The World Bank International Bank For Reconstruction And Development International Finance Corporation

DOING BUSINESS IN AGRICULTURE Concept Note 1 Contents: 1. Introduction 2. Rationale 3. Doing Business as a catalyst for reforms 4. What is Doing Business in Agriculture (DBA) 5. Coordination with other WBG agricultural activities 6. Implementation and deliverables

1. INTRODUCTION A legal and regulatory framework that fosters competition, business integrity, and fair practices is critical to create an investment climate that facilitates agricultural development and enhances productivity growth. Agricultural policymakers need to be able to identify in what ways their regulations enable beneficial agricultural growth, and where legal and regulatory reforms may be needed to encourage agricultural development. The Doing Business project offers an ideal methodological tool to support decision-making by such agricultural policymakers, with its established methodology for measuring laws and regulations; its informant network and participant convening power; and its effective dissemination strategies and product branding. Since its initial publication in 2003, Doing Business has inspired hundreds of regulatory reforms. Indeed, the Doing Business methodology – by providing actionable indicators and by focusing on areas in which relatively simple legal or regulatory reforms can have positive impacts on the business environment – has served as an incomparable catalyst for business reform initiatives. This approach to measuring business regulations can be very effectively applied to the agricultural sector. The World Bank Group’s Global Indicators and Analysis Department has already successfully adapted the Doing Business methodology to other regulatory areas, such as regulation of foreign direct investment (through Investing Across Borders) and business regulations that affect women’s prospects as entrepreneurs and employees (through Women, Business and the Law). Doing Business in Agriculture (DBA) will develop a set of indicators of the laws and regulations affecting agricultural business in countries around the world. The indicators will be consistent over time and comparable across economies, allowing countries to benchmark their agricultural regulatory framework and the implementation of their laws in practice. The topics covered will focus on regulatory areas that are most important for smallholder farmers and general agricultural productivity, and where relatively simple regulatory reform can have short-term impact on the investment climate for agriculture. The objective is to stimulate reforms in the legal and regulatory environment for agriculture across countries, ultimately improving smallholder productivity, agribusiness development, and rural standards of living.

1

This Concept Note was prepared by the World Bank – IFC Global Indicators and Analysis (GIA) Department, in the Financial and Private Sector Development Vice-Presidency. GIA is responsible for managing the Doing Business report, the Sub-National Doing Business, the Enterprise Surveys, and Women Business and the Law. For additional information please contact Federica Saliola ([email protected]) or John Anderson ([email protected]).

1

The World Bank International Bank For Reconstruction And Development International Finance Corporation

Doing Business in Agriculture is closely coordinating with the Agribusiness Indicators project (ABI) of the World Bank’s Agriculture and Rural Development Department (ARD). DBA has identified its proposed indicator areas in collaboration with ABI, and has adopted some indicators from ABI that are more appropriate to be analyzed using the DB methodology. 2. RATIONALE A legal and regulatory framework that fosters competition, business integrity, and fair practices is critical to create an investment climate that facilitates agricultural development and enhances productivity growth. The business of agriculture occupies a critical space in most economies. Distinct and special among industries, agriculture is the dominant source of employment for a large share, even a majority, of the population in developing nations. In the light of the global food crisis of 2008 and with fears of renewed crisis on the increase, the international community has paid renewed attention to the challenges of agricultural development in rural areas. Creating an enabling environment for agriculture and agribusiness development has become a priority in most governments’ reform agenda. By setting and enforcing standards that promote responsible food production, facilitating access to agricultural inputs and markets, regulating competition, promoting the competitiveness in the agribusiness sector, supporting the greater inclusion of smallholders and rural workers, etc., governments play a critical role in supporting agriculture productivity growth. Policies and reforms aimed at promoting the expansion and transformation of agricultural markets and facilitating agriculture productivity growth should take into account that, in a world increasingly dictated by value chains and the rules of globalization, competitiveness is the condition for survival. One critical aspect related to this is the role played by smallholders, which represent almost 80% of all farming in Sub-Saharan Africa. Evidence shows that improving smallholders’ productivity, profitability, and sustainability is likely to be the main pathway out of poverty in using agriculture for development. Therefore, policy makers should support smallholders’ competitiveness through appropriate agriculture policies. Smallholders face a number of challenges and constraints that are pretty similar across the developing world. Mostly small businesses face particularly strong barriers to entry, suffer more from poor access to finance and weak business skills (Liverpool and Winter-Nelson, 2010; Reardon et al., 2009; Markelova et al., 2009; Obare et al., 2003 and others). Although small-scale businesses are often considered to be part of the informal economy, several areas of legislation are likely to directly matter for their business and have a critical impact on their productivity. Uncertainties regarding land tenure and inadequate access to land, for instance, have been a critical challenge to smallholder farming in East Africa. The constraints related to the tenure system, such as insecurity of land tenure, unequal access to land, lack of a mechanism to transfer rights and consolidate plots, have resulted in under-developed agriculture, high landlessness, food insecurity, and degraded natural resource. According to Kimaru and Jama (2005), in East Africa sustained gains to agricultural productivity are threatened by land degradation, especially land erosion and loss of fertility. The study found that clear land-use and agricultural policies need to be developed to provide a framework for researchers, extension workers and smallholder farmers on environmentally-sensitive practices. Nevertheless, the lack of clarity of property rights and un-equitable access to land exacerbate the land degradation problem. The importance of water, along with land, has been recognized as critical factors contributing to increased agricultural production, income, health and sustainable land use – and, as such, to reducing poverty and food insecurity. In parallel to this, there is a growing awareness of the importance of considering the industrial and agro processing uses of water (i.e. at local or watershed levels). Although water scarcity is the main driving factor of lack of access to water, especially in Sub-Saharan countries, appropriate policy and interventions to improve water governance are required since legal and regulatory barriers to agricultural water access are still in place in several countries. In this framework, IFAD has strongly supported changes in water governance in recent decades working through community-based and civil society organizations and NGOs to better identify the changes that are needed, and with national and local governments to change policies and legislation.

