National 4 (Spotlight Weekly)

‘The Performance Of Agriculture Has Not Been As Bad As People Assume’

— Dr. RICHARD VOKES

Dr. RICHARD VOKES, country director, Nepal Resident Mission, Asian Development Bank, took up his post in the kingdom over three years ago. He spoke to KESHAB POUDEL on various issues related to the Agriculture Perspective Plan (APP). Excerpts:

You have been in Nepal for almost three and half years and have seen political instability and violence intensify. How do you assess the country's poverty alleviation programs and the agriculture sector?

When I first came and attended workshops, talked to government officials and read articles in the media, the impression I got was that agriculture was a total failure and that very little had changed. The Agriculture Sector Performance Review finished last year, showed that this was not the true picture. There are many positive things happening in the sector compared to what we might have thought. In some areas, like staple foods, the progress may not be satisfactory. Nevertheless, in the areas of livestock, including dairy products, meat, poultry and eggs, the achievement is much better than expected. Cash crops, pulses, fruits, vegetable, all have done quite well. We are beginning to see a more and more diversified agriculture. There is also quite strong growth in agriculture exports, a lot of those going to India. The actual performance of agriculture has thus not been as bad as many people assumed. Even during our field visits, we see many positive things happening. However, if you ask me if it is enough, then the answer is no.

How do you evaluate the implementation of the APP?

The Asian Development Bank supported the government in the preparation of the APP. Very extensive discussions were held between the Nepalese government and other stakeholders in the sector, including the donors and a broad consensus arrived at. But in terms of implementation, people point to the expected growth rate for agriculture in the Ninth Plan and the targeted allocations for agriculture and see these have not been realized and thus feel the APP, and by extension the agriculture sector, has been a failure. †We see things a bit differently. Although we were one of the stakeholders involved in the preparation of the APP, and thus part of the broad consensus, we indicated at the time that in our view the APP was still too target driven and that many of these targets were unrealistic, for example in terms of the expected increase in production or increased use of fertilizers. They reflected more what the planners felt was necessary rather than what was achievable. Because some of the targets were unrealistic, we have not achieved them, and people therefore feel the APP has failed. In the case of budget allocation again the targets may have been optimistic, not in terms of what was needed or desirable, but in terms of what the government, even with donor support, could realistically do. But even if more money had been provided, we cannot be certain that it would have led to better performance in agriculture, since the efficiency of a lot of investment, for example in irrigation, has been much less than expected. In terms of some of the major policy reforms, we feel the implementation has generally been good.

Have you seen any changes in the agriculture sector with the APP?

The Agriculture Sector Performance Review certainly indicates that the performance of agriculture has picked up in the period since the APP was implemented. As I said, the progress is not enough and the improved performance is still somewhat fragile, but we do see signs that the situation is getting better. The policies and investment strategies of the APP along with the weather have all played a part in this improvement. The sector has done well in some of the areas that were given less emphasis by the APP. Thus livestock and cash crops have done much better than basic staples. While we may not have achieved the target in basic staples, the actual impact on the farmer and farming incomes may have been better if the programs to boost grain production had been more effective given the intense competition in grains from India in recent years. Nepal certainly has to significantly boost productivity in grain crops if it is to compete with grain from India but this will take time. In the meantime, expanding livestock production, and cash crops like vegetables, horticulture, pulses and oilseeds have enabled many farmers to boost their overall production and incomes much more quickly.

A few months after the implementation of the APP, we saw instability in the government. Do you see any impact of political instability?

The answer is obviously yes. Political instability, frequent elections, changes of government and ministers, and so on, certainly make the process of policy reforms more difficult and may delay some of the changes. But political instability has not stopped the process of reform. Things have been moving forward, but may be slower than they would have been had there been more political stability.

How do you assess resource allocation in the agriculture sector?

As noted above, people are very concerned that the allocation to agriculture under the Ninth Plan was below what was targeted. But apart from the direct allocation under agriculture in the budget, you also have expenditure on irrigation and rural electrification, on rural roads and rural infrastructure, which come under separate ministries and budget headings. Taken together, there has still been quite substantial investment in the agriculture and rural sector as a whole. As you move toward a more market-based system where the private sector is expected to play a greater role in investment than before, so you also need to see what has been happening to private sector investment in agriculture, which also includes the farmers themselves. Certainly there is still an urgent need for public sector investment in agriculture, but you need to focus on certain key areas and ensure that it is good investment that achieves the desired results. As mentioned earlier, this has sadly not always been the case in the past. But if these problems can be tackled then certainly I think expenditure on agriculture and rural development is clearly one of the priority areas.

What are your impressions on research and extension?

These are the kind of areas that are clearly critical and which need to be given more priority. But while the public sector has a leading role to play in these areas, there is still scope for increased private-sector involvement in these areas. The government recently established a National Agriculture Research and Development Fund, which can be accessed by both public and private sector researchers through viable research proposals. The private sector has already begun to undertake applied research and they are playing an important role in the extension of new ideas and inputs. However, their roles can be further widened and made effective. You also need efficient and effective financial markets in rural areas; this is an area where the public sector has a key role to play both in terms of policy and direct participation. But again it should do so in ways that encourage other private sector players, such as cooperatives and micro finance institutions.

