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Module 1 - Building Agricultural Policy and Institutional Capacity

For the public investments described in this sourcebook to be effective, it is essential to develop an enabling environment for pro-poor agricultural growth. Governments must provide public goods and establish supporting legal, administrative, and regulatory systems to correct for market failures, facilitate efficient operation of the private sector, and protect the interests of the disadvantaged. The role of the public sector is evolving, driven by trade liberalization and international agreements, and requiring new skills and analytical capacities. Investments should focus on public sector program and institutional reforms, adjustment lending, human resource development, and strengthening capacity of sector institutions, both public and private.

Rationale for Investment in Policy and Institutional Capacity

The World Bank’s Rural Development Strategy identifies two important elements of successful poverty reduction¾creation of an investment climate conducive to rural growth, and empowerment of the poor to share in the benefits of that growth. Investments in policy and institutional capacity are critical to ensuring that the public sector can effectively carry out its functions, which include coordination, participatory development of sector strategies, policy formulation, and allocation and monitoring of public investment in agriculture. These governmental functions seek to promote an environment conducive to private sector activity and competitive markets in socially acceptable ways (box 1.1)


 Box 1.1 Key policies to promote a competitive agriculture

  • Macroeconomic—ensure undistorted exchange rate policy, removal of implicit taxes and market barriers, nondiscriminatory taxation, macroeconomic stability, and government credibility.
  • Trade—facilitate exports, participate in trade negotiations, reduce protection on import-substitute goods with relatively low and uniform tariffs, and remove nontariff barriers (while providing protection from acute price volatility).
  • Labor—ensure agricultural employment meets core labor standards, especially with regard to child labor, hazardous work, and equal employment opportunities for women.
  • Competition—reevaluate the role of marketing boards, promote competition in input markets, establish labeling regulations for grades and standards.
  • Environment/natural resource use—establish sustainable management, internalize externalities where possible, and develop markets for pollution and carbon credits.
  • Land—develop land markets, security of tenure, titling and recording of land transactions, and land reform for fair distribution of land ownership.
  • Technology—maintain public good research activities and foster private sector participation in research and extension.
  • Welfare and food security—establish social safety net programs to cope in times of extreme price changes and natural disasters.

Source: World Bank 2003


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