Somalia - Agricultural sector review (Vol. 1 of 3) : Main report

Report No. 2881a-SO FILE COPY Somalia Agricultural Sector Review (In Three Volumes) Volume 1: Main Report June 29, 1981 Eastern Africa Regional Office Northern Agriculture Division FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients oniy in the performance of their official duties. Its contents may not otherwise be disclosed without Wold Bar.! authorization.  CURRENCY EQUIVALENTS Currency Unit Somali Shilling (So.Sh.) US$0.1589 = So.Sh. 1.00 US$1.00 So.Sh. 6.295 WEIGHTS AND MEASURES 1 hectare (ha) 2 = 10,000 m 1 square kilometer (km ) = 100 ha 1 metric ton (ton) = 1,000 kg ABBREVIATIONS ADC - Agricultural Development Corporation ENC - National Trading Company FYDP - Five Year Development Program GDP - Gross Domestic Product LDA - Livestock Development Agency MLFR - Ministry of Livestock, Forestry and Range MOA - Ministry of Agriculture MNP - Ministry of National Planning NBB - National Banana Board NES - National Extension Service NRA - National Range Agency ONAT - Farm Machinery and Agricultural Services Organization SPC - State Planning Commission TYDP - Three Year Development Program FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY SOMALIA AGRICULTURAL SECTOR REVIEW Main Report Table of Contents Page No. Summary ................................................ i - iii Chapter I: The Country and the Economy ............................ 1 A. General Characteristics .................................. 1 B. The Somali Economy ...... ................. 2 C. The Agricultural Sector ............... . . ................... . 4 Chapter II: Major Issues Facing the Agricultural Sector .... ....... 9 / A. The Resource Base and the People .... ............. 9 B. Social Issues ...................... ...................... 14 C. Institutional Issues ................ .. ................... 15 D. Vulnerability to Drought ................................. 18 E. The Present Economic Crisis ............. .. ............... 21 Chapter III: Livestock Production ................................. 23 A. General Characteristics ............... .. ................. 23 B. Role of the Subsector in the Economy ........ .. ........... 23 C. Past Development Efforts .............. .. ................. 24 D. Priorities for Future Development .......... .. ............ 25 Chapter IV: Crop Production ....................................... 31 A. General Characteristics ............... .. ................. 31 B. Role of the Subsector in the Economy .......... ........... 35 C. Past Development Efforts .............. .. ................. 36 D. Priorities for Future Development ........................ 38 This report is based on the findings of a mission that visited Somalia in June/July 1979, and which comprised: S. Gafsi (Mission Leader), K. Meyn (Livestock Specialist), M. Devaux (Macroeconomist), U. Kuffner (Water Resources Engineer), E. Goetz (Agricultural Economist), M. Dagg (Research Assistant) (World Bank), C.P. Watson (Fisheries Specialist), H. Newton (Agriculturalist) (Consultants to the World Bank) and D. Aronson (Anthro- pologist) and C. Miller (Marketing Specialist) (Consultants to USAID). Mr. D. Lister (Agricultural Economist) led discussions of the draft report with Government officials in October 1980 and January 1981 and contributed to the final version. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  2- Page No. Chapter V: Fisheries . ........ ................. .. ................... 43 A. General Characteristics .................................. 43 B. Role of the Subsector in the Economy ..................... 44 C. Past Development Efforts ........ . . . . . ................... ...* .. . 44 D. Priorities for Future Development .......... .. ............ 45 Chapter VI: Development Strategy and Future Prospects ............. 47 A. Immediate Needs .......................................... 47 B. Longer Term Objectives ................................... 47 C. Policy and Institutional Framework ....................... 48 D. The Strategy ............................................. 52 E. Prospects for the Future ................................. 54 APPENDIX 1: Agencies Serving the Agricultural Sector APPENDIX 2: Proposed Development Projects MAP: Regions and Districts (IBRD 15445) VOLUME II: ANNEXES 1: The Livestock and Wildlife Subsector 2: Water Resources Development 3: The Fisheries Subsector -VOLUME III: ANNEXES 4: The Social Impact of Agricultural Development 5: Production Alternatives and Technological Choices 6: Institutions Serving Agriculture 7: Selected Agricultural Issues  SOMALIA AGRICULTURAL SECTOR REVIEW Main Report Summary i. Agriculture, including livestock, crops and fisheries, is the pre- dominant sector in the Somali economy. Over 80 percent of the 4.2 million Somali population 1/ depend directly on agriculture for their livelihood. Three-fourths of these, or some 60 percent of the total population, are nomads. Rural incomes are low, and highly variable due to drought. ii. Of the three agricultural subsectors, by far the most important is livestock production, which provides over 60 percent of employment, about 50 percent of gross domestic product and over 80 percent of export earnings. Livestock production is based on nomadic pastoralism; there is limited mixed farming of livestock and crops, and some specialized production near urban areas and on large-scale public production units. Crop production employs about 20 percent of the population and generates about 8 percent of GDP and about the same share of exports. Rainfed crop production is based pri- marily on sorghum, a high risk, low input/low output activity. Under con- trolled irrigation, crop production is centered on bananas (the principal cash crop and the second largest export commodity), sugarcane, rice and maize. Controlled irrigation is concentrated on state farms. It employs high input technology, but this has not always been realized in practice. In any case, its productivity has been low. Under flood irrigation, crop production has centered on maize and sesame. As under rainfed conditions, this activity is high risk, low input/low