2

The World Bank International Bank For Reconstruction And Development International Finance Corporation

Appropriate public policies are especially needed to govern access to inputs. Especially for small-plot farmers to increase their production, in fact, they must have regular access to quality agriculture inputs and services, such as irrigation technologies, seeds, fertilizers, agro-chemicals, credit, and transport. Low agricultural input use is often associated with declining soil fertility, declining yields, and low farmer incomes. Increased use of fertilizer and improved seeds are partially credited with the large increases in agricultural productivity growth in Asia during the Green Revolution. Public policies governing farmers’ access to agricultural inputs and markets are critical since these are central to the success of any effort to enhance productivity. For example, in Malawi, Tanzania and Rwanda, polices that have eased farmers’ access to seeds and fertilizer have helped produce bountiful harvests and generate impressive economic growth (AGRA 2012). Most farmers are often bypassed not only by commercial and national development banks, but also by formal microcredit institutions due to their lack of collateral and/or credit history. For investment, smallholder farmers usually depend on savings from their low incomes, which limits opportunities for expansion. In addition to own sources, farmers thus rely on incomes of friends and relatives, remittances, and informal money lenders. A sound legal and regulatory framework for warehouse receipt, and the ease of using agribusiness commodities as collateral, would be very beneficial for those farmers and small and midsize businesses that are unable to secure borrowing requirements due to lack of sufficient conventional loan collateral. The efficiency of the judicial system in a country has proven to be an important determinant of its comparative advantage in the global economy. Specifically related to smallholder business is the efficiency of the judicial system in the contract farming area. An emerging constraint on the output side to raising productivity of smallholder farmers in the developing world, in fact, has been the inability of most them to get linked into the supermarket chains. The main barrier is that they cannot meet the high quality and safety demands as well as delivery schedules that international value chains require, preventing them to compete in such markets. Supermarkets require uniform quality, minimum large quantities, consistency, and high standard of hygiene and timeliness of supply that can be difficult to meet for smallholder farmers. They may also require the ability to trace consignments back to the source to confirm how they have been produced (Hazell, 2005). Smallholder farmers, who are often undercapitalized and often undereducated, struggle to meet these requirements. One way to surmount these challenges is the contract farming. However, as with any form of contractual relationship, there are potential disadvantages and risks associated with contract farming. Therefore, the efficiency of the judicial system in resolving any related commercial dispute would be critical. Rules and regulations that directly impact medium- to large-scale businesses can also significantly affect the profitability of smallholders and the distribution of benefits from agribusiness development. The few examples above do not exhaust the list of business constraints faced by smallholders and areas of legislation and regulation that are likely to impact their profitability. Several areas of legislation, by improving the overall functioning of the market, would indirectly benefit smallholders’ profitability as their business choice is dependent on both their ability to participate in output and input markets and on the functioning of those markets. A competitive agricultural market requires both the upstream and downstream markets to be well-functioning. Mediumto large-scale enterprises have a critical role in job creation, access to foreign markets, technology, etc. and can significantly accelerate agricultural development. Agribusiness is often the off-farm link in agro food value chains. It provides inputs to the farm sector, and it links the farm sector to consumers through the handling, processing, transportation, marketing, and distribution of food and other agricultural products. Thus, there are strong synergies between agribusiness and the performance of agriculture for development. Dynamic and efficient agribusiness spurs agricultural growth and a strong link between agribusiness and smallholders can reduce rural poverty (WDR 2008). Therefore, rules and regulations that directly impact medium to large – scale businesses such as trade, employment conditions, contracting, product standards and access to finance can significantly affect the profitability of smallholders and the distribution of benefits from agribusiness development.

