UNIVERSITY OF

GONDAR

COLLEGE OF BUSINESS AND ECONOMICS

SCHOOL OF ECONOMICS

DEPARTMENT OF ECONOMICS

Module: Rural Development

(Econ 3112)

Prepared by: WonduAbebe

Edited by: Amare Berhanu

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Preface

Rural Development covers a vast field. The literature on the subject has been constantly selling
and it is extremely difficult to deal with all the aspect of the subject satisfactorily in this module.
One has to be rather selective in approach and the major guideline in this regard is provided by
the purpose for which the module is written.

The present work is primarily meant for undergraduate level students and discusses basic
elements of rural development as they apply to rural areas.

Suggestions for improving the coverage and the contents of this module are welcome.
Wehonestly feel and hope that the suggestions will greatly help in further improving the quality
of the module and thus adding to its usefulness.

WonduAbebe

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Chapter 1 Introduction...............................................................................................................................5
1.1 Concept of rural development............................................................................................................5
1.2 The Need for Rural Development......................................................................................................9
1.3 Objectives of Rural Development......................................................................................................9
1.4 Characteristics of Rural Development.............................................................................................10
1.5. Philosophy and Principles of Rural Development...........................................................................11
1.5.1 Philosophy of Rural Development................................................................................................11
1.5.2 Principles of Rural Development..............................................................................................13
1.6 Socio-economic and Cultural Factors in Rural Development..........................................................14
1.6.1 Population and Development....................................................................................................14
1.6.2 Gender and Development.............................................................................................................15
1.7 Elements of Rural Development......................................................................................................17
1.7.1 From basic need dimension......................................................................................................17
1.7.2 From Economic Welfare Dimension........................................................................................17
1.7.3 From Capability Dimension......................................................................................................18
1.8 Role of Agricultural Research and Extension in Rural Development............................................18
Chapter 2 Rural Institutions.....................................................................................................................19
2.2 Informal Institutions........................................................................................................................20
2.3 Economic interactions and institutions............................................................................................21
2.4 Institutional change..........................................................................................................................22
2.5 Rural Institutions.............................................................................................................................24
2.5.1 Rural Finance Institutions.........................................................................................................25
2.5.2 Cooperative Institutions and Rural Development.....................................................................26
2.5.3 Land Rights (Land Tenure Arrangements)...............................................................................28
2.5.4 Agricultural Markets and Institutions.......................................................................................29
2.5.6 Market Failure and Institutions.................................................................................................31
Chapter 3 Theories, Models and Approaches to Rural Development........................................................33
3.1 Lewis’s model of development with unlimited supply of labor.......................................................33
3.2 Human Capital Centered Development Theories.............................................................................34

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 3. 3 The Choice Between Unimodal and Bimodal Approaches.............................................................35
3.4 Integrated Rural Development.........................................................................................................37
3.5 Models of Agricultural Development..............................................................................................37
3.5.1 Frontier model........................................................................................................................38
3.5.2 Conservation model..................................................................................................................39
3.5.3 Urban - Industrial Impact Model...............................................................................................40
3.5.4 Diffusion Model.......................................................................................................................41
3.5.5 High - payoff input Model......................................................................................................42
3.5.6 Induced Innovation Model........................................................................................................43
Chapter 4 - Strategies and Polices of Agricultural and Rural Development..........................................44
4.1 Introduction.....................................................................................................................................44
4.2 The Dimensions of Rural Development Strategy.............................................................................44
4.3 Polices of agricultural and rural development..................................................................................46
4.3.1 Agricultural price policy...........................................................................................................46
4.3.2 Input policy...............................................................................................................................49
4.3.3 Marketing policy.......................................................................................................................49
4.3.4 Land tenure policy....................................................................................................................51
4.3.5 Food security policy.................................................................................................................54
Chapter 5 Rural Development: Policies and Strategy of Ethiopia...........................................................56
5.1 Introduction.....................................................................................................................................56
5.2 Goals of the Rural Development Policy..........................................................................................56
5.2 Basic Directions of Agricultural Development................................................................................58
5.3 Building Human Resource Capacity and Its Extensive Use.............................................................61
5.4 Proper Use of Land..........................................................................................................................67
5.5 Continuously Improving Agricultural Marketing System................................................................70
5.6 Improving the Finance System of the Rural.....................................................................................70
5.7 Encouraging Private Investors to Participate in Agricultural...........................................................73
5.8 Expanding Rural Infrastructure........................................................................................................76
5.9 Strengthening non-Agricultural Rural Development Movement...................................................81
References.................................................................................................................................................85

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Chapter 1 Introduction

Any attempt to portray evolving ideas in rural development over the past half-century risks
oversimplification. Understanding about sets of rural development ideas across different
disciplines, centers of learning, influential think-tanks, international agencies and national
governments is very uneven. There are leads and lags in the transmission of new ideas across
space and time. The interpretation that follows is mindful of this complexity, but nevertheless
seeks to identify dominant and subsidiary themes that have had major impacts on rural
development practice since the 1950s. It also seeks to identify critical areas of divergence
between rural development narratives that have co-existed but moved in opposing directions, and
it examines whether current events, ideas, and policy proposals are converging towards some
sort of consensus about rural livelihoods.

This chapter compiles definitions of basic concepts of rural, development and rural development
as they relate to the evolution of rural development worldwide as well as in Ethiopia;

1.1 Concept of rural development.

RURAL - Rural areas are sparsely settled places away from influences of large cities and towns.
Such areas are distinct from more intensively settled urban and suburban areas, and also from
unsettled lands such as outback or wilderness. People in rural areas live in villages, on farms and
in other isolated houses, as in pre-industrial societies.

In modern usage, rural areas can have an agricultural character, though many rural areas are
characterized by an economy based on logging, mining, petroleum and natural gas exploration,
or tourism.

Lifestyles in rural areas are different than those in urban areas, mainly because of thelimited
services, especially public services. Many governmental services may be distant, limited inscope,
or unavailable. Utilities like electricity,water, sewage, and street lighting may not be present.
Public transport is absent or very limited, people use walk or ride an animal.

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Rural areas are those which are not classified as urban areas. They are outside the jurisdiction of
municipal corporations and committees and notified town area committees (Singh, 1986).

DEVELOPMENT - Development is a process of continues rise in the capability of the people to

control their present and future wellbeing (Cuyno, et al., 1982). The definition embraces three
basic concepts.

1. It is a process suggesting change in people’s outlook, capabilities and way of life;

2. Man’s capability to accomplish tasks on himself / herself or with minimum assistance;

3. Freedom to live once own destiny.

Therefore, development as a process involves both economic growth and social development.

From the economist point of view, development is usually associated with the material wellbeing
of a given society. It is commonly thought of a sustained increase in per capita income
commonly known as GNP (Garcia, 1985).

Development is a sociological perspective that involves primarily social change. Bernard S.

Philips (1970) as cited by Garcia (1985) emphasized that the concept of social change converges
around the idea of development. For development to take place in a society, all its structures –
social, economic and political – should serve as stimulants to change.

If they pose as barriers, development becomes unattainable. Hence, development seems to be

much closely related to social change.

To the layman, development means having adequate food, i.e. the opportunity to eat three times
a day; adequate education or being able to send the children to school, even just high school,
trade school; enough income to meet the basic needs like clothing, housing, food and free from
sickness. Development therefore, includes:

a. The people (self-esteem, dignity, security, potential)

b. The economy

c. Technology

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d. Culture

e. Moral values

f. Environmental preservation

g. Social justice

h. Literacy and education

i. Change in social structure

j. Equal distribution of wealth

k. Organization

l. Discipline

m. Freedom (from servitude, debt, etc.)

n. Control over political destiny

It is a process wherein people are enabled through collective planning and action tomobilize
their resources to create and transform institutions so that these become authentically responsive
to their needs.