output. The fisheries subsector is largely an untapped resource at present. It provides part- or full-time employment to about 2 percent of the population and generates about 2 percent of GDP. iii. Somalia's economic policy is developed in a socialist framework with public sector leadership, a prominent role for parastatals in production and marketing, and Government controls over prices, credit and supply of inputs. Somali farmers participate to only a limited extent in the monetized economy; the marketable surplus of grain represents about 25 to 30 percent of total production, and nomadic livestock producers are even less involved in market- oriented activities. These conditions limit the effectiveness of market incentives for stimulating production in the short run. iv. Government-stated objectives for the agricultural sector include (i) self-sufficiency in sorghum, maize and oil seeds, (ii) increased production 1/ During discussion of the report, Somali authorities stated that the 1980 population, based on a new analysis of the 1975 census, was 5 million, excluding refugees. To the extent that the higher figure is confirmed by further demographic study, the problems indicated in this report would be that much worse, but the proposed strategy would not be affected.  - ii - for import substitution of rice, cotton and sugar, (iii) increased production for export of livestock, fish and bananas, (iv) development of new export crops, and (v) protecting the country against the effects of drought. The realization of these objectives would depend on the resolution of a number of critical issues. The first is to ensure that the growing population is distributed in a way that is compatible with the geographical distribution of limited natural resources. The second is to organize production in such a way as to allocate scarce resources equitably among beneficiaries and ensure widespread participation in the development process. The third is to strengthen public sector institutions through manpower training, improved organization and management, and enhanced incentives. The fourth is to decrease the country's vulnerability to drought by increasing production, which has been essentially stagnant for the last decade, and developing programs to cushion the effects of inevitable periodic droughts. The fifth, and most important issue for the immediate future, is the urgent need to restore economic equili- brium in the face of severe external and domestic financial imbalances which beset Somalia in 1980. A satisfactory resolution of this overriding problem is a necessary condition for creating an economic environment in which the other issues can be addressed. v. For the agricultural sector, resolution of the current economic crisis would require concentration on those activities which can generate increased production and exports in the short run. Such activities would have to focus initially on the more monetized part of the sector. For the livestock subsector, this would involve continuing to provide attractive export prices, animal health facilities at critical points in the marketing chain, selected improvement in market infrastructure, and assistance for improving production and export of hides and skins. For the crop production subsector immediate actions would consist of increasing producer prices and the supply of consumer goods and providing export incentives, rehabilitating irrigated areas, improving input supply and building the capability to forecast and respond to periodic food shortages. Consistent with the macro-economic objective of achieving quick returns at least possible cost, major new invest- ments designed to expand the area under controlled irrigation (i.e. Bardere Dam) should receive lower priority. Such investments should not be considered unless funds for them are additional, non-fungible and provided on a grant basis, and the required technical and managerial staff are provided by external donors so that these projects do not detract from the higher priority reha- bilitation effort. Unless these conditions are met, which will be extremely difficult, there seems to be no case for going ahead with the Bardere Dam in the context of the agricultural sector. For the fisheries subsector, immediate attention would be required for making productive use of existing deep sea trawlers, reallocating the motorized coastal fishing fleet to areas where maintenance can be guaranteed and reestablishing the supply of small boats and fishing gear. vi. These activities should be incorporated in a well defined investment plan designed to overcome the present economic crisis and prepare the way for future sustained development. The management of financial and skilled man- power resources, and the provision of incentives to motivate producers, would be crucial to the success of the plan. As progress is made in carrying out  - iii - these immediate activities and as more resources become available, priority would be given to investments which activate other sunk capital, complete other on-going investments and continue the rehabilitation of irrigated and rainfed areas. At the same time, actions (strengthening the information system, institution building, development of manpower) would be started to build the basis for longer term sustained development. This strategy for the agricultural sector would have elements which can be started immediately, others which require supporting services and institutional changes for suc- cessful implementation, and still others which would take more time because of the need for more information, adaptive research and improved infrastructure. vii. Somalia is not well endowed physically and, today, faces many serious problems. Nevertheless, there is considerable scope to better utilize those resources which do exist especially given the country's rela- tively low population. Provided that Government makes the required hard decisions and initiates actions to reform policies and institutions, rehabili- tate the country's underused productive assets and mobilize the necessary human and financial resources, the outlook for the agricultural sector by the end of the century could be considerably brighter. The predominantly nomadic, drought-prone rural population could be transformed into one which is more evenly distributed between livestock, crop and fisheries activities, and which is in better harmony with the country's resource base. The realization of this objective poses a major challenge to Somalia.   