3

The World Bank International Bank For Reconstruction And Development International Finance Corporation

Trade, for instance, is a critical area for medium to large – scale businesses as it affects both the initial and the final stages of the agribusiness value chain. Inefficient trade-related procedures can delay the export delivery and lead to a total loss of the entire consignment due to spoilage. Export policy pricing in place, such as export taxes or quotas, could also represent a critical disincentive for trade in agriculture. Importers and exporters of agribusiness inputs and goods are often subject to specific control procedures, especially because of the important public health and environmental safety issues associated with agriculture. Particularly importing inputs for agriculture is usually subject to several controls and an endless number of regulations. Often, complex and inefficient procedure related to seed imports limit the access to quality seeds in the economy (such as excessive time and number of procedures required to register, test, and obtain approval for new domestic seed varieties). The agribusiness inputs distribution system is also typically licensed and heavily regulated. Distributors of agricultural inputs (e.g., fertilizers, seeds, herbicides, and pesticides) often need to be licensed to deal in such products. Although input distribution licenses are critical to ensure quality standards are maintained, heavy and costly regulations could become a critical impediment to the expansion of local agribusiness negatively affecting the entire agribusiness value chain. Several studies have emphasized the need to enhance access to financial services in the agriculture sector. As outlined in the IFC “Scaling up Access to Finance for Agricultural SMEs” 2 report, a strong regulatory framework is crucial for the success of agricultural finance, as bank lending and efficient investments are adversely affected if the necessary legislation is absent or, even worse, if existing legislation is a roadblock for progress in agricultural finance. Agricultural finance is a specific sectoral concept that comprises financial services for agricultural production, processing, and marketing. Rural financial services provision in rural areas and rural economic activities faces specific challenges, in addition to those inherent in any financial intermediation, and is usually governed by specific regulations. For instance, the existence of a warehouse receipt system, and associated enabling or inhibiting laws and regulations is critical. Also, whether export contracts could be used as collateral for financing or not may have an impact on banking finance, as well as the existence of restrictions on the method of valuing agricultural land to be used as collateral. Important changes have been observed in global food trade with processed products now predominating exports and imports in developing country. As pointed out in many instances by the USAID, however, warehouse storage conditions for food commodities need improvement across the world. In Africa, for instance, large quantities of agricultural commodities produced by farmers tend to rot away unmarketed, while the smallholder farmers do not have the technology for timely consumption (Kamara, et al, 2002). The existence and the adoption of appropriate storage and handling procedures which encourage improvements in the conditions of food safety in warehouses are key elements for agribusiness competitiveness. At the same time, this presupposes sustainable costs to avoid binding standard compliance which can lead to a break down in domestic food supply systems. Agro-dealers are often requested to obtain licenses to operate the warehouse in compliance with standards and regulations. The time to obtain the licenses and associated user fees could be could be burdensome though. 3. DOING BUSINESS AS A CATALYST FOR REFORMS It is clear that a variety of laws and regulations affect agricultural activity around the world. In some countries, such laws and regulations may encourage agricultural business and foster agricultural productivity growth. In other circumstances, legal and regulatory restrictions and other agricultural policies may discourage agricultural business, limiting smallholder farmers’ access to quality inputs and inhibiting agribusiness development. Agricultural policymakers need to be able to identify in what areas their regulations are encouraging beneficial agricultural growth, and where legal and regulatory reforms may be needed to encourage agricultural development. The Doing Business project (DB) offers an ideal methodological tool to support decision-making by such agricultural policymakers. DB provides objective measures of business regulations and their enforcement across 183 economies. The 2

IFC “Scaling Up Access to Agricultural SME Finance: Policy Review and Recommendations” (http://www.ruralfinance.org/fileadmin/templates/rflc/documents/G20_Agrifinance_Report__(FINAL__ONLINE)__1.pdf)

4

The World Bank International Bank For Reconstruction And Development International Finance Corporation

project uses a case-study approach to gather comparable data using standardized surveys about the laws and regulations in 11 topic areas that would affect a small to medium-sized company across countries. By gathering and analyzing quantitative data to compare business regulation environments across economies and over time, DB encourages countries to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each country. This approach to measuring business regulations can be very effectively applied to the agricultural sector. Indeed, the DB methodology has already been successfully adapted to other regulatory areas: Women, Business and the Law uses the methodology to measure how business regulations affect women’s prospects as entrepreneurs and employees; Investing Across Borders applied the approach to measure regulations of foreign direct investment; and subnational DB reports compare the business environment across regions in a given country. The Doing Business in Agriculture project (DBA) will similarly be able to utilize the DB methodology, benefitting from the following aspects: •