Development is basically to improve in the standard of living of the entire population of a given
country or region. It is a process with many economic and social dimensions, but requires as a
minimum, rising per capita incomes, eradication of absolute poverty, and reduction in inequality
over the long term.

RURAL DEVELOPMENT - Theconcept of rural development has been changed significantly

during the last 3 decades. Until the 1970s, rural development was synonymous with agricultural
development and, hence, focused on increasing agricultural production. This focus seems to
have been driven primarily by the interests of industrialization to extract surpluses from the
agriculture sector to reinforce industrialization.

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With the focus on increasing agricultural production, the stated objective of most countries was
to promote smallholder agriculture. Over time, this smallholder agriculture-centric concept of
rural development underwent changes. Four major factors appear to have influenced the change:

 increased concerns about the persistent and deepening of rural poverty;

 changing views on the meaning of the concept of development itself;
 emergence of a more diversified rural economy in which rural non-farm
enterprises play an increasingly important role; and
 Increased recognition of the importance of reducing the non-income dimensions of
poverty to achieve sustainable improvements in the socioeconomic well-being of the
poor.

The establishment of the Millennium Development Goals (MDGs, 2000 - 2015) has significantly
reinforced the concerns about non-income poverty. With the paradigm - shifts in economic
development from growth to broadly defined “development,” the concept of rural development
has begun to be used in a broader sense. It is also more specific, in the sense that it focuses (in its
rhetoric and in principle) particularly on poverty and inequality.

In more recent years, increased concerns on the environmental aspects of economic growth have
also influenced the changes. Today’s concept of rural development is fundamentally different
from that used in the past 3 or 4 decades ago. The concept now encompasses concerns that go
well beyond improvements in growth, income, and output.

The concerns include an assessment of changes in the quality of life, broadly defined to include
improvement in health and nutrition, education, environmentally safe living conditions, and
reduction in gender and income inequalities.

Today there seems to be a universal consensus that theultimate objective of rural development is
to improve the quality of life of rural people. This makes it essential to go beyond the income-
related factors such as prices, production, and productivity to a range of non-income factors that
influence quality of life and hence inclusiveness of rural development.

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Inclusive rural development is a more specific concept than the concept of rural development. In
broad terms, the concern of inclusive rural development is improving the quality of life of all
members of rural society.

According to the World Bank, rural development is a strategy designed to improve the economic
& social life of a specific group of people living in the rural area. Rural development involves
extending the benefit of development to the poorest among those who seek a livelihood in the
rural area. This group can include small scale Farmers, tenants & the landless.

On the one hand, rural development intends to increase production & raise productivity,
increases employment & mobilizing local resources for local development with the aim of
reducing poverty & income inequality. On the other hand, it increases participation of the rural
poor in development activities & decision making process. Rural development is not only
concerned about agricultural matters but also with all aspects of rural life.

Therefore, rural development should plan should be geared towards improving all aspects of
rural life.

1.2 The Need for Rural Development

The need for a new emphasis on rural development is because:

 About 2/3 of the population of less developed countries live in rural areas.
 The accelerated population growth created serious social & economic problem.
 More than 50% of the rural population in less developing countries is poor
 Despite the fact that impressive increases in agricultural output is observed in most least
developed countries, the poverty of the landless & small scale farmers has not been
improved significantly (because of socially inappropriate agricultural growth)

1.3 Objectives of Rural Development

There is a need to tackle the problems on the development of the rural economy.
Therefore, integrated rural development is needed. To achieve this goal all or some of the
following integrated objectives should be included in rural development planning

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A. Human development: - this is improving productivity of people by improving the
education system, provision of health services, prospects of future employment &quality
of life.

B. Resource enhancement & growth in capital base: - This includes improvement in

the natural resources like land, water and forest & also in manmade capital such as fertilizer,
pesticides & plant varieties.

C. Technical Advancement:- this includes improving production methods & techniques to

increase crop & livestock production

D. Institutional structural change:- This is concerned with the generation & utilization of new
institutional arrangement that determines who owns what rights & privileges relative to others
with respect to property, legal status & the like.

1.4 Characteristics of Rural Development

Rural Development is basically a mandate of government

One of the primary tasks of all governments is to improve the welfare of their
constituents particularly those in the rural areas which in many countries are the majority of the
population. As the word rural, it is always associated with the agriculture sector which is
primarily the producers of food for the country. The rural areas are major parts of the nation as
this sector can never be ignored. As many governments always expressed their concern of the
rural poor as the winning agendum and pillars of their development propaganda in any election.

Rural Development has wide coverage or scope

As mentioned earlier in the definition and concepts, RD covers the totality of life in the rural
area. Economic, social, political, cultural, environmental, agrarian reform, science and
technology, waste management, forest and natural resources, climate change, communication
and transportation, energy, and infrastructure development. Now, where to start the development
initiatives? Who will lead? Who will design the development framework and serve as the
architect of rural development? Who will be involved?

Rural Development requires holistic approach

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Since RD covers any areas, many expressed that a holistic development framework and strategy
must be formulated. This must be guided by a strong philosophy of people first and foremost.
Although, it will take years to develop an area, every political administration must be guided by
a clear vision and goals to achieve in every stage of development which they can manage and
control.

Rural Development involves partnership

As done in many Asian countries, government cannot do it alone as the new US President
Barack Obama said “I cannot do it alone but together, yes we can.” Government, the people or
civil society and private sectors have to work together for the common good guided by the
regardless of color, religion or beliefs, education, economic status and political affiliation.

Rural Development is anchored on the culture of the people

Every country or nation for that matter has its own unique culture that must be nurtured,
developed, protected and respected through the years of its development journey. Modernization
is a part of life; however, as a people we must not forget our own unique culture and values
which make us different from the rest of the world. The rate of development in many cases
is influenced by the people’s culture whether material and non-material culture. Simple housing
project for the minorities or other groups must consider the style of living in order to attain
occupancy of the housing project. There was a case that the intended group of families abandon
and did not occupy the houses built free for them by government officials with different culture.

Rural Development is harmonizing activities and sharing resources

Development is not done alone by one person or group, we need others to work with us since
resources are not always available and they are in the hands and control of other groups or
agencies. Easier said than done, to work with others is not easy even you are covered by legal
documents like memorandum of agreement or memorandum of understanding. Every group
or agency has their own mandate and every agency wants to clamor for their own
accomplishments and claim honor and glory.

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1.5. Philosophy and Principles of Rural Development

1.5.1 Philosophy of Rural Development

In the field of rural development, there are so many statements of philosophy as there are people
working in and for development. Every leader of a nation, an organization, an elected local
government official, appointed head of government or private agencies and institutions have
formulated statement of philosophy anchored on philosophic ideas in order to give focus,
directions and unification of efforts. It isreally very logical, realistic and acceptable that we
should have policy and philosophical statement which everybody in the organization must
accept, believe and work for. This may seem impossible but in all our differences in the
organization, there must be a common and unifying philosophy that we must follow. If a person
or group does not agree and follow, they have to get out of the system or the organization and
join another system which they believe in or put up their own working system. In a democratic
society, people have the freedom to be in a group where they are happy living and working.

Every leader, implementer or philosopher in rural development has a system of doing things
anchored on philosophic ideas and purposes of doing rural development work.

This portion shall present philosophic ideas which can help in formulating appropriate, workable,
realistic, humane, people-centered, balance, equitable and universal statement of philosophy.

1. Rural development is first and foremost directed toward the development of man and
society. This statement is based on the religious tenet that man is God’s creation and commanded
to preserve, protect and develop all God’ creation on earth. Man can only do this mandate if
he/she has the knowledge and resources to do so.

2. Rural development is a continuing process of improving the economic, social, cultural,

political, spiritual and environmentalaspects of the target communities. Leaders often commit
mistake of doing all these, since resources are scarce, prioritization is important and phases of
development can be designed.

3. Rural development is a kind of planned change which developed a grand design or a

comprehensive development plan for the benefit of the greatest number of society.

