Preparation of the Policy and Investment Framework (PIF) for Agricultural Development in Ethiopia

Preparation of the

Policy and Investment Framework (PIF) for

Agricultural Development in Ethiopia

 

International Firm

 

Terms of Reference

 

Developed by the Rural Economic Development and Food Security (RED & FS)

Sector Working Group: PIF Advisory Committee

 

 

1.         Background

 

Globally, agriculture development offers tremendous opportunity to improve food security, spur growth, and ultimately reduce poverty.  As a vital source of economic livelihood, agriculture provides tremendous opportunities for smallholders, small and medium size enterprises, as well as the rural poor.

 

In Ethiopia, the government’s Plan for Accelerated and Sustained Development to End Poverty (PASDEP, 2005/06 - 2009/10) heralded new policy directions by emphasizing economic growth mainly through greater commercialization of agriculture.  With the private sector posed to play a leading role, PASDEP set in motion a massive push by the GOE to accelerate growth by large-scale agricultural commercialization, with a strong export focus, by the exploration of high value niche markets in high potential areas such as floriculture, spice production, and horticulture, and by scaling out best practices in rural extension, crop production, among other innovations, across the country. PASDEP recognizes the need for an agro-ecologically differentiated approach, including the recognition of the particular challenges of pastoral areas.  PASDEP also set the objective of accelerating commercialization of agriculture and private sector development in agriculture[1] (PASDEP, 2006). To support the transition to private sector development in agriculture, PASDEP underscored areas of state intervention such as rural infrastructure development (feeder roads and irrigation systems), financial sector reforms and development of agricultural credit markets, specialized extension services, measures to improve availability of seeds and fertilizers, measures to improve land tenure security and make land available for large-scale commercial farming, and macro-economic stabilization to ensure a stable exchange rate and low inflation (ibid, pages 47-48).  PASDEP renewed the commitment to supporting smallholder farmers. This was the main feature of the earlier poverty reduction strategy document, which emphasized the rolling out of a massive extension effort, focusing on a technology package of seeds and fertilizers, supported by credit and field level extension. In PASDEP, a combination of targeted interventions are proposed which include: intensification of extension support at the local level, establishment of a network of demonstration centres, increased low-level veterinary services, small-scale irrigation support, and better use of ground water, and productive safety net and off-farm income-generating initiatives, supported under the then national Food Security Programme (2004-2009).

 

Since the inception of PASDEP, there is increased evidence that agriculture contributes to a higher reduction in poverty than non-agriculture sector (WDR, 2008)^[2]. However, with the increased pressure on the environment and natural resources, agriculture development is now recognized as integrally interwoven with environment protection and sustainable natural resources management.  Agriculture has been impacting on and been impacted by the environment.  As outlined in the World Development Report (WDR) 2008, agriculture is a significant user of both surface and sub-surface water, and contributes to water scarcity, agrochemical pollution, soil degradation and climate change whilst it is also contributing to sequestering of carbon, managing water sheds and preserving biodiversity. This is a clear demonstration that holistic planning for sustainable agriculture development is vital.  Engineering a new generation of policies and investment mixes to sustain the significant progress Ethiopia has achieved in agriculture and food security is necessary in the context of evolving national and international conditions.

 

Agriculture is the key sector of Ethiopia's economy as the overall economic growth of the country largely mirrors that of the agricultural sector. It provides employment to 85% of the population, contributes 47% to the county's GDP and 85% of its export earnings. Improving agricultural growth will thus benefit both the rural and urban poor by providing more food and raw materials at lower prices; generating foreign exchange for importation of strategic industrial and capital goods; providing a growing amount of labor and capital needed for industrialization; and providing market for industrial goods. Notwithstanding the erratic pattern of economic growth for the last many decades, recently, however, encouraging progress has been registered that has contributed to reducing poverty, enhancing growth and expanding social services. According to Annual Progress Reports (APRs) for PASDEP (2006/07 and 2007/08), Ethiopia has experienced steady economic growth in the last four years, largely coinciding with four years of consecutive good Meher (main season) harvests, with a real GDP growth rate of 11.7% in 2003/04, 12.6% in 2004/05, 11.5% in 2005/06, 11.5% in 2006/07 and 11.6 % in 2007/08[3]. Agriculture has experienced steady growth since 2003/4. Based on official data, average increases in production can be attributed to both increased area under cultivation and productivity improvements in staple crops in pockets of the country.