•

•

•

Expertise in legal/regulatory analysis. DB has an established and refined methodology for measuring laws and regulations that affect firms in either a supportive or inhibitive way. DBA will be able to draw on its success identifying appropriate laws and measuring the time, procedures, and cost required to comply with administrative requirements in the agricultural sector. Established informant network and participant convening power. DB has established a network of more than 9,000 local experts in its countries, including lawyers, accountants, and government officials. The DB brand – as well as the name of the World Bank Group – has convening power to encourage participation of additional contributors. DBA will be able to benefit from this network to access appropriate experts in the agricultural sector to provide information about the agricultural laws and regulations in their country. Effective dissemination strategies and product branding. DB has achieved great success in the recognition of its brand, and in associating that brand with high-quality actionable information. Its reports are disseminated widely to relevant policymakers, business leaders, and journalists. DBA will benefit from this brand recognition so that the information and analysis quickly reaches the targeted decision-makers. Success in encouraging regulatory reform is perhaps the most important benefit of adapting the DB methodology. The methodology focuses on areas in which relatively simple legal or regulatory reforms can have positive impacts on the business environment, even in the short term. The emphasis on comparability across countries is also key: competition across countries for acknowledgment of a favorable business environment has proven to be an extremely powerful stimulus for reform. As a result, as of 2011, DB had tracked more than 1,750 regulatory improvements since 2004.

A growing body of research using the Doing Business data suggests that these regulatory reforms have real impacts on social and economic outcome. A recent study by Bruhn (2011) estimates the economic effects of a reform implemented in Mexico that simplified business entry regulation. The reform was introduced in different municipalities at different points in time. The study provides evidence that the reform increased the number of registered businesses by 5%. In addition, the reform increased wage employment by 2.2%. Similar results were found in India, where the progressive elimination of the “license raj” led to a 6% increase in new firm registrations, and highly productive firms entering the market saw larger increases in real output than less productive firms (Aghion et al. 2008). In the area of trade, Djankov, Freund and Pham (2010) show the positive impact of streamlining the institutional environment for trade (such as by increasing the efficiency of customs) on trade volumes. One study found that an inefficient trade environment was among the main factors in poor trade performance in Sub-Saharan African countries (Iwanow and Kirkpatrick 2009). Research also shows that an economy’s ability to enforce contracts is an important determinant of its comparative advantage in the global economy. Nunn (2007) finds that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important, and that contract enforcement explains more of the pattern of trade than physical capital and skilled labor combined. In the area of regulations and institutions that form part of the financial market infrastructure, Haselmann (2010) found that reforms strengthening collateral laws increased the supply of bank loans by 13.7% on average in 12 transition economies. Creditor rights and the existence of credit registries, whether public or private, are both associated with a higher ratio of private credit to GDP (Djankov, McLiesh and Shleifer 2007; Houston and others 2010).

5

The World Bank International Bank For Reconstruction And Development International Finance Corporation

4. WHAT IS “DOING BUSINESS IN AGRICULTURE” Doing Business in Agriculture will develop a set of indicators of the laws and regulations affecting agricultural business in countries around the world. The indicators will be consistent over time and comparable across economies, allowing countries to benchmark their agricultural regulatory framework, as well as its implementation in practice. The topics covered will focus on regulatory areas that are most important for smallholder farmers and general agricultural productivity, and where relatively simple regulatory reform can have short-term impact on the investment climate for agriculture. The objective is to stimulate reforms in the legal and regulatory environment for agriculture across countries, ultimately improving smallholder productivity, agribusiness development, and rural standards of living. The methodology of the Doing Business project will be used, allowing DBA to benefit from the established successes of DB as explained above. The indicators of the general business environment measured by DB will be used as a starting point for DBA, but they will be modified and expanded upon to focus on legal and regulatory issues directly relevant for agriculture. Case studies will be developed of a standard agribusiness enterprise or smallholder farmer, to make responses to survey questions consistent across countries. The two types of indicators used by DB will also be used by DBA: • •

‘Legal indicators’ will provide measures of the de jure laws and regulations on the books. ‘Time and motion indicators’ will measure the efficiency or complexity in achieving a regulatory goal by recording the time, procedures, and cost required to complete a transaction in accordance with all relevant regulations from the point of view of an entrepreneur.

The following list presents the seven indicator areas that Doing Business in Agriculture proposes to be considered for inclusion. The specific indicator areas will focus on the key interactions between the government and the private sector at the various stages of the agribusiness value chain. This list is illustrative and preliminary: as explained in the implementation section below, the final selection of topics and specific indicators will require further research, piloting, and consultation with experts. 1.