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4. Rural development considers existing resources—natural, physical, human, financial,
technical and institutional. These are basic as we always start where we are now and decide
where we are going and strategize how to get there.

5. Rural development is thinking “local but acting global”. This is now the realities of life, that
our problems are not just in the Ethiopians but we are influenced by the outside world. The
climate change is now a global concern which requires unified global actions from all countries
of the world.

6. Rural development must be anchored on sustainable development giving due respect to

the protection of God’s gift of creation the natural resources ----land, water and air. Almost all
our problems today are caused by man’s interventions and destruction of the forest, water
resources and the chemicals emitted in the air causing global warming.

7. Rural development is political in nature. It is highly directed, influenced and planned by the
people in government. The greatest mistake a nation or a community can make is to elect people
in government whose inner and foremost desire is to be powerful and wealthy no matter what. It
is the animalistic nature of man’s supremacy over the rest of society not the humanistic nature of
being holy and giving service and love to humanity.

8. Rural development is cultural and it is influenced by the people’s religion or beliefs

and what they would like to achieve. Culture is a way of life by a given society and no
development efforts shall succeed without considering the culture.

9. Rural development is desired and acted by the people themselves –a group

development target. Any change in the individual, group or society must come from within, the
desire to develop themselves, the motivation to achieve a higher level of development. People
have their own desires, ambitions and purposes in life. If development scenario does not answer
these goals, there will be chaos in society.

10. Rural development involves modernization of society where computer technologies are now
in existent. In the future, there are other technologies coming up which planners and
implementers must be able to adapt according to people’s needs and wants.

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1.5.2 Principles of Rural Development

Principles are guides in our daily lives, in our work, community, and in the organization. These
are some of the principles in rural development which have been used, accepted and believed by
many practitioners. Principles we believe in are manifested in our actions, words expressed,
projects we implement, procedures and processes we follow and the values we adhere to. As
many people say, principles are universal but people are not.

1.6 Socio-economic and Cultural Factors in Rural Development

1.6.1 Population and Development

Rapid population growth in less rural area is linked to many problems, including poverty,
hunger, high infant mortality and inadequate social services and infrastructure (transportation,
communication etc.) Rapid population growth may intensify the hunger problemin the most
rapidly growing countries. Population growth can reduce or eliminate food production gains
resulting from modernization of farming. Population pressures may also encourage practices
such as over irrigation and overuse of crop lands, which undermine the capacity to feed larger
numbers.

In some cases population growth is quite directly related to a social problem because it increases
the absolute numbers whose needs must be met. For example some less developedcountries have
made enormous progress in increasing the percentage of childrenenrolled in school. However,
because of population growth during the same period, the number of children whoare not
enrolled in school also increased because there were insufficient resources to meet the growing
need.

Similar observations could be made about jobs and employment, housing, sanitation and other
human needs such as water supply, transportation, energy requirement etc. These problems are
compounded when large numbers migrate from rural to urban areas and increase the burden
placed on already inadequate supplies and services.

Studies within particular countries, suggest that population growth above 2% a year inhibits
efforts to raise income in poor countries with high birth rates and young age structure. In
countries that are already poor, then, rapid population growth only makes matters worth

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leading to economic insecurity. Economic insecurity, intern, encourages people to have large
families.

Poverty and lack of economic opportunities increase incentives to exploit marginal resources,
such as overgrazed land, over harvested forests, and thereby further environmental degradation.
Rapid population growth although not a direct cause, appears to exacerbate all these trends and
makes solutions harder to implement. Governments need to provide basic social services (such as
health care and education), infrastructure and investments that will lead to job opportunities.

1.6.2 Gender and Development

Gender is a social and cultural construction. It refers to ways in which a particular society
Constructs or makes differences between men and women, masculinities and femininities.

According to Mosse (1993:2) “Gender is a set of roles which, like costumes or masks in the
theatre, communicate to other people that we are feminine or masculine.” These masks include:
dress, attitudes, personalities, work both within and outside the house, family commitments, etc.

Gender roles vary from one country to another, but almost everywhere, Women face
disadvantages relative to men in social, economic and political spheres of life. Where men
are viewed as the principal decision makers, women often hold a subordinate position in
negotiations about limiting family size, contraceptive use, managing family resources, protecting
family health, or seeking jobs.

Whether and when the world’s population stabilizes will depend in large measures on
changes in the status of women around the world. There is a growing body of scientificevidence
supporting the view that improvement in women’s status is good development policy and may
well be the key to lower birth rates.

Based on national reports the UN received from 150 countries for the 1994 International
Conference on Population and Development (ICPD), certain characteristics of the status of
women are common to all regions of the world: lower status and salary levels than men in
the formal work force; large proportions of women in the informal sector of the economy; a
rising number of female headed households; lack of enforcement of legislation protecting

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women’s rights; and under – representation of women in politics and decision making positions.
Women are poorly represented in national governments around the world.

Cultures throughout the world have historically given men and boys preferential treatment in a
broad range of life matters; education, food, healthcare, employment opportunities, and decision-
making authority. While the disparities are usually much greater in developing countries, there
are barriers to break down in all countries.

The International Conference on Population and Development (ICPD) held in Cairo, Egypt
in 1994 document notes that “in all parts of the world, women are facing threats to their lives,
health and well – being as a result of being overburdened with work and of their lack of power
and influence”.

Women often engaged multiple roles, balancing their time between household responsibilities
and economic activity.Women are the primary custodians of the health and wellbeing of the
family. Increasingly, they contribute to family income without a corresponding decrease in
domestic chores.

As more households are headed by women (up to one – third in some countries), elevating
women’s status becomes an even more urgent national concern, Women –headed households
tend to be poorer than those headed by men, and many women have all the household
responsibilities without the power or resources necessary to meet them. Gender equality is
central to economic and human development. Removing gender inequalities gives society a
better chance to develop. A report given by the World Bank to the Ministry of Trade and
Industry in 2007 shows that addressing gender inequalities and especially the link between
gender and economic growth can lead to: reducing poverty levels, elimination of inequalities
hence increase opportunities for both genders and more generally the attainment of the Gender
equality is necessary for meeting all of the MDG Goals.

Gender mainstreaming continues to be a challenge even at the international level where 70% of
world’s poor are women and children, 1% of the world’s land is owned by women, 66%
of the world’s work is done by women for 33% of earned income, 80% of the world’s refugees
of Internally Displaced People are women and children and the majority of primary careers
in the home are women. These alarming statistics are evidence of acute gender inequality and

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discrimination against women, a situation which cannot be ignored by any nation or institution if
the global goal for economic growth and poverty reduction is to be realized.

Gender Mainstreaming is the process of assessing the implication for women and men ofany
planned action, including legislation, policies, or programs in all areas and at all levels. It is a
strategy for milking women's as well as men's concerns and experiences and integral dimension
of the design, implementation, monitoring and evaluation of policies and programs in all
political, economic and societal spheres so that women and men benefit equally and inequality
is not repeated. It isthe process whereby attention to gender equality is integrated into an
organization's analysis, planning, performance, personnel policy, monitoring and assessment,
there by changing the content and direction of these practices at organizational and institutional
level.

The ultimate goal of gender mainstreaming is to achieve gender equality. The term
"mainstreaming" came from the objective to bring attention to gender equality into the
mainstream or core of development activities. Gender Mainstreaming was based on the need to
move beyond trying to unquestioningly integrate women into the existing development agenda to
changing or "transforming" the agenda so that it moreadequately responded to the realities and
needs of both women and men.

1.7Elements of Rural Development

There are at least three basic elements which are considered to constitute the ‘true’ meaning of
rural development. They are as follows:

1.7.1 From basic need dimension

People have certain basic needs, without which it would be impossible (or very difficult) for
them to survive. The basic necessitates include food, clothes, shelter, basic literacy, primary
health care and security of life and property. When any one or all of them are absent or in
critically short supply, we may state that a condition of ‘absolute underdevelopment’ exists.
Provision of the basic necessities of life to everybody is the primary responsibility of all
economies, whether they are capitalist, socialist, or mixed. In this sense, we may claim that

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economic growth is a necessary condition for improvement of the ‘quality of life’ or rural
people, which is rural development.

