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Project components were not formally revised during implementation, except for
slight modifications related to: (a) the small bio-gas promotion activity under
component three, which was dropped because the unit cost turned out to be beyond
the average farmers reach; (b) the planned promotional mini-kit activities under
component two were later subsumed into the Governments newly developed
massive extension intervention program, for which the project continued to provide
the planned support; and (c) the number of field/rural soil testing laboratories was
increased from 8 to 17 as the need for additional laboratories in different parts of the
country became evident.
Two developments that affected the growth of a network of private fertilizer retailers
were unforeseen. The first development was the emergence of party affiliated,
although technically private, regional trading houses engaged in fertilizer trade and
other sectors.
These entities have occasionally attracted allegations of privileged
market access and other uncompetitive behavior. The second development was the
launching of an extension intervention program through which public extension
officers or staff of cooperatives delivered seeds and fertilizers to participating
farmers. This brought the government into the business of input distribution,
contrary to its own national fertilizer policy. This program expanded greatly in later
stages of the project. At the same time, the number of private retailers declined
sharply.
3. Results/Impact
Although several interventions supported by the project contributed to agricultural
growth and improved management of the fertilizer sector, OEDs evaluation of the
project as a whole rated its outcome as unsatisfactory; sustainability as unlikely,
institutional development impact as modest, and bank and borrowers performance
as unsatisfactory. Judged purely on the stated objectives included in the project
documents and development credit agreement, the project did not achieve its
objectives because the institutional developments that would have underpinned
sustainable growth in more intensive agriculture, and specifically the creation of a
viable private fertilizer sector, cannot be judged to have taken place. Therefore, the
development objectives were judged to be unsatisfactory despite some of the
positive achievements.
Annual fertilizer use increased from 247,000 tons in 1995 to 298,000 in 2000.This
increase contributed to increased food production--particularly in moisture-reliable
areas of the country. According to government statistics, fertilized area increased by
1 million hectares between 1995 and 2000. The incremental yield estimate of 0.60
tons/ha on fertilized land was more than double the conservative 0.32 tons/ha
appraisal projection.
Consequently, cumulative incremental grain production
reached 3.0 million tons, over and above the appraisal projection of 2.6 million tons.
However, although the increment was positive and laudable, not all could have been
attributed to the interventions of the project, and the sustainability of this gain was
not yet assured. In fact, some of the conclusions from a recently completed Bank
report1 are that there has been very little productivity growth since the close of the
project despite significant increases in fertilizer use. This raises the question of
whether or not the performance in the 1990s can be attributed to fertilizer use. More
growth is related to area expansion and very little to productivity. Another factor,
according to the report, is that fertilizer use by farmers and area covered has
1
increased, but fertilizer intensity has not changed. In addition, it appears that the
fertilize use is not efficient. In part, this has to do with extension services, marketbased incentives: ineffective output market signals, inefficient input markets, which
result in high costs and untimely availability.
Government figures suggest that the proportion of the population experiencing food
poverty declined from 47 percent in 1995/1996 to 42 percent in 1999/2000. This
situation most likely worsened in subsequent difficult years. The reevaluated net
current value of the project was positive and substantial, and the policy reforms and
institutional development carried out under the project were, and continue to be,
important elements in the country assistance and poverty reduction strategies.
However, although all agreed market reforms were fully implemented, a new set of
market distorting phenomena emerged and prevailed throughout project
implementation. These hindered the establishment and growth of a competitive
fertilizer market, and countered the measures supported under the project. These
included the manner in which the rapidly growing input credit and agricultural
extension programs were implemented and uncompetitive tendencies in the input
distribution market. Consequently, the sustainability of the projects outcome was
not assured.
Other positive outcomes included improved industry coordination and monitoring;
increased environmental protection awareness; improved consumer protection
awareness; enhanced foundation for efficient nutrient management; and farmer
empowerment.
4. Lessons learned
(i)
(ii)
(iii)
(v)
It is equally important to treat both input and output markets holistically. The
grain market crash of 2001 and the resulting hardship in credit repayments
and precipitous drop in fertilizer consumption in 2002, clearly illustrate the
importance of focusing as much on agricultural input markets an on output
markets.
Despite fertilizer market reforms and the initial positive response by the private
sector, the recently completed World Bank report indicates that the last nine years,
have witnessed the private sector (other than party-affiliated trading houses) exit
the fertilizer market. In addition, the report concludes that the future of fertilizer
markets in Ethiopia is uncertain. Although the Governments recent Agricultural
Marketing and Input Strategy indicates an overall commitment to private sector
involvement, the particular directives in the Strategy suggest that the public sector
will continue to play an active and dominant role in the import, wholesale, and retail
of fertilizers. Recommendations provided by the Bank report include: promotion of
competition and private sector participation in the sector, and elimination of state
involvement in credit guarantees, debt recovery, and seed production.
Prepared from World Bank project documents by Jeanette Sutherland.