Exporting Agricultural Products

This topic will examine the legal and regulatory regime to export agricultural products from a given country. It will build on the DB Trading Across Borders topic, but with a focus on regulations specific to agricultural trade. Specific questions/indicators to consider including are: • • • • • •

2.

What export pricing policies are in place (such as export taxes, export subsidies, price controls, or quotas)? What export approvals or other restrictions exist (including by law, and in practice)? What licensing requirements exist to export agricultural products? How easy is it to comply with sanitary/phytosanitary (SPS) approval requirements or pesticide compliance requirements? What proportion of exported containers of agricultural products is inspected? What are the time and procedures associated with clearing all export requirements for an agricultural good, such as a refrigerated product with payment made via a letter of credit?

Accessing agricultural inputs

This topic will examine the legal and regulatory regime to access inputs for agricultural production. This will involve both the import of agricultural inputs, and the domestic sale and distribution of such inputs. Specific questions/indicators to consider include: •

Procedural requirements to import inputs (including by law, and in practice) o Are licenses required to import inputs?

6

The World Bank International Bank For Reconstruction And Development International Finance Corporation

•

•

o Are approvals required? o What are the time and procedures associated with importing agricultural inputs? Procedural requirements to distribute inputs (including by law, and in practice) o Are licenses required to distribute/sell agricultural inputs? o What type of documentation is necessary to receive such a license? o What are the time and procedures associated with obtaining an input distribution license? Taxes/subsidies on agricultural inputs o Tractor import taxation/subsidization o Fertilizer import taxation/subsidization o Seed import taxation/subsidization

An example of a specific possible case study is measuring access to quality seeds. Questions to ask may include what restrictions exist to importing certified seeds; whether the country has an International Seed Testing Association-accredited laboratory; and what time and procedures are required to register, test, and obtain approval for new domestic seed varieties. 3.

Getting credit for agribusiness

This topic will examine access to credit by smallholders and agribusinesses for agricultural production and trade. It will build on the DB Getting Credit topic, focusing on regulatory issues directly pertinent to access to finance for agricultural activity, including: • • • • • • 4.

Leasing agricultural equipment (is there a law, what procedural steps are required, etc) Are there regulations that enable or inhibit the use of moveable collateral? Existence of a warehouse receipt system, and associated enabling/inhibiting laws and regulations Can export contracts be used as collateral for financing? Are there restrictions on the method of valuing agricultural land to be used as collateral? What kinds of insurance are farmers able to access?

Accessing agricultural land/property

This topic will cover a variety of legal and regulatory issues related to purchasing or leasing land for agricultural production. It will build on the DB Registering Property topic, as well as the Accessing Industrial Land topic developed by the Investing Across Borders project. Specific indicators may include: • • • •

5.

Registering property: time and procedures required to purchase agricultural land and transfer the property title to the new owner. Securing land/resolving land disputes: time and procedures required to settle a land dispute through the judicial system. Leasing land: time and procedures required to lease rural land for agricultural production. Security of access to land: measure of the security of a farmer’s title to land through i) the level of protection offered by land registries to registered owners, ii) whether land boundaries are clear, and iii) whether there is compensation in the event of expropriation.

Accessing water

Access to water is a critical aspect of agricultural production and processing. Water pricing policies or distributional regulations can have a significant impact on who has access to sufficient water for agricultural activity. DBA will explore what specific legal and regulatory issues affecting access to water are most appropriate as the basis for indicators. 6.

Storing, handling, and transporting agribusiness products

7

The World Bank International Bank For Reconstruction And Development International Finance Corporation

This topic will cover regulatory issues affecting the availability and efficiency of storage and transport services for the agricultural sector. Possible indicators to be developed include: • • •

7.

What procedures or licenses are required to commercially store agricultural products? How efficient are inspection requirements of storage and treatment facilities? Do regulations improve or inhibit ease of entry into the trucking sector? How are these regulations implemented in practice?

Contract farming

Contract farming can involve smallholder farmers formally in the agricultural value chain, enabling them to benefit from agribusiness productivity increases and increase their access to finance. The legal and regulatory framework affecting contract farming will be analyzed, considering: • • • •

Are there cooperatives of smallholders that assume the responsibility of distributing the necessary inputs and facilitating the provision of extension services? Do dispute resolution and enforcement mechanisms exist? Are they handled by local magistrates or through national courts? How complex and costly are the dispute resolution and enforcement mechanisms that exist?