1.7.2 From Economic Welfare Dimension

The first is the economic dimension that encompasses providing both capacity and opportunities
for the poor and low-income rural households in particular so that they will get benefit from the
economic growth process in such a way that their average incomes grow at a higher rate than the
growth of average incomes in the sector as a whole. The economic dimension also includes
measures to reduce intra- and inter-sectoralincome inequalities at reasonable levels.

1.7.3 From Capability Dimension

Rural development supporting social development of poor and low-income households and
disadvantaged groups, eliminating inequalities in social indicators, promoting gender equality
and women’s empowerment, and providing social safety nets for vulnerable groups.

It also involves improving opportunities for the poor and low-income people in rural areas,
including women and ethnic minorities, to effectively and equally participate in the political
processes at the village level and beyond compared with any other. As long as society is bound
by the servitude of men to nature, ignorance, other men, institutions and dogmatic beliefs, it
cannot claim to have achieved the goal of ‘development’. Incapability in any from reflects a state
of underdevelopment.

1.8 Role of Agricultural Research and Extension in Rural Development

The modern concept of extension process is working with rural people through informal
education for achieving total community development covering several activities, agriculture
being the most important. Agricultural extension is considered to be a special branch of rural
extension dealing with several economic and social aspects of farming community such as:

i) Efficient farm production

ii) Efficient marketing, distribution and utilization of farm produce

iii) Conservation, development and use of natural resources for farm sector development

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iv) Efficient farm management

v) Improving the standard of living of rural population

vi)Development of leadership for community improvement.

Extension is a continuous process of transmitting the knowledge on latest development in

agricultural technology to a section of community for field application and feedback process to
know the problems arising for further improvement of technology.The overall objective of the
various initiatives is to improve the agricultural sector and that in turn will help realizing
sustainable healthy and prosperous rural communities.

An effective agricultural extension system has the potential of developing rural areas through the
delivery of superior, economical and viable farming technology package. Hence, an effective
extension system of any country always plays very prime role in the developmental process.

Chapter 2Rural Institutions

This chapter provides an introduction to Institutions Definition and concepts of institution,
informal Institutions and Economic interaction and institutions and they have been applied
in practice. The unit then moves on to look at how Institutional change, Demand and supply of
institutions and role of different institutions in the rural areas.

2.1 Introduction

Institutions are rules that govern behavior and/or actions of individuals. They are bases of
organized behavior through which people coordinate their action and resources. Institutions are
rules, customs/cultures, etc. that are accepted by members of a community. The basic function
of institutions is facilitating coordination /interactions among people. These interactions could be
any form: economic, social or political.

Economically agents (economic agents) interact through production, exchange/ distribution and
consumption.

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Institutions increase information available to agents and reduce uncertainty associated once
actions and/or outcomes of certain actions. Institutions have informational because it enables to
predict how and when one behave in certain way under different circumstances. Institutions
set constraints on individual behavior to force behave in certain way in a given circumstances. It
also provides incentive to strength for behaving in a ‘desirable’ way. Through such ‘punishment’
and/or ‘reward’ mechanism built into it enhance predictability of behavior and strengthen socio –
economic interaction among people. In economic terms such services of institutions (information
services, coordination, reduction of uncertainty, etc.) will reduce transaction costs.

Transactions costs are costs incurred by agents in the process of interactions or costs of doing
business. Transaction costs are not directly related with cost of production or prices of goods,
services or inputs. They are costs associated information costs, costs of contract enforcement,
costs associated with dishonesty in economic matters (costs associated with information
asymmetry), time and resources one spent looking for the right partner in exchange, time
and resources spent in monitoring individual (employee) behavior/actions, etc. Existence
ofinstitution reduces costs associated with all these because they allow to know or predict ‘what
one can and can’t do’, ‘when it can or it can’t be’, ‘what is allowed or not allowed’, ‘what is
right or not right’; and under what circumstances.

2.2 Informal Institutions

Institutions can be formal or informal institutions. Informal institutions are those laws and
regulations of governments related to economic, political, social aspects of a society. For
example: constitution, financial laws of the state, laws about political parties, property
right laws, etc.

Informal institutions include, customs/habit/culture that are accepted by members. For

example institutions or regulations that govern ‘Equib’ among members, institutions that regulate
‘Edir’, institutions of traditional credit system - ‘Aratta’, institutions of property right, etc.

Informal institutions come from the cultural transmission of values, from extension and
application of formal rules to solve specific exchange problems, from the solutions to
straightforward coordination problems (North, 1990). For instance, effective tradition of hard
work, honesty and integrity simply lower the cost of transacting and make possible complex

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productive exchange. The past and existing cultures are the major source of informal institutions
(constraints). The historical experience (traditional/modern) and path followed in institutional
and economic development usually shape the direction and efficiency of new institutional
changes. The informal institutions are rooted on the characteristics of cultural components. The
important cultural components and their definitions are briefly outlined as follows.

Culture, as used by many social scientists refers to the whole collection of agreements that the
members of a particular society share. It includes the shared points of view that define what is
true and what is good and what kinds of behavior people can expect of one another - but which
might seem very strange to an outsider. Symbols are short hand representations of the shared
knowledge and understandings of a group of people, such as national flag.

Beliefs are agreements about what is true, and values are agreements about what is preferred.
They compose the overarching umbrella of agreements under which a society operates.

Status,describes the social locations a person holds in an organization or social system.

A person usually holds a number of statuses at the same time, such as mother, wife,
leader of a village's women group. Status position may be assigned (ascribed) without the
person's doing anything, such as the status of woman.

Role, when a person puts the rights and duties associated with the status into effect, he or she
performs the role. Role describes what a person does; thus, a student's role is described as to go
to class, study, and take exams. Roles are agreed upon expectations of behavior by people who
occupy given statuses.

Norms of behavior are the expectations or rules of behavior that the society agrees members
holding different statuses should follow. Sanctions are the elements of culture used by a group to
attempt to assure the behavioral norms are allowed. They can be either positive or negative. In a
learning Sanctions, are the elements of culture used by a group to attempt to assure the
behavioral norms are allowed. They can be either positive or negative.

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2.3 Economic interactions and institutions

Any economic activity (agriculture, industry or any other economic sector) involve human
interactions. Institutions exist as far as there are interactions. In most cases these interactions are
complex. Good institutions are those that allow or coordinate complex economic interactions.

Economic development / growth goes parallel with increase in complexity of economic

interactions; such as growing complexity of exchange as an economy moves from simple
subsistence based economy into a complex market based economy. In market based economy
(economy with sophisticated exchange system), there should be well functioning institutional
framework to handle the complex economic interaction involved.

Hence, economic growth/development goes hand in hand with institutional development.

Different institutions evolved in different societies based on differences in their socioeconomic
evolutions. In the area of economic relations they have a crucial role in establishing expectations.

Institutions determine the structure/characteristics of relations existed in the given society.

Economic/livelihood activities are embedded in these structured relations, being shaped by the
relational rules (institutions). One can therefore consider economy as a set of structured relations.

According to Douglass North (1996) institutions are the humanly devised constraints that
structure human interactions. Institutions define organizations (e.g. corporation), in which case
organizations are not institutions (working rules). Organizations are comprised of institutions
(working rules). Thus, institutions define an organization with respect to the rest of the world;
and spell out the internal nature of the organization.

Institution or social structure develops from the interaction of beliefs, values, statuses, and
roles, influenced by norms (rules) of behavior and social sanctions.

Institutions expand human choices, an important goal of economic development. Economic

growth itself is expansion of human choice through expansion of resource base, physical capital
accumulation and human capital (education, health and technology).

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Development process can be conceptualized a process whereby the institutional foundations of
an economy are continually modified and redefined so that the existing physical endowments
(land, labor, capital, etc.) become more productive.

