the road certainly plays an important role in transporting agricultural product to Addis. I think the connection is very clearly noticeable.
Do you think Ethiopia is at the level of excellence in producing wheat from the Eastern Africa point of view?
If you see the entire country, I don’t think we are there yet. After many years of investment in agriculture, on extension or programs like AGP, if you look at the country’s average yield as a whole, there is no strong evidence the yield has improved that much. In this particular area, yes the yield has increased. But this is the smaller area in the country. The vast majority of the country’s yield has not improved that much. So I would not say it is at its excellent level. Estimates say that in Ethiopia, if your average yields improve by 40 or 50 percent, you will have enough to feed the rest of the country. You will have no one starving. Getting products to the most who need them is, of course, another reason. But we are obviously talking about roads, marketing infrastructures and logistics. However, the average by itself over the last couple of years has not been improved significantly across the country.
When you talk about just AGP, the bank’s funding to this project is over USD 300 million. Was it worth it?
Yes, I think it was worth it. USD 300 million is only partial. The government itself is also funding the project. The 300 million is both the World Bank and development partners’ share. The bank alone has some USD 150 million. If you actually look at the disbursement, only one-third of the total fund is disbursed. USD 200 million is still waiting. How do you make the best use of it? That is an issue we have to focus on during the mid-term review of the projects. If you ask me, so far it is a good program going and can certainly do better.
Can we expect the bank to approve the continuation of these projects?
We certainly have that intention. However, it is not going to be a one-sided decision. We work with the government as partner and it is up to them to see how these programs deliver results and what kind of results they themselves have. By all intentions and by all indications, yes we intend to move in the phase two of the projects in about two years’ time.
I see that you have some USD five billion funding available to Ethiopia. How does that sound?
USD five billion for Ethiopia is not a lot of money. It is a very poor country and needs lot more resources to improve in all areas from social infrastructure to physical structures, from education to extension services, health and social protections, to energy network and road networks. There are lots of investments needed. The World Bank assistance is only a small fraction of what the country needs.  However, the country needs to raise its own resources as the country grows. You have to have bigger base to raise revenues, mostly from domestic sources. Of course, the country can strategically select a certain area where you can attract additional financing from abroad. One of the areas that I think the country needs to do more is to attract foreign direct investments because that will present a large flow of resources to the country.  Our funding is very limited. But the scale of foreign direct investment, relatively speaking, is kind of unlimited. A lot of money is out there in the global investment environment. But to do that you have to compete. They don’t necessarily have to come to Ethiopia. They can go to your neighboring countries. In fact, that is what the south Asians are doing. Ethiopia will have to do much more to be able to attract those foreign direct investments.  In doing so, it will achieve several objectives. One will be helping the industrialization. The second is job creation. The third will be bringing in the capital. Of course, the technologies and management experiences are important too. Countries like Ethiopia have not gone through the industrialization process. I cannot see any other country except those that I call resource-rich countries, which can move to the middle income country category without passing through the industrialization process.
The World Bank is pushing light manufacturing sector to be one of the vantage points to Ethiopia. Agriculture is to be the main source of input to this sector. At the same time, it is unable to feed the country. How do they go hand in hand?  
When we say light manufacturing, agricultural processing is also a light manufacturing. We advocate that this country need to develop its own agricultural processing. You do produce a lot of agricultural products. By developing agricultural processing business, you can increase the value addition. That’s why we emphasized on it. In terms of feeding the people, I think two strategies can be applied in parallel. Increasing agricultural productivity, improving the distribution system, improving the social safety net program to bring the food to the most needed is one part of it. The second part is that as you develop you cannot have your 80 percent of the population in agriculture. Some of them have to move to the urban areas that are happening in any case.  They have to find jobs in the cities and that is why we say manufacturing will help to provide job opportunities to these people.
What is the status of light manufacturing at this point in time? Recently, you have provided a document to the government, right?
The document was produced two years ago. I think progress has been there but it could have been faster.  One of the key challenges in attracting foreign direct investment in this country is the investment climate issue. The challenge in logistics – moving goods in and out of Ethiopia – is very costly. Customs procedures are very cumbersome, often there is a lot of delays. Technical education of labor force, access to land, capital access to reliable energies are the factors on how you can attract investments. I do believe the government recognizes that and is trying to tackle these obstacles.  If you don’t do your part, the investors don’t necessarily come here.
As an international partner, where do you position yourself as the World Bank in the development path of Ethiopia?
I think the World Bank has been a strong and long-term partner of Ethiopia. We were a consistent partner in those good, bad or difficult times. Our program here has been consistent in that we never really walk away from this country even in the most difficult times. In the last two years since I have been here, I certainly feel that our partnership has been much strengthened both in the volume of our financial services to the country and in an analytical work to this country. We are providing our advice to the government to influence the decision-making. Last fiscal year, which was from July 2012 to June 2013, we set a record of total disbursement to this country of a close to USD 900 million in one year which is roughly about ten percent of your federal government’s budget. This is not an insignificant amount. In the same year, we also newly committed USD 1.2 billion of new lending, bringing around our total portfolio including the trust funds to almost USD six billion, which is also a new record to Ethiopia. Along with that we have produced a number of influential reports. For example, we have started an economic update series and over the last two years, we have launched two issues and are working on the third. We have launched a light manufacturing study in Africa, that is certainly influential on government’s policy on developing light manufacturing. Last year we also did a report, a survey of Chinese foreign direct investment in Ethiopia, following the large sample we have got from the Chinese firms. By the way, we have also launched our new country partnership strategy. These are the key milestones we have had in the last two years. But there is a lot yet to be done.

Sourced here:  http://www.thereporterethiopia.com/index.php/interview/item/1241-the-world-banks-promise