Developing Countries Increase Rural Investments

Sergio Jellinek (202) 458-2841sjellinek@worldbank.org

Kristyn Ebro  (202) 458-2736 kebro@worldbank.org

WASHINGTON, September 23, 2004—As a result of the World Bank’s renewed focus on rural areas through its 2002 Agriculture and Rural Development Strategy and other sector strategies, World Bank lending for projects in rural areas has expanded more than 40 percent to more than $7 billion in the fiscal year to June 2004 from about $5 billion dollars in the 2002 fiscal year 2002,  according to a  status report released today.

“The strategy called ‘Reaching the Rural Poor’ focuses on improving the lives of those living in rural areas, where still 70 percent of the world’s poor live.” says Ian Johnson, World Bank Vice President for Sustainable Development.  “It is contributing to the increase of productivity in rural areas, which in many developing countries has a very positive impact in other sectors of the national economy.”

According to a report on the status of rural investments in World Bank operations, the number of projects with rural investment components went up as well – increasing by one-third to 195 projects. 

Reaching the Rural Poor, endorsed by the Bank’s Board of Executive Directors  in October 2003, rests on five pillars:

(i)                fostering an enabling environment for broad-based growth;

(ii)              enhancing agricultural productivity and competitiveness;

(iii)             fostering non-farm economic growth;

(iv)             improving social well-being, managing risk, and reducing vulnerability; and

(v)               enhancing the sustainability of natural resources.

Coordination at the Global Level

“The challenge,” says Kevin Cleaver, World Bank Director for Agriculture and Rural Development, “is to keep the Millennium Development Goal of poverty and hunger reduction at the forefront of the international development agenda.” 

To achieve this, the Bank is working with donors, countries, and other stakeholders to harmonize policies and mobilize investment support for rural and agricultural development. The primary mechanism for this coordination is the Global Donor Platform for Rural Development – established in 2003.  The Bank also participates actively in the UN Hunger Task Force, and is supporting studies on the link between agricultural and rural development and the Millennium Development Goals (MDGs). 

However, Cleaver warned that without a substantive change in the protectionist policies from rich countries, the efforts in rural areas will not have the expected impact.  “Farmers in OECD countries last year benefited from around $257 billion in support from taxpayers and consumers, administered through a complex system of direct payments, export subsidies, and barriers to trade.  This artificially increases production in these countries and takes agricultural markets away from poor farmers in the developing world.”

Reversing a downward trend in agriculture and rural investments

The implementation of the strategy has lead to significant investment progress in agriculture and rural development investments.

• Community driven development is now being implemented on a large scale, such as with the Brazil Northeast and India Poverty Reduction projects and programs. 
• Land reform and land administration projects have been successful in the Eastern Europe and Central Asia, East Asia and Pacific, and Latin America and Caribbean Regions. 
• The Forest project portfolio is increasing – with 50 million hectares of additional protected forests achieved worldwide from projects in such countries as Brazil and Russia. 
• Natural resources management work is expanding, with successful projects in Turkey, Tunisia, India, and China.

Innovations

            The Strategy has helped introduce innovations to address the continuing challenges facing agriculture and rural development. These innovations include the rehabilitation of irrigation systems and strengthening of water users’ associations in Mexico and China; natural disaster mitigation in areas such as Europe and Central Asia and the Pacific Islands; public-private partnerships in the agriculture sector in China and Uganda; enhancing the rural investment climate in countries, such as Sri Lanka and Nicaragua; and weather risk insurance in India, Ethiopia, and the Ukraine. 

For more information, please see the website:

www.worldbank.org/ruraldevelopment