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4.Implications

116. The implications of these findings for the proposed Project are presented in the executive summary and need not be repeated in the main report. Additional and somewhat more detailed recommendations consist of the following.

Privatization


(a) Expanding the scope of land registration services and continuing the support to a rapid completion of land titling is perhaps the easiest and most important follow-up to the existing Pilot Farm Privatization Project. Expanding the geographical coverage of this support is important. Doing so will have the additional impact of enhancing trust in rural reform. There is also need to review the legitimacy of municipal and State land allocations and share results with rural people; this too will enhance trust in the reform process.
(b) Distributing land by lottery has received relatively good feedback. At the same time, it is important for family members to pool their land resources; many say they would like to do so in order to buy farm machinery. Therefore, in areas where land plot assignments have not been made, family members may be given an option to enter the lottery as a group.
(c) Creating an enabling environment for private sector investments in agro- industries will yield large benefits. Farmers welcome private sector investments of both local and/or foreign companies. The development of the private sector will also help improve quality of farm inputs as well as encouraging use of pesticides and fertilizers29. There is need to pay particular attention to providing information for the creation of agro-businesses to support small livestock and poultry production. Especially important is to support small scale, household level entrepreneurial activities, which already have an important place in rural families’ livelihood. In this context, it is advisable to look into the feasibility of privatizing social services such as health facilities and kindergartens in rural communities to ensure better service and to lift the burden of operating these services from local administrations.
(d) A peasant economy has already emerged in rural Azerbaijan. It may be advisable to support this economy through income and employment generation with a focus on small-scale self-employment initiatives within and outside the agricultural sector.

Improving Farm Inputs


(a) As irrigation is a major input, there is need to expedite the preparation of support for the rehabilitation of the existing schemes. For the management of irrigation systems, the creation of functioning water user associations is important; however, expectations of cost recovery should be low and there should be readiness to make heavy investments in the rehabilitation of existing irrigation schemes before the associations can assume responsibility for their operations.
(b) The study of the feasibility of providing support to small-scale intensive agricultural initiatives such as greenhouses on garden plots is important. Financing of small-scale on-farm irrigation systems, such as hand pumps and artesian wells for garden agriculture, might also have high payoff for low-income households.
(c) The Bank may wish to support state farms (pedigree farms) and agro-services to produce and provide good quality seed and other inputs to independent farming families as short-term farm revival strategy. These may be provided as in-kind loans to be paid back in-kind after harvest.
(d) Simple and flexible procedures for credit delivery to farmers, voluntary production associations and small enterprises are needed. Alternative approaches experimented by the Bank to encourage “people’s banking” should be shared with a mixed group of stakeholders in Azerbaijan to allow a participatory decision making rather than prescribing a given credit system arrangement.
(e) It is important to increase the transparency in distribution of farm assets and machinery so that these do not concentrate in a few hands. As elsewhere, in Azerbaijan, there are serious equity issues involved in the distribution of farm equipment. Therefore the feasibility of having these managed by a private entity may be considered30.
(f) Of particular interest to the farmers is the availability for lease or sale of low cost, energy efficient farm machinery and training for their use. This can be achieved through “farm equipment fairs” in several regions. Long term concessional loans for farm equipment might also be important, although it is necessary to reconsider the current practice of making these available only to cooperative or collectives.

Marketing Improvements


(a) It is important to research current mechanisms and incidence of rural corruption and its effects on the poor and on independent farmers. Once adequate information is available, the Bank may fund, as appropriate, institutional development efforts to combat rural corruption.
(b) Currently, transport and lack of adequate markets are major problems affecting people’s abilities to sell their products. These problems are community specific. Therefore, it is advisable to form formal marketplaces in rayons and provide transportation from villages to the markets on specific days of the week where such services are lacking.
(c) There is high demand for agricultural extension services. These services can be integrated with the credit services for higher effectiveness. Farmers emphasize that demonstrations are necessary and that their land plots could be used to do so. Activities that can be demonstrated can include (but are not limited to) apple drying facilities, simple jam making facilities and greenhouses. Farmers also emphasize that they would need easy and regular access to advisory services; therefore the current extension program should be moved from Baku to the regions. Services in Baku tend to reach to a few people and are not effective as desired31. Availability of such services throughout rural areas, targeting both female and male farmers, is crucial to avoid spatial and gender inequities.