5. COORDINATION WITH OTHER WORLD BANK AGRICULTURAL ACTIVITIES The final set of DBA indicators will be determined in close coordination with other WBG activities, to avoid duplication and ensure complementarities. DBA has already closely coordinated with the Doing Business project to benefit from its methodology, as described above, and will continue to do so during further refinement of the project scope. There are many valuable initiatives by other organizations that collect data on agriculture, agribusiness, food security, and nutrition. We seek to incorporate their lessons into the DBA project and use their experience to shape our product. DBA is most closely coordinating with the Agribusiness Indicators project (ABI) of the World Bank’s Agriculture and Rural Development Department (ARD). The project, funded by the Gates Foundation, identifies success factors that can leverage agribusiness in seven Sub-Saharan Africa (SSA) countries and develops a set of indicators for cross-country comparisons. The ABI project develops indicators for leveraging the private sector to directly impact on agricultural productivity and competitiveness: These focus on three areas (1) Access to Critical Factors of Production, including certified seed, inorganic fertilizer, and mechanical inputs; (2) Supporting Services Measures, including finance and transportation government policies; and (3) Enabling and Regulatory Environment, including fiscal and monetary policies, trade policies, and the private sector perception of enabling environment particularly as regards to government crowding out of the private sector. The ABI project does not use a Doing Business-type methodology but is generating key metrics which .. (i) present a matrix to benchmark country performance, (ii) highlight new indicators of agricultural commercialization and (iii) the tracking of the impact and effectiveness of new agricultural policies. Data are collected through discussions with key informants representing different stages in the production, processing, and marketing of key agricultural commodities; review of scientific publications and policy research papers; and secondary data collected from various sources Doing Business in Agriculture has identified its proposed indicator areas in collaboration with ABI, and has adopted some indicators from ABI that are more appropriate to be analyzed using the DB methodology. DBI and ABI therefore closely complement, one another rather than duplicate, this major agricultural data initiative.

8

The World Bank International Bank For Reconstruction And Development International Finance Corporation

Senior management within the World Bank Group have agreed that will merge their efforts to deliver a joint Doing Business in Agriculture product, building on the range of expertise and experience both groups have developed. This will build on the Doing Business’s 10 years of experience in: (1) developing actionable indicators which have proven most effective at triggering changes in polices, (2) establishing a network of correspondents and gathering data on a cost effective and regular basis, and, (3) having a product and a communication process which as the leader in effective indicators to leverage change. The ABI’s group, within the World Bank’s central Agricultural Department contribution to the Doing Business in Agriculture will be: (1) their detailed understanding of the issues of global Agricultural development (2) expertise in indentifying, testing and verifying indictors that are relevant to the agricultural sector, and (3) in generating a database of reliable correspondents / key informant from whom updated indicators can be gathered on an on-going basis. Doing Business in Agriculture will also coordinate with units that provide advisory services to governments related to the business environment and investment climate. The Investment Climate and Competitive Industries departments in the Financial and Private Sector Development vice presidency work directly with government clients to implement reforms related to the regulatory environment. Given DBA’s design as an input to and stimulus of regulatory reforms, the final design of the DBA indicators will be done in consultation with these departments, to ensure that the information produced can be used practically in reform advisory processes. The WBG’s Global Indicators and Analysis Department (GIA) has significant experience implementing projects such as Doing Business in Agriculture. In addition to 10 years of experience implementing Doing Business, the department has successfully applied the DB methodology to range of other areas including Investing Across Borders; Women, Business and the Law; and the Subnational Doing Business projects,. Additionally they have been able to add new indicator areas such as Getting Electricity to the DB project. This experience will enable GIA to quickly and effectively begin implementation of the new Doing Business in Agriculture activity.

6. IMPLEMENTATION AND DELIVERABLES

The GIA and ABI teams will operate as a unit bringing together their disparate skills into a combined effort. In particular GIA teams will bring expertise around the requirements of indicators to be both effective and collectable on a cost effective and scalable basis. GIA also has in place the machinery and staff for collecting data and communicating reports on a truly global scale. The ARD team will bring their agricultural expertise and experience of generating reports on the agricultural sector in a diverse range of developing countries. The two teams will merge their approach. This will result a raft of agriculturally relevant indicators which will be collected from a wider range of key informants than the DB have used to date. Implementation process The first step will be additional research and consultation work to refine the specific DBA indicators. Staff with specific legal and agricultural development expertise within the World Bank Group will conduct more in-depth research of the proposed topic areas to identify the precise legal and regulatory issues most relevant to smallholder farmers and agribusinesses. Survey documents will be developed for each topic as the main output of this process. Expert consultative groups (ECGs) will also be formed to contribute to the refinement of the indicators. For each topic area, external experts in fields such as agricultural law and policy, private agribusinesses, and agricultural development and economics will be consulted on the general scope and specific indicator questions under consideration. GIA has found that the input of ECG members ensures that the broad range of relevant perspectives is incorporated into the project design, and builds consensus around the focus and scope of the activity. The second step will be to pilot the surveys and indicators that have been developed. GIA has found that practical testing of surveys used to gather data for new topics with actual respondents is a crucial step to ensure that the final indicator