Institutions affect human choice by influencing the availability of information and resources, by
shaping pattern of incentives, and by establishing the basic rules of social interactions.
Institutional innovations contributes to development by providingmore efficient ways of
organizing economic activities, ways that often lead to fundamental restructuring of an economy.

2.4 Institutional change

Institutional change refers to evolution of institutions over time. Though institutions are sticky
(resistant to changes) because they are deeply rooted in the society, but they do change over
time.

Institutional change is gradual and is a complicated process. It involves changes in rules, change
in the form of constraints and incentives, change in kinds of and effectiveness of enforcement
mechanism, etc.

Institutions change incrementally– it changes bit by bit. It can’t happen overnight or institutions
can’t be discontinuous overnight. Informal institutions (informal constraints) are product of
evolution (through gradual process and change), and not product of revolution, hence, difficult to
change through revolution.

Although formal rules may change (more easily and frequently) as the result of political or
judicial decisions; informal constraints embodied in customs, traditions, and codes of conduct are
much more impervious to deliberate policies. These cultural constraints not only connect the
past with the present and future, but they provide us with a key to explaining the path of
historical change.

Relating institution to incentives, to choices, and to outcomes is essential to assess its

characteristics. Efficient institutions are expected to reduce transaction costs by reducing
measurementcost, information costs, costs of monitoring and costs of enforcement of
contracts/agreement. Good institutions are those which maintain adequate incentives within the
system to sustain a desirable from of behavior.

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Implementing and maintaining institutions are costly (institutions are not free).

Institutions that benefits more than it costs are preferred by rational agents. Institutional changes
(such as evolution of property rights in land) would contribute to the economic efficiency only if
the benefits /gains that could be obtained are greater than costs involved in the implementation
and enforcement of the given institution (rules/laws). Institution that costs more is inefficient and
subject to changes (or needs re-designing).

Demand for institutional change arises when existing institutions become inadequate to handle
emerging trends in economic relationships. Technological change, changes in relative factor
endowments, intrusion/flow of new ideas/culture into a given community or society, etc. are
cause of demand for institutional changes. Changes in relative factor endowments (say inequality
in resource distribution) could cause demand for new institutions/modification of existing once
to deal with inequality in resources.

Technologicalchange brought with it new opportunities as well as adversaries. For example,

patent rights are form of institutions that designed as an ‘incentives’ to inventors. Institutional
innovations/changes are demanded because they enhance the welfare of rational actors.

Institutional innovations depends critically on the power structure or balance among interest
groups in a society.

Political process/government and institutional (Formal channel) – through formal political

process institutional innovations / change could introduced. This is done through formal debate
and voting system. Socially desirable institutional change could be induced through majority
vote in the political process. For example political party could campaign in election by claiming
new form of land tenure arrangement. if won the election, it will enforce new property right law (
institution) in land ownership.

Culture and Institutional change (informal Channel) - Culture has impact on institutional change.
Cultural endowments, including religion and ideology, exert a strong influence on institutional
innovation; changes in culture, belief system or customs of a society induce change in
institutions. Cultural values and norms are important suppliers ofinstitutions. Communities with

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different cultural background could follow different path of institutional changes; hence, this
could account for differences among economic performances different nations.

For example, existence of strong moral obligation in village community to cooperate and
maintenance of communal infrastructure will make less costly to implement rural development
programs than in societies lacking in such tradition.

2.5 Rural Institutions

Some of the rural institutions discussed here include:

 Rural financial institutions

 Cooperative institutions
 Land rights( Land tenure System)
 Land Reforms
 Agricultural market institutions

2.5.1 Rural Finance Institutions

Financial markets are important sources of funds for investment in rural sector.
Agricultural investment is key for the development of agricultural sector. Availability of funds
facilitates the transfer of advanced technologies and modern inputs to the rural sector.
Introduction of new inputs and technologies increase both total output and productivity
(per land size or per labor) in agriculture. Low productivity of agriculture is reason for large
number of people to remain dependent on agriculture in countries like Ethiopia (approximately
80% of the population), as well as prevalence of food insecurity.

However, there is no (or there is very limited) operation of formal financial system in the rural
areas. This could be due to the absence of institutions and infrastructure that support formal
financial system in the rural areas. The formal financial markets are based on: very detailed
information, skilled labor capable of analyzing and interpreting sophisticated data, well
developed infrastructure and highly sensitive to risk. Ruralinstitutions are not sophisticated
enough to handle formal financial markets. Hence, this could explain the reason for lack of
investment funds in agriculture as well as low capital accumulation in agricultural sector.

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Informal financial institutions - even if rural informal finance (saving and lending) is
functional in rural areas it has a number of drawbacks:

 It is based on relationship or family ties – lenders provide loans based on

personal trust and kinship. There are no institutions for fair distribution of loans.
 Informal Financial market is casual, it is not full time activity
 Limited funds – difficult to raise adequate funds. There is no mass mobilization of funds
in the rural. Since lenders relay ion their own saving, they can’t provide adequate for
funds to borrowers. In the long run, developing financial institutions that facilitate
accumulation of large amount of voluntary savings from rural people is the soundest
way of increasing rural and agricultural credit.
 Very high interest on loans (it may even exceeds 100%). This is due lack of economies
of scale in the informal finance in mobilizing and managing funds, high demand
relative to low supply (availability) of funds, mono[poly of individual lenders and/or
absence of alternative sources, etc.

Limited financial sources available in the rural sectorwill have severe effect on agricultural
sector. It will adversely affect investment &capital formation in agricultural.

Without adequate financial resources agricultural transformation will be difficult.

2.5.2 Cooperative Institutions and Rural Development

According to International Cooperative Alliance (ICA, 1995) cooperatives are defined as

autonomous association of persons united voluntarily to meet their common economic, social
and cultural needs and aspirations through a jointly owned and democratically controlled
enterprise. Cooperatives are governed by Principles of Voluntary (Membership), Democratic
control and Participation (one man – one – vote), joint ownership and economic viability.

Cooperatives could be of different kinds:

 consumers’ cooperatives,
 credit cooperatives,
 housing cooperatives,

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  producers ‘cooperatives,
 Marketing cooperatives, etc.
 Agricultural cooperatives include:
 producers’ cooperatives,
 agricultural marketing cooperatives
 Rural financial cooperatives, etc.

Cooperatives develop based on the specific institutional environment (formal or formal) that
prevails within a given society/community. Cooperatives are form of mobilization of community
resources for the benefits of its members. In a society where there are good traditions
(institutions) that motivate individuals to contribute for the common good, it iseasy to create
different kinds of cooperatives. In fact, good institutions are considered as social capital of a
community that has productive uses. Social capital is an asset for a community that can be used
productively for common goods/goals.

In Ethiopia, the formation of cultural and traditional associations or form of cooperatives

includes:

`Eddir` - a form cooperative to deal with social problem associated with death of
community member or relatives,

`Eqqub`- financial cooperative,

`Debbo` -cooperation in production, pooling labor and other resources.

Agricultural cooperatives are those cooperatives organized around agricultural production,

agricultural marketing (agricultural products and inputs markets), agricultural finance, etc.

Farmers/Peasants long realized the value of cooperation for improved productivity and for the
task that require collective effort. For example, ‘Debbo’ is one of the traditional self-help
organizations prevailing in agricultural communities of Ethiopia. People living in a given
particular geographical boundary help one another in cultivation, weeding, harvesting, house
construction etc.

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Rural development is possible through institutional development that inherently affects
mobilization and utilization of resources in the rural economy. The basic functions of
cooperatives include:

 To realize benefits of economies of scale by pooling resources

 To open new economic opportunities that would have been difficult at individual level
 To enhance bargaining power of farmers; such as through marketing cooperatives (both
in agricultural products and agricultural inputs markets) farmers could increase their
bargaining power. Cooperatives also enhance bargaining power of farmers in the political
arenas.