 

Though the overall trend is encouraging both in terms of overall agricultural production and productivity, resulting in a reduction in the food poverty head count nationally from 42% in 1999/00 to 38% in 2004/05 and then 31.4% in 2007/08, the sector suffers from major  structural challenges[4]. Despite a decade of support close to 25% (or 13.7% on average over the four years ending 2007/08) of total expenditure, Ethiopian agriculture remains low input, low-value and subsistence oriented, and vulnerable to frequent climatic shocks. Average productivity increased from about 12.7 quintal per hectare in 2004/05 to 15.3 quintal per hectare in 2008/09, still remaining at a low level. In addition the supply in the agricultural sector needs to continue to respond to increased demand in order to avoid general increases in inflation, which are mainly fueled by food inflation.

 

The national food inflation rate stood at 44.2% and the country level non-food inflation rate stood at (23.8%) in June 2009. According to the monthly Central Statistics Agency (CSA) report, the higher increase in the food inflation rate was due to the increase in price indices of the food components like cereals, pulses, meat, milk and egg, vegetable and fruits, potatoes and other tubers and stems, and other food items. This is clear demonstration how agriculture is contributing to the overall macroeconomic situation of the country. Furthermore, agriculture production is vulnerable to its dependence on rainfall. Only about 10% of the total cereal crop lands are irrigated, and yield variability at the regional level is one of the highest in the developing world, drought can shrink farm production by 90% from normal output. Such vulnerability results in approximately three to five million people needing emergency food assistance in any given year, while another 7.5 million people are deemed chronically food insecure and participate in the GOE’s Productive Safety Net Programme (PSNP).

 

Similarly in natural resources management, although there is encouraging progress within the framework of Sustainable Land Management (SLM), programme coverage captures only a fraction of what is deemed as degraded land nation-wide (CAADP Ethiopia, 2009). The agricultural potential is under-realized as evidenced by relatively low yields, input use, irrigation coverage despite ample water resources, and low cropping intensity.

 

Examining budgetary flows within the sector, the agriculture sector public expenditure review of 2008 reported that Ethiopia has committed significant resources of its public expenditure to the sector (higher than the CAADP target of 10% of the total expenditure). ). The sector claimed 13.7% on average over the four years ending 2007/08 of the total public expenditure and around half of the pro poor expenditure (the average for the period 2002/03-2007/08 is 21.9%)[5]. The share of agriculture and rural development expenditure to total Gross Domestic product (GDP) increased from 3.7 to 6.6% in the period 2002/03-2005/06, respectively. This demonstrates the strong commitment of GOE to ensure availability of resources to the agriculture and rural development sectors. However, detailed assessment of spending within the sector reveals that 77% of total agriculture and rural development expenditure in recent years has been absorbed by food security, roads, rural extension, and sector oversight. Food security alone, largely social transfers and other investments in chronically food insecure districts, has claimed more than 41% of the total budget^[6].  Although investments to reduce chronic vulnerability and food insecurity are very important, there is a risk of an imbalance when compared to investments to enhance agricultural growth. This is particularly important as the nature of GOE’s food security programme targets geographical areas with uneven potential for economic growth.

 

According to the APR 2007/2008, there are several challenges to scale up the on-going efforts to enable farmers produce market-oriented commodities and to cover the majority of Ethiopian smallholder farmers in rendering them entrepreneurial farmers, such as[7]:; the supply of inputs, particularly improved seeds, has not kept pace with demand; the marketing system for both inputs and outputs needs to be further streamlined; the agro-processing export base needs to be further broadened and diversified; more effort needs to be exerted to empower women in the economic, social and political domain; financial resources and human resource capacity are limited .

 

Broad-based and economically efficient rural growth can significantly help to reduce rural poverty by bringing about sustainable increases in productivity and reducing risks and vulnerability for the poorest population. In the context of the CAADP Compact signed in September 2009 and in view of the next national five year development plan formulation, the Ministry of Agriculture and Rural Development (MoARD) is leading the preparation of a Policy and Investment Framework (PIF) for Agricultural Development. The PIF outlines a national level strategic planning framework used to guide the prioritization, planning and implementation of current and future public and development assistance investments that contribute to sustainable agricultural growth and rural development, food security, and poverty reduction.  The PIF will reaffirm, and modify as needed for inclusion in the next version of national five year development plan, the vision of the GOE for agricultural development based on successes and challenges to date.  The PIF will assist GOE and its development partners to identify salient policies linkages and any policy changes that might be recommended for the next version of national five year development plan, and will also define investment needs and balances among: 1) CAADP investment pillars such as agricultural growth and marketing, sustainable land management, and disaster risk management and food security, 2) investment areas such as moisture reliable, drought prone, and pastoral areas, and, 3) investment programs and activities such as land administration, public-private partnerships, value-chain expansion in high value commodities, irrigation, agro-processing, improved seed varieties, data collection and performance measurement, household asset building, spatial planning, fertilizer expansion, smallholder access to markets, and other program and activity investments.