9

The World Bank International Bank For Reconstruction And Development International Finance Corporation

set and associated surveys are feasible and deliver useable information. A couple of contributors per topic, in one or two countries per region, will be targeted for such a piloting exercise. DBA will benefit from the World Bank Group’s review and oversight process for indicator projects. An internal process has been established through which the Council of Chief Economists reviews the technical aspects and associated indicators of every indicator-based activity. Comments and insights from the council will be incorporated into the design of DBA. Throughout this technical and methodological review and refinement of the DBA indicators, the World Bank Group will be identifying the countries to be covered and developing a database of contributors to invite to participate in the project as follows: •

•

A methodology will be developed to select the specific countries that will be included in the first round of the DBA activity. The selection will focus on countries where agriculture represents a significant component of economic activity, perhaps at least 10 percent of GDP. A diverse group of countries will be selected, across regions and income levels. This will ensure that agricultural regulatory regimes that demonstrate efficient practices, as well as regimes in which reforms would be beneficial, will be analyzed. An initial selection of approximately 80 countries will be targeted to be included in the first round of DBA. Local experts in each country that are qualified to respond to surveys on the various DBA topics will be identified. The Doing Business contributor network will be a crucial starting point, but some refinement and supplementation will be necessary to create a DBA contributor network qualified to respond to questions about the agricultural regulatory environment. Contributors will be selected from law and accounting firms that provide services to the agribusiness sector; government regulators working in agriculture; organizations representing smallholder farmers; and private agribusiness firms. An illustrative list of types of contributors is presented by topic in Appendix 2.

In addition to country contributors, the project will also work to establish partnerships with global firms working in agricultural regulatory areas. Examples could include a global bank with significant agricultural lending operations across countries, or an accounting firm that provides consulting services in the agriculture/food security sector. Such partnerships have proven very effective to access relevant expertise on other GIA projects, and this same model will be applied on DBA. At this stage, DBA will begin the official data gathering and analysis process. Surveys will be distributed to the contributor network. The received data will be analyzed and coded. Writing and analysis will be done using the coded data, considering cross-country and regional comparisons and areas for reform. The ultimate deliverable will be a Doing Business in Agriculture report and website, presenting the information gathered across countries and regions. The report would be disseminated broadly to policymakers in the agricultural sector and other relevant stakeholders, with the goal of promoting reforms. The project would gather new data and issue a new report every two years, enabling the tracking of changes and reforms over time and across countries. Depending on the final design of the indicators, the project may also offer subnational DBA studies to client countries. Timing and deliverables Given the World Bank Group’s experience and capacity to implement such projects, DBA could be started as soon as funding is available. GIA is committed to producing and delivering timely and actionable information products, and seeks funding opportunities that would enable quick implementation of DBA. An implementation calendar for three years of the DBA project is provided in Appendix 1. Such a timeline is by necessity an estimate that is subject to change; for example, the internal WBG indicator review process may identify constructive changes that would make the DBA product more robust and effective, but which could delay the timeline. An indicative timeline for submitting the main deliverables is: •

Official draft of DBA methodology note and survey documents: Quarter 1 of Year 2 (such as September 2013, with a project start date of July 2012)

10

The World Bank International Bank For Reconstruction And Development International Finance Corporation

•

Publication of the first DBA report: Quarter 2 of Year 3 (such as November 2014, with a project start date of July 2012)

Outline of the Merger Process of GIA and ABI to Deliver Doing Business in Agriculture

Developed & refined methodology, large scale data collection with mounting evidence of policy impact

Field testing of data collection & respondent reaction to combined indicator report

GAI Doing Business Merging of selected RB & AB indicators

AgriBiz Indicators

ABI

Initiating new countries & indicators

Developing & testing raft of new indicators, building new key agricultural informants listings

Developing & testing a raft of new metrics focusing on leveraging private sector to promote greater agricultural productivity in SSA

2002

Doing Business in Agriculture

Rural /AgriBiz Indicators

2010

2012 2013

2014

2015

Operating to scale with tested , refined methodology & dissemination process

2016

11

The World Bank International Bank For Reconstruction And Development International Finance Corporation