5.Preliminary Social Impact Monitoring and Evaluation Indicators

117. For the social development aspects of project monitoring, it is advisable to develop a number of indicators and track the developments with respect to these indicators. The following indicators emerged from the initial social assessment for the Farm Privatization Project.

Indicators focusing on the land registration process
Actual receipt of land title

The percent of women receiving land title

Obstacles to land trade

Land consolidation levels: is consolidation working or are already large holders getting a bigger share?

Perceptions of equity in the land distribution process

Access to adequate and timely information on land distribution

Perceptions on family land allocations
Indicators focusing on state farm asset distribution
Actual receipt of these assets by the people entitled to them

Perceptions of equity in the assets distribution process

­Actual percent of entitled women receiving assets

Trust and corruption issues in asset distribution

Cooperation in using the distributed assets
Access to inputs and outputs markets
Existing barriers

Improvements in removing these barriers

Number and quality of input suppliers and access to them

Pricing constraints

Access to local markets

Number of agri-businesses in rural communities

Transportation issues: cooperation in transport, problems and potential solutions

Information on access to markets

Performance and usefulness of pedigree farms

Women’s access to local markets and information


Irrigation issues
Impact of the Bank-financed irrigation project on the small holders and potential problem areas

Current and existing problems with irrigation

Impact of electricity and other infrastructure on irrigation

Payments for irrigation


Advisory services
Number of people advised per rayon

Percent of women among those actually received advise

Usefulness of the advise as seen by the small holders

Establishment of appropriate institutional mechanisms for advisory services

Expected behavioral changes in production methodology and amounts
Credit
Access to credit through regular institutions and informal arrangements

Actual receipt of credit

Degree of cooperation to receive credit

Collateral usage for credit

Uses of credit

Women’s access to credit

Repayment: problems with repayment and perceptions

Adequacy of credit targeting and institutional arrangements for small holders

Number of associations receiving credit and their quality
Other monitorable issues
Unemployment among women who do not have pensions

Availability of social services and insurance systems (if exist)

Number of voluntary associations formed and found useful

Use of garden plots




  • Putting in place participatory feedback mechanisms and institutions

  • Participatory monitoring of the project objectives through the indicators identified above

  • Putting in place consultation mechanisms for policy making at the central and local government levels


Sources

Focus Group Discussions, December 1997-January 1998.

Household Survey in Five Rayons, January - February 1998.

Survey with Rural Women, March 1998.

Interviews with local and central government officials

Interviews with local people

“Land Reform in Moldova,” Nora Dudwick, October 30, 1997

Azerbaijan Farm Privatization Pilot Project, Staff Appraisal Report, December 1996



1 The rise of “Dutch disease” is viewed to be substantial

2 The SA team was unable to get permission to work within the pilot communities; rather it reviewed issues in other communities of regions where the Pilot project is under implementation.

3 Other laws include the Land Code of Azerbaijan (1991), Reforms of kolkhozes and sovkhozes (February 1995), Bill on Improvement of Irrigation (September 1995), Rules of Allocating Land Plots (October 1996), Improving the State of Use of Saline Land (October 1996), Definition and Use of Pastures (October 1996).

4 Azerbaijan Poverty Assessment. 1995. Human Resources Division, Country Department III, Europe and Central Asia Region. The World Bank.

5 Municipalities are the local administrations, however, their legal status is not clear yet. According to the land distribution law, up to 50% of distributed productive lands can be left to the municipality to be sold to young people in the future. Municipalities, on the other hand, argue that they are keeping this land for the expenses involved in maintaining the social assets.

6 Azerbaijan Poverty Assessment. 1995. Human Resources Division, Country Department III, Europe and Central Asia Region. The World Bank.

7 Kudat, Ayse and Stan Peabody. 1998. Social Dimensions of Agricultural Development in ECA: Knowledge Vacuum. Draft Report. The World Bank.