 

The PIF will provide a holistic and integrated strategic planning framework for addressing challenges that are hindering sustainable agricultural development in multi-sectoral and coordinated manner. It will further ensure alignment of sector support with the Government of Ethiopia overall strategy, i.e., Agriculture Development Led Industrialization (ADLI), CAADP Ethiopia Compact, and the next five year national development.  The framework will outline feasible policy and programmatic options, suitable strategies and action plans as a basic framework for investment decisions by government, private sector and development partners.

 

Furthermore, the PIF will identify joint action by GOE and its development partners to implement the investment programmes described in the CAADP Ethiopia document.

 

2.         Objective of the Assignment

 

The overriding objective is to assist the Government in formulating a Policy and Investment Framework (PIF) for Agricultural Development on the basis of the overall national development strategy of the GOE. This framework will further elaborate a ten year roadmap to achieve the development vision of the GOE and act as a guide for focused investments falling under the CAADP and RED & FS thematic areas, i.e. agricultural growth and marketing; sustainable land management; and disaster risk management and food security. The PIF will identify short, medium and long term agricultural investment needs of the country with clear outcomes in terms of agricultural and food security development indicators.

 

The objective of this Assignment is for the international firm to contribute to the overall assignment as per this ToR, under the leadership of a senior national economist and in close collaboration with a national public finance specialist.

 

 

3.                  Working modalities

 

The formulation of a Policy and Investment Framework (PIF) for Agricultural Development will be carried out by a PIF Preparation Task Team composed of:

·         a senior national economist, who will be leading the formulation of the PIF and contributing to specific outputs;

·         an international firm, which will contribute to the whole preparation process by bringing international expertise and lessons learned from other countries’ experiences as well as assisting the Government in prioritizing policies’  implementation and investments;

·         a national senior public finance expert.

 

This Assignment is a sub-set of the general Terms of Reference for the Preparation of the

Policy and Investment Framework (PIF) for Agricultural Development in Ethiopia. This implies that the three members of the PIF Preparation Team will be equally held accountable for the quality of the overall outputs delivered under the general ToR. Therefore draft and final outputs will have to be accepted by the international firm and the national public finance expert before their release by the lead consultant to the Government.

 

In addition the MoARD will also assign a technical assistant, agricultural economist, to work with the PIF Preparation Task Team. MoARD, MoTI, Ministry of Water Resources, MOFED, Ministry of Transport/ERA, and other relevant ministries and agencies will assign at minimum one focal sectoral expert to work with the PIF Task Team in particular in the areas of livestock, trade issues and their relations to macro-policy, infrastructure (roads and irrigation); high value commodities; credit and agricultural inputs sector. The focal expert will be able to facilitate the work of the PIF Task Team, drawing attention to relevant developments and facilitating collection of required information and data.

 

4.                  Indicative Tasks and expected outputs

 

The following tasks and deliverables will be undertaken by the international firm to achieve the above stated objective. While recognizing that some tasks are subsequent to others, the firm should not wait for one task to be completed to start the next one. On the contrary, the firm is expected to manage its time in the most efficient way.

 

This consultancy is expected to deliver three outputs, in addition to contributing to the other outputs included in the general ToR and in particular the drafting of the PIF document:

 

1.      Revised annotated outline for the PIF document;

 

2.      Outline a clear vision on where Ethiopia should/could be in ten years time in terms of agricultural development. This vision should be fully aligned with the country priority as stated in the national development plan, namely, the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) and the Agricultural Development Led Industrialization (ADLI) Strategy, and other regional initiatives such as the NEPAD- Comprehensive African Agriculture Development Program (CAADP);

 

3.      Identify key short and medium-term strategies and action points on which Ethiopia would focus in order to reach the vision and goals; To deliver this output the firm will use the policy indicator matrix developed by the lead consultant.