SOMALIA AGRICULTURAL SECTOR REVIEW Chapter I: The Country and the Economy A. General Characteristics 1.01 Somalia is located in the northeastern corner oi Africa, between the latitudes 11030'N and 1030'S (Map). The length of its coastline is 3,000 kilometers. Its area is 63.8 million hectares. The topography consists mainly of plateaus that slope to the Indian Ocean in the east and to the Gulf of Aden in the north. These plateaus are broken by chains of mountains in the north, and they end in a relatively broad coastal plain in the south. Sixty percent of the sparse and dispersed population of about 4.2 million are nomads, 20 percent are settled rural dwellers, and 20 percent are urban dwellers. The lack of communication among settlements presents a serious obstacle to the development of a number of regions and to trade among various parts of the country. Distances to markets and ports are long, which means that certain goods, abundant in some areas, are scarce in others. 1.02 Somalia is among the poorest countries in the world. Estimates of average income per capita range from US$150 to US$200. These orders of magnitude indicate that by international standards, the per capita income is very low; for most Somalis it is not much higher than the level of absolute poverty income, which for the country as a whole is estimated to be about US$150 per capita. Not only are most Somalis poor, but they are also vulner- able to drought which makes even their low incomes highly variable. Tradition- ally, Somalia was a land with few class distinctions, especially among nomads. Increasing income differentiation in recent years, however, has led to the emergence of at least four distinct classes in the rural sector: agents of the State, rural wage workers, the "mobilized" rural producers and the residual masses (Annex 4). 1.03 Somalia is among the least developed countries in Africa. Not only is it among the poorest, but until recently the general lack of infra- structure - physical and institutional - has made it even more destitute. Efforts are now underway to fill these major gaps, such as the construction of roads, port facilities and irrigation systems, and strengthening of the university and the agricultural research and extension system, but much remains to be done. The Somali nation, independent since 1960, had been arbitrarily divided under colonial rulers. The interest of the former colonial powers was limited to only a few points along the shoreline for strategic and commercial reasons; they were not concerned with developing the interior of the country. The predominance of the nomadic lifestyle was not favorable to the dissemina- tion of education. The absence of incentives to reward individual initiative combined with low salary levels has induced a large number of the few gradu- ates of secondary schools and universities to seek employment in oil-rich  - 2 - neighboring countries. The result is a widespread lack of managerial and technical talents in Somalia that is reflected in a weak institutional infrastructure. 1.04 The statistical system is so poor as to prevent the generation of any significant data for the purposes of planning and budgeting. There are no national accounts and no comprehensive sectoral data. The data that are available are sparse, coverage is uneven and statistical reliability is low. The first census of population and livestock in the country was taken in February 1975, but the information collected is still being processed. No agricultural census has ever been taken, and data on crop areas, yields, and production and livestock are based on vague estimates of basic parameters. Statistics on foreign trade are available, but with a time lag. There are none on internal trade. Consolidated government accounts are not analyzed according to their economic and functional classifications. Under these circumstances, analysis had to be based on limited quantitative informa- tion and on the combination of judgments of the World Bank mission, of the government, and of others who are informed about Somalia. Deficiencies are being addressed progressively by the government, and it is expected that a national program for the development of statistics will be undertaken soon as part of the Agricultural Extension and Farm Management Training Project (IDA Credit 905-SO). B. The Somali Economy 1.05 In terms of production and potential for growth, the Somali economy is dominated by the agricultural sector. Reliable statistics on the gross domestic product (GDP) are not available, but it is estimated to be of the order of US$1,000 million in 1978. Productive sectors, other than agriculture (manufacturing, mining, construction and public utilities), contribute only 10 percent of GDP and employ 7 percent of the labor force. Services contribute about 28 percent of GDP and employ 13 percent of the labor force. GDP growth was estimated at about 2.5 percent a year in real terms for the period between 1972 and 1978. However, the average growth rate was only about 1 percent a year in the productive sectors while it was 6 to 7 percent in services. Crop production, which showed a decline of 5 percent, was especially disappointing. The rapid growth in the services sectors reflects mainly a rapid increase in government employment. Socialist Framework 1.06 The country's economic policy is developed in a socialist framework with public sector economic leadership and Government controls. The declara- tion in 1970 of the socialist nature of the Somali revolution, reflected three main strands of thought -- ending neo-colonial subservience, ending national poverty and changing the face of the countryside. These elements have in turn translated into a number of interrelated policies, the most notable of which have been: (a) nationalization of the banks and creation of state import and trading monopolies for many items to control elements of commerce felt to have  been exploiting the country, (b) efforts to prevent the use of government service to amass wealth, and (c) rapid expansion of the state sector in crop agriculture and expanding irrigation, and the spread of cooperatives in agriculture, trade and industry. Over the years, these measures have tended to produce a lack of incentives for many activities, leading to stagnation in the productive sectors of the economy. 