The ultimate objective of agricultural cooperatives is the improvement of the livelihood (income
and/ or living standard) of its member - farmers. As such institutions play an important role in
the rural development by influencing the formation and efficiency of rural cooperatives.

2.5.3 Land Rights (Land Tenure Arrangements)

Land Tenure system / land ownership rights are one of the most important forms of rural
institutions that determine how land is owned and used in agriculture.

Different arrangements of rights to own and use of land existed in different cultures, under
different economic conditions, at different times in history. When large territories are controlled
by a few groups, the rights to the use of land are likely to be determined by membership, or
status in a group. Pattern of ownership existed in a given society affect productivity and
distribution outcome from the land. Form of control over resources determine pattern of
economic incentive and efficiency in the utilization of the resource.

Different land holding arrangements include:

 Private or individually owned land: underthis arrangement, individual households’ has

full ownership (or life time tenure rights) to land and return from its uses. This is a
dominant form of ownership.
 State owned land- land is owned by the state and individuals’ are granted use rights of
the land. This dominant form of ownership in Ethiopia.

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  Communal ownership of land – under this arrangement, land is owned and used
socially/communally.
 Common property – in this case, there is no defined ownership rights to
common property (or common land), but everyone has access to its uses. It will cause
overutilization of common property (tragedy of the commons).Eg. Common grazing land.
 Cooperative farm: farmers pool their land and farm together; the income from the uses
of land is distributed on the basis of once resource contribution to the cooperative farm
(labor, land and capital). This form of ownership doesn’t involve transfer of ownership.
 Collective farms: individually owned land is transferred to collective ownership. The
return from the uses of land is distributed to members based usually on some measure of
contributions such as labor or criteria set by members. This system supposed to high
degree of income distribution.

2.5.4 Agricultural Markets and Institutions

Agricultural marketing services in many less developed nations are costly and inefficient. Due
to Lack of Storage and transport infrastructures,large amount of output and resources have
to be transported to markets and processing plants, primarily using labor and pack animals. The
transformation of traditional agricultural marketing is required to improve marketing transaction,
storage, transportation, and processing. This section deals with both input and product marketing
in the context of growing economy.

The relative neglect of marketing in developing countries probably, reflects a combination of

factors, including lack of institutions to handle the complexities of market process. The rural
sector/agricultural is characterized by market failure due to the following problems:

i. Missing markets
ii. imperfect information
iii. High distribution costs
iv. Absence of credit facilities to facilitate transactions
v. Inadequate infrastructural facilities

Economic Functions' of Marketing

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Different marketing textbooks present the following four economic functions good marketing
infrastructure:

1. Storage utility. As most agricultural crops are produced during a short harvest period but
consumed over extended periods of time, storage are important to maintain products in good
conditions until used. Well-developed market will reduce cost of storage by enabling a timely
withdrawal of agricultural produces by the market.

2. Mobility utility. The movement of large amounts of agricultural products from farming areas
to consumers usually includes some form of packaging to prevent damage or loss and
transportation. These activities also use scarce resources. A well-functioning market will reduce
costs in distribution (mobility) of agricultural goods.

3. Marketing management. To perform marketing functions, management activities are

required. Managing marketing require resources. A well-functioning Market make management
more easy and significantly reduces costs associated with marketing management through:

(i) Reducing or eliminating Cost of gathering market information such as demand, prices,
technical information, market regulations, etc.

(ii) Reducing Costs of making financial arrangements, including those for credit use and risk
reduction.

4. Improve predictability - A well-functioning market allows agent to reliably predict behavior,

processes, interactions and outcomes in a given market. Predictable environment facilitate
decision making by agents.

2.5.5 Impact of Economic Growth on Marketing

Economic growth has the following changes in an economy,

i. Increases the demand for marketing services: economic growth will increase no only quantity
of marketable commodities but also increases diversity of goods on the market.

ii. Increases degree of specialization; high degree of specialization usually associated

with intensive and extensive marketing (high degree of exchange) activities.

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iii. Economic growth increases the complexity of marketing process

iv. Economic growth could induce change in market institutions so to cope with the degree of
marketing complexity induced by economic growth.

v. Increases linkage across sectors - Economic growth increases backward and forward
linkages among different sectors of an economy, for example, it enhances linkage of agriculture
with other sectors. The strength of agricultural linkage to other sectors will increase marketing of
agricultural inputs and products between farms and the rest of the economy, and leads to greater
productivity of agriculture.

Forward linkage of agriculture - refers to increased capacity of (supply) of agricultural products

to other sectors.

Backward linkage of agriculture - refers to increased demand in agriculture for modern inputs
from other sectors.

vi. Follows of people out of agriculture and into other sectors. Economic growth will increase
the relative role of other sectors (non- agricultural sectors) in the economy this will create
opportunities for a bulk of labor force to move from the rural/agricultural sector to the
new- non- agricultural sectors.

As an expanded and more complex farm input supply system develops, agriculture's backward
linkages to the economy grow (demand for agricultural input from other sectors increases). This
agricultural transformation will significantly enhances marketability of agricultural products
because a greater proportion of farm production is sold in order to pay for a greater amount of
modern agricultural inputs used. In this way, forward linkages (flows of agricultural products to
other sectors) are increased to the rest of the economy through an expanding agricultural
product-marketing system.

2.5.6 Market Failure and Institutions

Institutions are very important in markets. Markets require institutions to facilitate exchange
process and minimize costs associated with.

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Market failures are essentially institutional failures. Absence of institutions that handle complex
marketing process would lead to market failure; and market failure could imply existence of high
transaction costs in business interactions.

How institutions are essential to markets note the following points:

 Institutions enhanced marketing information, reduces uncertainty (or improve

predictability) of circumstances relevant to marketing process.
 Institutions provides framework how contracts and negotiations in exchange (market) are
to be settled.
 Institutions define property rights which are key for well-functioning of markets.
 Property right institutions specify and determine who has the right to use; the right to
exclude others, right to transfer to others, etc. of a commodity, property or land.
 Financial institutions are also key institutions in facilitating marketing transactions
 Institutions are basis for legal system which enforce property rights, maintains peace
security in marketing activities

If the above institutional conditions are not available, markets fails and transaction costs are
high (transaction costs are costs that are associatedwith marketing process, not related with
internal costs such as production costs). Hence, alleviation of agricultural market failure in will
require development of well function institutions.

Land reform involves redistribution of rights on land and other related issues. Tenure reform
could be induced for different reasons such as: need for equal access to land, institutional change
or it may be required for bringing efficiency in agriculture.

Institution of property right

Institutions of property right address a complex issue with wide range of social, political and
economic repercussions. The institution in rural play a great role to assure land tenure reforms by
answering the following:

 How the land rights of different segments of the society be handled

 Which objective should be prioritized /addressedby the reform – equity or efficiency?

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  How much power should the State have over land - should be owned by the state or other
actors?
 Issues on marketability of land - should a market in land permitted or not? If
permit to what extent it should be.
 How dispute on land be settled
 How cost effective the registration and documentation process of the reform is.

Chapter 3 Theories, Models and Approaches to Rural Development

3.1 Lewis’s model of development with unlimited supply of labor

Arthur Lewis’s seminal 1954 paper and its emphasis on dualism appeared at a time when neither
the work of Keynes and Harrod–Domar nor the later neoclassical production function of Solow
seemed relevant for developing countries.

Arthur Lewis, of course, was an active participant in various dimensions of the then current
search for applications of existing theory to the problems of the developing world.

In this module we will focus on his signal seminal work, that of ‘Development with Unlimited
Supplies of Labor’. It should be of some interest to note that the Lewis model and its many off-
spring continue to be viewed as relevant in the South and considered a valuable guide to policy
in places like China, India, Bangladesh, Central America and even some parts of sub-Saharan
Africa, i.e. wherever heavy population pressure on scarce cultivable land remains a feature of the
landscape.