Appendix 1: Illustrative implementation calendar for Doing Business in Agriculture Y1, Q1 Y1, Q2 Y1, Q3 Y1, Q4 Y2, Q1 Y2, Q2 Y2, Q3 Y2, Q4 Y3, Q1 Y3, Q2 Y3, Q3 Y3, Q4 Project design phase: Research and consultation work with expert consultative groups Piloting surveys Developing contributor database and global partnerships Internal review of the WBG Council of Chief Economists Finalization of methodology note and survey documents Official report development cycle: Survey distribution and data gathering Data analysis and coding Report writing and analysis Final WBG data and report review process Publication of DBA report Dissemination and and transition to next round: Dissemination and promotion activities Refinement of DBA and preparation for next data gathering round

12

The World Bank International Bank For Reconstruction And Development International Finance Corporation

Appendix 2: Illustrative list of contributors This appendix presents an illustrative list of types of contributors that Doing Business in Agriculture will draw upon to gather information about the relevant laws and regulations and their implementation across countries. DBA will utilize the existing relationships that DB has with its contributor network, while identifying additional contributors specifically relevant for DBA. Significant input on the appropriate types of contributors was also received from ARD’s Agribusiness Indicators Project, benefitting from their experience gathering data from stakeholders in the agricultural sector. The list of types of contributors is presented by topic: Exporting agricultural products • Freight forwarders serving agricultural firms • Customs brokers • Ministries at the national level (Agriculture, Trade/Industry, Finance) • Export promotion agencies • Export/import banks • Law firms working in trade/agricultural law • Accounting/consulting firms providing auditing/consulting/tax services to agribusiness firms • Transport firms/organizations (such as private shipping companies, or ports authorities) • Private agribusiness firms that engage in cross-border trade (such as seed/machinery importers, produce/grain exporters, international agbiz firms, etc) • National tax authority • International organizations (FAO, IFAD, IFPRI) • Accreditation organizations (such as GlobalGAP certifiers, or HACCP certifiers) • NGOs or agricultural advocacy/development organizations working on agricultural trade policy Accessing agricultural inputs • Ministries at the national level (Agriculture, Trade/Industry) • Export/import banks • Law firms working in trade/agricultural law • National agricultural research institutes, extension services, or plant/seed regulators • Customs brokers and freight forwarders facilitating the import of agricultural inputs • Accounting/consulting firms providing auditing/consulting/tax services to agribusiness firms • National tax authority • International organizations (FAO, IFAD, IFPRI) • Private agribusiness firms engaged in the input trade (such as seed/machinery importers, input distributors, international agricultural input firms, etc) • NGOs or agricultural advocacy/development organizations working on access to inputs Getting credit for agribusiness • Commercial banks, especially their legal offices or agricultural lending operations • Law firms that provide financial/agricultural business services • Credit bureaus (private and public) • Insurance companies working in the agricultural sector • Export/import banks • Rural/agricultural banks • Chambers of commerce or agricultural business associations • Non-profit agricultural finance organizations • Microfinance institutions providing agricultural finance

13

The World Bank International Bank For Reconstruction And Development International Finance Corporation

• •

Leasing companies Central bank (if they maintain some type of collateral registry)

Accessing agricultural land • Law firms and notaries providing legal services to agribusiness firms • Local land registry offices or cadastre agencies • Surveyors who work in rural areas • Accounting firms that provide auditing/consulting services to agricultural firms • Private agribusiness firms engaged in land access issues (produce/grain producers, international agbiz firms, etc) • Farmer cooperatives/associations • Leasing companies • NGOs or other agricultural advocacy/development organizations dealing with land issues • Municipalities and local tax authorities

Accessing water • Ministries at the national level (Water, Natural Resources, Agriculture) • Public water utilities • Private water distributors/irrigation providers • Private agribusiness firms engaged in agricultural production and processing (grain/produce producers, agricultural exporters, beverage producers, etc) • Farmer cooperatives/associations • NGOs or other agricultural advocacy/development organizations dealing with water access issues • International organizations (FAO, IFAD, IFPRI) • National agricultural research institutes and extension services

Storing and transporting agribusiness products • Ministries at the national level (Agriculture, Trade/Industry) • Accreditation organizations (such as GlobalGAP certifiers, or HACCP certifiers) • Transport firms/organizations (such as private shipping companies, or ports authorities) • Private agribusiness firms engaged warehouse services, agricultural exports, etc • Chambers of commerce or agricultural business associations • Food safety and inspection agencies • Farmer cooperatives/associations

Enforcing contracts • Law firms working in rural/agricultural contracts • Court officers (judges, court registrars, magistrates) • Accounting firms providing auditing/consulting work to agribusiness firms • Private agribusiness firms that may engage in such contracts (produce/grain exporters, international agbiz firms, international retailers, etc) • Chambers of commerce or agricultural business associations • NGOs or other agricultural advocacy/development organizations dealing with contract farming issues • Farmer cooperatives/associations

14