 

The following indicative tasks are envisaged for these three outputs:

 

·          Depending on the inventory of analytical studies that will be undertaken by the lead consultant, the firm is expected to identify any additional short research and/or assessment notes which would be needed for the PIF formulation and to revise the annotated outline in close collaboration with the lead consultant;

 

·          Assess recent trends in the agricultural sector and highlight key opportunities for Ethiopia through:

Þ       a thorough review of the information/literature on growth rates of agricultural outputs and key inputs in Ethiopia;

Þ       a review of information on food demand and its key determinants, taking into consideration population growth and income impacts;

Þ       a review of the root causes of livelihood vulnerability in Ethiopia and efficiency of investments to date to address vulnerability;

Þ       a quantitative analysis on the relation between agricultural growth, employment (and by inference poverty reduction), and food security;

Þ       an analysis of sources of growth and household food security as a basis for recommendations particularly with respect to priorities for investment, institutional change and policy;

 

·         Highlight lessons learned from similar processes in other countries (e.g. Mozambique or Tanzania in Africa; Vietnam in Asia);

 

·         Review strategic documents developed by international agencies (i.e. OECD/DAC reports; Global Donor Platform for Rural Development) to support the development of such policy and investment frameworks;

 

·         Preparation of a vision document outlining the main goals that the GOE should pursue in order to achieve agriculture-led growth, food security, and poverty reduction. The vision document will reaffirm GOE’s core principles underscoring its vision. These principles may derive from international statements to which Ethiopia is signatory such as the G8 L’Aquila Statement on Food Security, the Paris Declaration of Aid Effectiveness, Ethiopia’s Compact on the Comprehensive Africa Agriculture Development Program, and other relevant declarations.

 

·         Identify key success strategies for enhancing sustainable agricultural development and achieving household food security that will form the basis for programming in the country, taking into consideration sustainability of investments. Consider options for short and medium-term strategies that will improve returns to investment, including the incomes and well-being of smallholder communities. In the process of developing strategy options, review attractiveness of affordable and sustainable policy incentives for attraction of private sector investment into agriculture/livestock both at smallholder and larger operational scales. Include initiatives that can ensure stability of returns to investors and moderate commercial risk that would worsen already high natural risks from reliance on rainfall.

 

5.                  Methodology

 

Accomplishment of the tasks described above will require multiple approaches and sources of information. Desk reviews of existing policies, independent evaluation and research works and existing programme documents will be a primary source of information. Field visits to selected regions will enable the PIF Task Team to obtain relevant data. Consultation of all stakeholders at various levels will be required on several occasions before the formulation of the policy and investment framework for agricultural development.

 

6.                  Schedule of Deliverables

 

The international firm is expected to commence its work on November 30, 2009 and forty five days are envisaged to complete this assignment.

 

Key deliverables are noted as follows:

 

	Key Deliverables	Deadline
i	Submit refined analytical framework and annotated outline of the PIF document (see Annex 2 of general ToR) to the Team Leader	December 28, 2009
ii	Submit draft vision statement for the PIF document to the Team Leader	January 5, 2009
iii	Submit to the Team Leader report of PIF TT consultations with key informants, e.g., regions, private sector, civil society, development partners and submit draft on key strategies to focus on	January 10, 2010
vi	Contribute to the submission of preliminary draft PIF document	January 23, 2010
vii	Contribute to the submission of revised preliminary draft PIF document	January 29, 2010
viii	Participate in National PIF Consultation Workshop, deliver presentations, guide discussions	February 12, 2010
ix	Contribute to the submission of 2nd Draft PIF document	February 22, 2010
X	Participate in National PIF Consultation Workshop, deliver presentations, guide discussions	March 19, 2010
xi	Contribute to the submission of final PIF document	March 31, 2010

 

Evaluation Criteria

 

The technical and financial evaluations will have a weight of 70% and 30% respectively. The combined score method is selected for the reason that this assignment is very strategic and technical in its nature. Technical proposals will be rated as per the following matrix. A firm will have to score a minimum of 70% to be considered for the next step. Financial evaluation will be conducted for the qualified and responsive technical bids (i.e 70% and above). The responsive and qualified firm with the highest combined score (technical + financial) will be issued a contract.

 

	Technical Evaluation Criteria	Score Weight %	Points Obtainable
2.1	What is the relevant experience possessed by the proposed personnel that will ensure the smooth execution of this task.   ·         Education back ground- Msc in agriculture economics and above ·         With more than 15 years of relevant experience  in agriculture policy and research ·         Excellent communication skills	50%	250
2.2	What institutional backstopping capacity do the firms have that will ensure appropriate support?	16%	80
2.4	Understanding of the TOR?	34%	170
	Grand Total	100%	500

 

 

Submission of Technical & Financial proposals

 

Qualified and interested Firms should submit their Technical and Financial proposals in separate sealed Envelopes to the following address no later than 14 December 2009:

 

 

UNDP Ethiopia

Procurement Specialist

ECA Compound Old Buld.

Vacancy No: RFP/048/2009

Fax: 251 11 5514599 / 5515147

P. O. Box 5580, Addis Ababa

Ethiopia