8 Initially, the heads of republican center on pilot private farms were against the conduct of research. Executive committee heads in project districts were instructed not to allow the researchers enter into the farms. Due to these problems, the SA could not be completed in the pilot villages. Only four focus group discussions and survey in one pilot village could be conducted. Nonetheless, available information gives an overall view of the conditions in these pilot farms.

9 The project team was not able to conduct focus groups in Lenkeran.

10 In exceptional instances, informal lenders provide credit with 20-25% monthly interest (and most pay back within a month or two, thus the reason for a general lack of annual interest rates).

11 This does not mean, however, that working capital is not needed to buy farm inputs, including equipment and irrigation water. Rather, it appears that until market constraints are removed and local corruption is substantially reduced, goods and services in kind, rather than in cash might be made available to the small independent farms.

12 Ex-farm managers and local authorities are said to have claimed ownership of buildings, equipment and livestock.

13 The property index combines a number of variables pertaining to the property ownership of the household. The first variable is the conduct of privatization in the village. The second variable is the receipt of land due to privatization. Third variable is the receipt of machinery and equipment (in the first three variables, values are multiplied by 10 to ensure an accurate index calculation). Fourth variable is cattle ownership as defined by the number of cattle, and the fifth variable is small livestock ownership as defined by number of livestock multiplied by 1.5 since small livestock is more important to livelihood of rural families. The index is the sum of these variables; the property order is created by taking the average value of this index in each rayon.

14 The Azerbaijan LSMS (1995), found that in rural areas, households spent about 57 percent of their incomes on food.

15 US $1 = 3,900 manats, September 1998.

16 Small livestock, such as sheep and goats, are easier to feed than cattle. Cattle needs large grasslands to graze. Sheep and goats have smaller mouths and can feed even in mountainous areas and small grasslands.

17 At present about 60% of the land privatized is being given to individuals often in plots less than 1/8 ha. The practice of allocating 40% of the privatized land to local "municipalities" is a mystery to most farmers who know that their plots are too small to be profitable.

18 One of the reasons why farmers criticize current land distribution mechanisms (through lottery) concerns the fragmentation of land owned by members of extended families. Often, married sons or a family are each allocated land in different parts of a village; this makes their joint cultivation and economies of scale impossible. Nevertheless, farmers are eager to pool the holdings of different family members in order to be eligible for farm equipment credit provided that terms are concessional and repayment period sufficiently long.

19 All the respondents in Lenkeran rayon who said privatization took place in their village are from the Narimanov village, which was the only World Bank pilot project village that could be surveyed within the SA.

20 Mechanisms for greater transparency of credit distribution are being established; they too will be for larger credit amounts meant for rural “firms” or cooperatives/collectives.

21 The SA, however, cannot confirm whether this is the result of a price-fixing effort on part of food processing enterprises or the natural functioning of the markets.

22 The Bank is currently financing an irrigation project in Azerbaijan and the more specific problems will be addressed within that project.

23 Here, housekeeping includes taking care of the household plot, taking care of children and in addition, running daily household errands. Therefore, even though most women are currently unemployed, there has been a real increase in their workload.

24 This category includes cattle breeding, trading, fruits and vegetables cultivating, office work, collective farm executive, nursing, technical workers and students.

25 However, these answers are only from women who think there have been changes in their lives. Since the sub-sample size is small, the answers are not statistically significant and can only be used as an indicator.

26 These include high production expenses, lack of means of production, salinized land, unemployment, complaints about unfair distribution of land and physical problems.

27 These include opportunities to get machinery, doing charity, giving a good dowry for daughters and obtaining government credits.

28 These include creation of new jobs, provision of more information to the people, creation of good market conditions and people who are unsure of what could be improved.

29 Currently, low incomes and lack of buyers combine in lack of pesticide and fertilizer utilization in production. The result is low quality produce with no potential for international marketing.

30 Current arrangement of having these assets controlled by ex-farm management is creating cynicism; families state that the rental costs are too high.

31 In addition, people who attend to these courses are labeled as “government people” and hence, they have problems with their friends and neighbors when they go back to their home areas.



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