1.07 The 1979-1981 development program states that it is intended that the larger production schemes planned in agriculture, mining, industry and fisheries should be undertaken by the Government itself or by Government promoted cooperatives. The role of the private sector is recognized in crop and livestock production, small-scale manufacturing and retail trade, and it is Government policy to encourage it where the principle of social justice is not sacrificed. Foreign Trade and Capital Movements 1.08 Exports consist mainly of two commodities: live animals and bananas. In 1978, for example, they accounted, respectively, for 83 percent and 8 percent of total merchandise exports. In volume terms, export trends have been most unfavorable as Table 1 indicates. Although livestock production has recovered from the effects of the 1973-75 drought, exports of live animals have not yet reached pre-drought levels. Domestic consumption appears to have increased faster than production. The sharp drop in other exports is mainly due to the fall in banana production and the cessation of exports of canned meat to the USSR. Export earnings are now more vulnerable due to their dependence on one export commodity and one export market (83 percent of exports in 1978 were live animals and 96 percent of this was to Saudi Arabia). Table 1 Volume Indices of Exports 1972 1979 Live Animals 100 91 Other Exports 100 37 Total Exports 100 71 1.09 As a result of recent developments and increasing oil prices, government expenditures rose sharply, domestic price pressure was intensified, and the deficit of the balance of goods and services widened as demands for imports increased faster than exports. The current-account deficit has widened in recent years. The balance of payments is heavily dependent upon flows of concessional assistance, remittances from Somalis abroad, and earnings from exports of livestock.  -4- Fiscal Situation 1.10 Budgetary support of economic ministries in 1978 accounted for 30 percent of government expenditures. This is lower than comparable expen- ditures in other countries and reflects an unusually large allocation of government resources to defense and general administrative and social services. Government budgetary allocations to economic services also show an inconsis- tency between ordinary and extraordinary expenditures. 1/ Maintenance and recurrent expenditures are insufficient to maintain existing investments, which are thus allowed to deteriorate. Recurrent expenditures in general are low, and existing capital facilities are very much underused. For the agri- cultural sector, the budgetary allocations reflect this general imbalance. ordinary expenditures in this sector, which reflect salaries and recurrent expenditures for the most part, account for about 6 percent of total ordinary expenditures of the government, while extraordinary expenditures account for 39 percent of the extraordinary budget. 1.11 Over the last two or three years Somalia's external and internal financial position has deteriorated sharply. There are a number of reasons for this deterioration, e.g., the Ogaden refugees, the rise in oil prices, etc. The discussion of these developments is outside the scope of this report. One important factor responsible for the recent deterioration is the stagnation of production in agriculture and this report will focus on this sector. C. The Agricultural Sector 1.12 The agricultural sector provides employment for about 80 percent of the labor force and generates about 60 percent of GDP. Within the sector, livestock production is by far the most important subsector, followed by crop production and fisheries. There is little integration between development activities in the three subsectors. This stems, for the most part, from the physical and geographical separation between areas where livestock, cropping and fisheries activities take place. Institutional arrangements have tended to reflect this separation. However, even in the two limited areas where a potential exists for interaction between the subsectors (North West Region and interriverine area, para. 1.17), development efforts have tended to be sharply defined along subsectoral lines. There will be an increasing need in the future to develop integrated crop and livestock systems, including both irri- gated and rainfed farming areas, and to coordinate infrastructural development to serve all three subsectors. The three subsectors are described in Chapters III, IV and V. 1/ The government has an ordinary budget and an extraordinary budget. The former, which represents the bulk of the total government budget, covers current expenditures. The latter covers investment expenditures and expenditures for special programs, such as emergency programs (settle- ment), or special actions such as crash programs.  1.13 Somali farmers participate only to a limited extent in the monetized economy. The Agricultural Development Corporation estimates that only 15 to 20 percent of grain production is marketed through official channels. It is estimated that another 10 percent of grain production is sold in the unofficial parallel market. The marketable surplus thus represents only 25 to 30 percent of total production. Similarly, the use of marketed inputs is limited and the array of consumer goods available in the countryside is narrow. For these reasons, the impact of price changes on production is less than in many countries, especially in the case of subsistence crops. Livestock producers are mainly nomads who live at the margin of the monetized economy in which they participate to an even smaller extent than crop producers. the Resoui,.