Rural Development Strategy Ineffective

By Samantha Sparks

SKIM THROUGH ANY of the many glossy reports produced by the World Bank and you will find colorful pictures of rural development at work: sturdy farmers look out over fields ripe for the harvest; beaming mothers proudly display a new water pump; well-paved roads lead off into the horizon. In reality, however, rural development by the Bank has been less picturesque. After nearly 15 years, the Bank has taken a hard look at its rural development strategy and concluded that major changes are needed to make the effort more effective. A recent internal report concludes that too many projects intended to improve life for the Third World's rural poor have been ill- conceived, bloated or poorly implemented. The report, published as the Washington-based Bank is literally begging Congress for the U.S. share of a $74.8 billion capital increase, raises important questions about the agency's rural development programs.

With about 80 percent of poor people in developing nations still living in rural areas, problems with rural development strategy in the world's biggest development bank are worth knowing about.

While the bank study contends that "the [rural development] strategy was appropriate and effective" overall, it admits that "in more specific terms, the often ambitious targets have not all been met."

Bank officials say that despite the problems with the program to date, rural development will continue to be an important part of the agency's $17 billion annual lending program. "This report does not say rural development doesn't work and so we shouldn't do it," says Graham Donaldson, chief of the agriculture division for the Bank's Operations Evaluations Department (OED), which produced the report. "There are some good projects," Donaldson contends. "We're trying to balance the act, because in many respects we're screwing up."

John Haywood, an advisor to the Bank's agricultural operations staff, agrees. "The whole rural development process has been a learning experience for the Bank," he says. "I don't think we want to throw the baby out with the bathwater."

One of the most disturbing findings of the report is that in many projects the Bank succeeded in promoting expensive infrastructure in borrowing countries through the use of foreign contractors, but failed to train local residents to use the equipment. This has been the case especially with irrigation projects, the backbone of many rural development programs. "In many cases the lack of [local] farmer support and technical expertise resulted in long delays, poorly-maintained infrastructure, and lack of farmer interest in project-sponsored activities," the report notes. All together, spending on infrastructure--including construction for roads, bridges, services buildings and water supply--accounted for about one- half of total projected costs in a five-year period in which rural development was in full force. In Asia, Eastern Europe, and the Middle East, infrastructure costs were even higher. However, "the extent to which such capital-intensive projects truly reflected the broader intent of the rural development strategy," i.e., to promote sustainable development, "is questionable," the report contends. Too often, according to the report, rural development proved a lucrative business for foreign firms, but a costly mistake for the cash-strapped Third World.

The rural development program, which was first introduced at the Bank in 1973, has grown rapidly. About 498 projects had been launched by 1986, with a total cost of about $50 billion. Bank commitments for rural development projects in that 13-year period totalled $19.1 billion. And just over half of the Bank's commitments came from its International Development Association (IDA) affiliate, which makes concessional loans to 62 of the world's poorest nations. Regionally, East Asia and the Pacific and sub-Saharan Africa absorbed the largest share of Bank loans for rural development, with somewhat less emphasis in South Asia, North Africa and the Middle East and Latin America, the report says.

But while rural development programs have become an increasingly important part of Bank business, success has frequently been elusive. The Bank's rural development program has not been impressive whether measured in terms of specific goals or by a project's economic rate of return. That rate of return, essentially a cost/benefit analysis with additional factors such as a project's impact on employment or the environment, is one way in which the Bank attempts to measure the feasibility of loans. For rural development lending, "the expected performance shortfall is much larger for [rural development] projects than for non-poverty projects," the report found.

The main objective of the Bank's strategy, to increase small- holder agricultural production by 5 percent a year, has been met in less than one-third of the projects assessed, the report says.

The Bank defines rural development as "improving the living conditions of poor people residing in rural areas," Donaldson explains. Consequently, the Bank's strategy concentrated on increasing agricultural production and related projects dealing with irrigation, livestock, tree crops, credit and settlement. Putting ideas into practice, however, proved difficult. Even when projects were judged successful in terms of their immediate return, in many cases, the report points out, it appears unlikely that their benefits will be sustained over the long run. In large part, this is because the Bank and its borrowers relied too much on international technical assistance instead of taking the time and energy to develop local capabilities.

"Expatriate technical assistance is a poor long-run substitute for local capability, even if it enhances efficiency," the report states. In one extreme case, four state level rural development schemes in Nigeria, worth some $1.5 billion, called for 722 staff-years of technical assistance from the Bank and its consultants. Not only did this deprive local residents of training opportunities and create tremendous coordination problems for the government, but "audits to date suggest that although the very large infrastructure components of these projects have been largely successful, productivity increases are expected to be very disappointing," the report says.

The Bank's understanding of political and sociological constraints has also been insufficient, the report found. "Technical packages which showed promise experimentally were frequently not adapted to fit farmers' resources and conflicted with land use practices," it states. For example, farmers in South Yemen resisted Bank promotion of a high-yield wheat because their traditional wheat produced straw for making bricks. In a tree crop diversification project in Sri Lanka, "ethnic tensions between Tamils and Sinhalese were exacerbated by faulty project design which dispersed Tamil settlers among Sinhalese villages," according to the report.

Officials now say they have learned from their mistakes and are determined to use input from local beneficiaries, even if this takes more time. "We have to go more slowly and use local people much, much more," says Haywood. But officials also admit that institutional pressures within the agency will continue to make it difficult to "go slow," even when there is ample evidence that patience makes good development sense. Pressures to expand the portfolio mean staff are rewarded for new projects, not for spending their time in the field on old ones. "In too many cases, rural development lending was driven by funds and project slots, rather than demand-driven by sound strategies,n the report concludes. Now that the Bank is spending about 25 percent of its money on quick-disbursing balance-of-payments assistance for policy reforms (not linked to specific projects), officials hope there will be less pressure to pad projects in order to keep lending levels high. Indeed, since the Bank began making non-project loans, lending for rural development has actually declined. Rural development loans began in the mid-1960s at about 12 percent of total World Bank lending. They peaked in FY 1980-82 at 61 percent, and fell to 39 percent in FY 198345, according to the report. Officials also contend that the success rate of their rural development strategy will improve once governments get their macroeconomic policies right.

"The Bank is realizing that policy and field level actions must be intimately linked," says Haywood. Whether the Bank has learned from its mistakes remains to be seen.