What else needs to be done to improve the situation?

Clearly roads, bridges, improved trails and irrigation are other key areas where public-sector investment is critical, although even here we can also see the very positive results of community participation. Beyond that, I would just emphasize the vital role the government has to play in providing the necessary policy environment to encourage more private-sector investment, in production, agro-processing and marketing. The government cannot and should not try to do everything.

How is the ADB supporting the APP?

The ADB is the largest single source of external assistance to the agricultural sector. We have been supporting policy reforms under the government's second agriculture program. We have also been providing complementary support in the areas of production and irrigation. We are supporting a number of ongoing programs and projects in the irrigation sector, not only for surface irrigation but also for community ground water irrigation. We have also been supporting livestock development, which has been a very successful area. The government and ADB are now working together on a new program of support in this sub-sector based on a pre-feasibility study prepared by government, in which the Department of Livestock took the lead. We are providing support to crop diversification. Then there is also a project for the commercialization of agriculture and agro-business development in the pipeline.

How do you view the reforms undertaken by the government, including the withdrawal of fertilizer subsidies?

The Agriculture Sector Performance Review, as well as other studies, has shown clearly that the supply of fertilizers has increased following the removal of the subsidy. Under the subsidy regime, there was never enough money to bring in adequate fertilizers. So, you always ended up with rationing. Often the fertilizer came too late since the funds to import were not available at the right time. Yes, it was cheaper but if farmers couldn't get enough or it came to late this was no help to them. Everyone involved in agriculture has realized that supply has improved as a result of the removal of the subsidy. Of course, prices have also gone up. People point to the problem of poor quality. This was also a problem before although it certainly appears to have got worse with liberalization; but this is also because their remains a lot of smuggled, and often adulterated, fertilizer in the market. Clearly the quality problem needs to be addressed which the government is doing through by setting up more quality control laboratories. But when you talk to the farmers, they are also increasingly aware of the problem and buying from suppliers they know they can trust. So the general picture is positive. The other interesting part is that fertilizer use has gone up more among small farmers than larger ones. That is exactly the kind of thing we want to see.

What about the issue of shallow tube well subsidies?

In the case of shallow tube well, the initial impact was not good. There has been dislocation as a result of policy reform. There were uncertainties on whether the policy reform would continue. The bumper crops in India and Nepal forced down grain prices, and thus farmers incomes just at the time when the cost of the shallow tube well is going up. But last year the situation improved and we now a growing demand for shallow tube well. Significantly, the cost of the shallow tube-well is coming down. A much wider range of shallow tube well and groundwater technology is now available to the farmers. Through the community shallow tube wells, more and more small and marginal farmers are getting access to groundwater irrigation. So it seems the policy reform is having the desired impact and the private sector is coming in. This should lead to a more sustainable and rapid growth in groundwater irrigation in the future.

Rural electrification is a central component of agricultural growth. What is the state of Eighth Rural Electrification Program?

Certainly, the Rural Electrification, Transmission and Distribution project has moved rather slowly. It was delayed in its first two years but the project is now moving into the implementation phase. You are right that expansion of electrification in the rural areas will also have a significant impact on the agriculture sector, including in the use of ground water. In areas where farmers have electricity, they are choosing electric rather than diesel pumps, since they tend to be cheaper, more reliable and easier to use. Rural electrification also helps to develop rural industry. Expanding electricity is certainly another critical development goal.

How do you see the ceasefire between the government and Maoists?

Obviously we greatly welcome this development and very much hope that it will lead to a lasting peace. And I very much hope that all of the key stakeholders in the process of building such a lasting peace will work together sincerely to achieve this goal. Apart from the government and the Maoists, this also includes the main political parties. Experience from other countries also suggests that a strong civil society role is important in building a sustainable peace process. But while welcoming the recent developments, it is obviously critical that the underlying causes of the insurgency, in terms of poverty, social exclusion, neglect of remote areas, weak delivery of government services, low efficiency of investment and poor governance and corruption, must not be forgotten. These problems have to be addressed with the utmost urgency.

If the government were to request ADB, what kinds of support would you provide in the process of rehabilitation and reconstruction?

Of course ADB, like all of Nepal's development partners, stands ready to try and help the process of rehabilitation and reconstruction. Indeed, at the recent meeting of the Nepal Donor Group, which was held a few days after the announcement of the ceasefire, this was the main topic on the agenda. The development partners realize that they also have an important role to play in helping to build a sustainable peace by supporting immediate relief efforts, fast-impact development activities, particularly in the most seriously affected conflict areas, as well as rehabilitation and reconstruction and more longer-term development activities. Not all of the development partners will necessarily provide support in all these areas. Some agencies are more suited to providing immediate relief and development activities, others like ADB, are more suited to rehabilitation and reconstruction, although we are already in discussion with the government to s! ee whether there is any scope under the existing projects and programs being supported by ADB to support more immediate development activities. It is also necessary that all these efforts are properly coordinated and the government is already discussing this aspect with the Donor Group.