The relationship between growth and equity in the Lewis tradition, of course, also spills over into
an analysis of technology choice, technology change and the relationship between growth and
poverty, currently very much on the front burner of both theorists and policymakers. Low real
unskilled wages in agriculture and industry and the expectation of more to follow, of course,
favor labor intensive technology choices statically and labor using technology change
dynamically.

This fact, and the reversal in these dimensions once the system enters the one-sector neoclassical
world after the Lewis turning point, has been documented. The asymmetry between sectors and

33
the interest in the contrasting pre- and post-turning point behavior of the whole system clearly
supports the dualism model theoretically as well as being helpful to policymakers. For example,
the issue of the intersectoral terms of trade and the importance of balanced growth policies,
which need to be more or less maintained before the turning point in order to avoid food
shortages, continues to be of importance in the contemporary development context, even in the
open economy. Food imports do not solve the problem of a failure to mobilize the agricultural
sector on behalf of a successful development effort. Indeed, they may contribute to the problem.

3.2 Human Capital Centered Development Theories

According to Schultz (1981) investment in human capital is the major long-term factor
explaining the modern economic growth and development. To achieve and maintain rural
development, continuous investment in human capital must occur alongside investments in other
forms of capital and technology.

Human capital is an important source of extensive and intensive growth, too. Economic growth
is closely linked to the speed with which world get ready to use new technologies, especially in
the information and communication field. Human capital is relatively young production factor.
Because it is closely related to the production factors of labor and has features in common with
the labor, analysis and research work are often not explicitly mentioned.

The new modern theories of economic growth (80-90 years of 20th century) had begun to take
the human capital as one of the main factors of economic growth. New growth theory is based
on the assumption thatthe production function is not affected only by labor and capital but
also by education, improving the quality of labor and capital, better infrastructure which are
unaffected by exogenous but endogenous. This means that the growth of education and
upgrading skills operate as a multiplier which makes for faster economic growth. These
economic theories identified physical and human capital.

Physical capital involves the machines, the equipment, and the technologies. Human capital is
the sum of inborn or obtained knowledge, competencies, skills, and experiences of the
individuals.

34
There are realized extensive industry changes, at present.Innovations are changing the style of
working life; emphasize the importance of education, creativity, communication and
cooperation. Knowledge-based society requires more and more expertise, and therefore it
promotes lifelong education, improvement of scientific, and research activities for continuous
self-education and improving thequality of work skills and habits that bring a positive effect on
economic performance in rural area. The importance of human capital for economic increase can
be characterized in relation to the implementation of the structural changes that contribute no
only to quantitative but mainly to qualitative changes in the development of society and its
output.

3. 3 TheChoice Between Unimodal and Bimodal Approaches

The most fundamental issue of rural development strategy faced by the late developing countries
is to choose between a bimodal strategy whereby resources are concentrated within a sub
sector of large, capital-intensive units or a unimodal strategy which seeks to encourage a more
progressive and wider diffusion of technical innovations adapted to the factor proportions of the
sector as a whole.

The essential distinction between the two approaches is that the uni-modal strategy emphasizes
sequences of innovations that are highly divisible and largely scale-neutral. These are
innovations that can be used efficiently by small-scale farmers and adopted progressively.

A uni-modal strategy involves progressive technical change which only gradually increases the
degree of capital-intensity and which involves the entire agricultural sector to the technical
change. This approach does not mean that all farmers or all agricultural regions would adopt
innovations and expand output at uniform rates. Rather it means that the type of innovations
emphasized are appropriate to a progressive pattern of adoption in the twofold sense that there
will be progressive diffusion of innovations within particular areas and extension of the benefits
of technical change to new areas as changes in environmental conditions, notably irrigation
facilities, or improved market opportunities or changes in the nature of the innovations available
enable farmers in new areas toparticipate in the process of modernization. In brief, bimodal and
unimodal strategies are to a considerable extent mutually exclusive.

35
Johnston and Kilby (1975) stated that in most of the developing countries the government adopts
the 'bimodal' strategy of agrarian change, where there is a dualistic size structure of farm units
and in which resources are concentrated on a small, highly commercialized subsector of the
agrarian economy with large farms. They argued that the 'bimodal strategy' is likely to be less
effective as a means of achieving the goals of development ln those countries than a 'unimodal'
approach based on the mass of relatively small farms, and requiring a divisible and improved
technology.

A bimodal strategy in rural development involves capital-intensive technical change within

a modernized subsector. Under a bimodal strategy frontier firms with their high capital to labor
ratio would account for the bulk of commercial production and would have the cash income
required to make extensive use of purchased inputs. Inasmuch as the schedule of aggregate
commercial demand for agricultural products is inelastic and its rightward shift over time is
essentially a function of the rate of structural transformation, to concentrate resources within a
subsector of agriculture inevitably implies a reduction in the ability of farm households outside
that subsector to adopt new purchased inputs and technologies. In addition, the high foreign
exchange content of many of the capital inputs employedin the frontier sector implies a reduction
in the amount of foreign exchange available for imported inputs for other farm firms (or for other
sectors). It is, of course, because of these purchasing power and foreign exchange constraints that
it is impossible for the agricultural sector as a whole to pursue a crash modernization strategy.

It might be argued that a proper farm credit program could eliminate the purchasing power
constraint, but the availability of credit (assuming that repayment takes place) merely alters
the shape of the time horizon over which the constraint operates. And capital and government
revenue are such scarce resources in a developing country that government subsidy programs are
not feasible means of escaping from this constraint.

Under the bimodal approach the divergence between the factor intensities and the technical
efficiency of "best" and average firms is likely to become progressively greater as agricultural
transformation takes place. Moreover, both the initial and subsequent divergences between the
technologies used in the two sectors are likely to be accentuated because the factor prices,
including the price of imported capital equipment, faced by the modern sector in contemporary
developing countries typically diverge from social opportunity cost. This divergence is obvious

36
when subsidized credit is made available on a rationed basis to large farmers and when
equipment can be imported with a zero or low tariff at an official exchange rate that is
overvalued. In addition, the large -scale farmers depend on hired labor rather than unpaid family
labor. The wages paid hired labor may be determined by minimum wage legislation, and even
without a statutory minimum the price of hired labor is characteristically higher than the
opportunity cost of labor to small farm units. Market wage rates tend to reflect the marginal
productivity of labor in peak seasons, and even in those seasons jobs are likely to be rationed to
some extent.

Various factors, including policies which repress instead of foster the healthy growth of financial
intermediaries, would tend to raise the price of capital to the traditional sector above the social
opportunity cost of capital, resulting in an opposite bias in relative factor prices.

3.4 Integrated Rural Development

Integrated Rural Development is a Programmeconcept that covers the majority of our activities.
It means that we assist rural communities in making sustainable improvements in living
conditions in all aspects of daily life.

Complex problems need complex solutions. A poor village needs help with many aspects of life
and all of these are interrelated. For instance an irrigation system can do more than just provide
water for agriculture; it can also reduce the risk of landslides and floods.

That’s why rural development has an integrated work program, because success in one sector can
strengthen successes in other fields as well.

Real development means genuine advances in living conditions, and not just temporary benefits.
Too many aid projects fail when outsiders takecharge of running services, rather than enabling
the local population to do it themselves and become self-sufficient.

In rural development programs, sustainability is a key word. By building local capacities,

knowledge and infrastructure integrated rural development helps communities reach a permanent
improvement in living standards that endures long after a project or Program has ended. As an
example, trains local women to spread knowledge on health and sanitation to households in their
communities. When building an irrigation system or other infrastructure, employs local men and

37
uses mainly local materials. This means that knowledge is built, and remains within the local
community, even after the end of a development program.

3.5 Models of Agricultural Development

Prior to this century, almost all increase in food production was obtained by bringing new land
into production. By the end of this century almost all of the increase in world food
productionmust come from higher yields- from increased output per hectare. In most of the
world the transition from a resource-based to a science-based system of agriculture is occurring
within a single century. In a few countries this transition began in the nineteenth century. In most
of the presently developed countries it did not begin until the first half of this century. Most of
the countries of the developing world have been caught up in the transition only since mid-
century. The technology associated with this transition, particularly the new seed-fertilizer
technology, has been referred to as the “Green Revolution”.

During the remaining years of the twentieth century, it is imperative that the poor countries
design and implement more effective agricultural development strategies thanin the past. A
useful first step in this effort is to review the approaches to agricultural development that have
been employed in the past and will remain part of our intellectual equipment. The literature on
agricultural development can be characterized according to the following models: (1)the
frontier, (2) the conservation, (3) the urban-industrial impact, (4) the diffusion, (5) the high-
payoff input, and (6) the induced innovation.

3.5.1 Frontier model

Throughout most of history, expansion of the area cultivated or grazed has represented the
dominant source of increase in agricultural production. The most dramatic example in western
history was the opening up of the new continents - North and South America and Australia – to
European settlement during the eighteenth and nineteenth centuries. With the advent of cheap
transport during the latter half of the nineteenth century, the countries of the new continents
became increasingly important sources of food and agricultural raw materials for the
metropolitan countries of Western Europe.

38
Similar processes had occurred earlier, though at a less dramatic pace, in the peasant and village
economies of Europe, Asia and Africa. The first millennium A.D saw the agricultural
colonization of Europe north of the Alps, the Chinese settlement of the lands south of the
Yangtze, and the Bantu occupation of Africa south of the tropical forest belts.

Intensification of land use in existing villages was followed by pioneer settlement, the
establishment of new villages, and the opening up of forest or jungle land to cultivation. In
Western Europe there was a series of successive changes from Neolithic forest fallow to systems
of shifting cultivation of bush and grass land followed first by short fallow systems and later by
annual cropping.

Where soil conditions were favorable, as in the great river basins and plains, the new
villages gradually intensified their system of cultivation. Where soil resources were poor, as in
many of the hill and upland regions, new areas were opened up to shiftingcultivation or nomadic
grazing. Under conditions of rapid population growth, the limits to the frontier model were often
quickly realized. Crop yields were typically low-measured in terms of output per unit of seed
rather than per unit of crop area. Such as Egypt and south Asia, and the wet rice areas of East
Asia, in many areas the result was increasing miserization of the peasantry.

There are relatively few remaining areas of the world where development along the lines of the
frontier model will represent an efficient source of growth during the last two decades of the
twentieth century. The 1960s saw the “closing of the frontier” in most areas of Southeast Asia. In
Latin America and Africa the opening up of new lands awaits development of technologies for
the control of pests and diseases (such as the tsetse fly in Africa) or for the releases and
maintenance of productivity of problem soils.

3.5.2 Conservation model

The conservation model of agricultural development evolved from the advances in crop and
livestock husbandry associated with the English agricultural revolution and the notions of soil
exhaustion suggested by the early German chemists and soil scientists. It was reinforced by the
application to land of the concept, developed in the English classical school of economics, of
diminishing returns to labor and capital. The conservation model emphasized the evolution of a
sequence of increasingly complex land-and labor-intensive cropping systems, the production and

39
use of organic manures, and labor-intensive capital formation in the form of drainage, irrigation,
and other physical facilities to more effectively utilize land and water resources.

Until well into the 20thC the conservation model of agricultural development was the only
approach to intensification of agricultural production available to most of the world’s farmers. Its
application is effectively illustrated by development of the wet-rice culture systems that emerged
in East and South East Asia and by the labor-and landintensivesystems of integrated crop-live-
stockhusbandry which increasingly characterized European agriculture during the eighteenth and
nineteenth centuries.

During the English agricultural revolution more intensive crop-rotation systems replaced the
open-three-field system in which arable land was allocated between permanent crop land and
permanent pasture. This involved the introduction and more intensive use of new forage and
green manure crops and an increase in the availability and use of animal manures. This “new
husbandry” permitted the intensification of crop-livestock production through the recycling of
plant nutrients, inthe form of animal manures, to maintain soil fertility. The inputs used in this
conservation system of farming –the plant nutrients, animal power, land improvements,
physicalcapital, and agricultural labor force-were largely produced or supplied by the agricultural
sector itself.

Agricultural development, within the framework of the conservation model, clearly was capable
in many parts of the world of sustaining rates of growth in agricultural production in the
range of 1.0 percent per year over relatively long periods of time. The most serious recent effort
to develop agriculture within this framework was made by the people’s republic of china in the
late 1950s and early 1960s. it became readily apparent, however, that the feasible growth rates,
even with a rigorous recycling effort, were not compatible with modern rates of growth in the
demand for agricultural output-which typically fall in the 3-5 remains an important source of
productivity growth in most poor countries and an inspiration to agrarian fundamentalists and
the organic farming movement in the developed countries.

3.5.3 Urban - Industrial Impact Model

In the conservation model, locational variations in agricultural development are related primarily
to differences in environmental factors. It stands in sharp contrast to models that interpret

40
geographic differences in the level and rate of economic development primarily in terms of
the level and rate of urban-industrial development.

Initially, theurban-industrial impact model was formulated inGermany by J.H Von Thunen
toexplain geographic variations in the intensityof farming systems and the productivity of labor
in an industrializing society. In the united states it was extended to explain the more effective
performance of the input andproduct markets linking the agricultural and nonagricultural sectors
in regions characterized by rapid urban-industrial development than in regions where the urban
economy had not made a transition to the industrial stage. In the 1950s, interest in the urban-
industrial impact model reflected concern with the failure of agricultural resource development
and price policies, adopted in the 1930s, to remove the persistent regional disparities in
agricultural productivity and rural incomes in the united states.

The rational for this model was developed in terms of more effective input and product markers
in areas of rapid urban-industrial development. Industrial development stimulated agricultural
development by expanding demand for farm products, supplying the industrial inputs needed to
improve agricultural productivity, and drawing away surplus labor from agriculture. The
empirical tests of the urban-industrial impact model have repeatedly confirmed that a strong
nonfarm labor marker is an essential prerequisite for labor productivity in agriculture and
improved incomes for rural people.

The policy implications of the urban-industrial impact model appear to be most relevant for less
developed regions of highly industrialized countries or lagging regions of the more rapidly
growing LDCs. Agricultural development policies based on this model appear to be particularly
inappropriate in those countries where the “pathological” growth of urban centers is a result of
population pressures in rural areas running ahead of employment growth in urban areas.

3.5.4 Diffusion Model

The diffusion of better husbandry practices was a major source of productivity growth even in
pre-modern societies. The diffusion of crops and animals from a New World(America) into the
old (Europe, etc) such as: potatoes, maize, cassava, rubber; and from the Old World into the
newly discovered lands from 15th 19thC.

41
The diffusion approach rests on the empirical observation of substantial differences in land and
labor productivity among farmers and regions. The route to agricultural development, in this
view, is through more effective dissemination of technical knowledge and a narrowing of the
productivity differences among Farmers and Regions.

The diffusion model has provided the major intellectual foundation for much of research and
extension efforts in farm management and production economics, since the emergence of
Agricultural Economics and Rural Sociology as separate discipline (in the latter years of the
nineteenth century). These contributed in linking agricultural and the social sciences.
Developments leading to establishment of active programs of farm management research were
making only a mildest contribution to agricultural productivity growth.

A further contribution to the effective diffusion of known technology was provided by rural
sociologists’ research on the diffusion process. Models were developed emphasizing the
relationship between diffusion rates and the personality characteristics and educational
accomplishment of farm operators.

Insights into the dynamics of the diffusion process, when coupled with the observation of wide
agricultural productivity gaps among developed and less developed countries and a presumption
of inefficient resource allocation among “irrational tradition –bound”peasants, produced an
extension or diffusion bias in the choice of agricultural development strategy in many LDCs
during the 1950s. during the 1960s the limitations of the diffusion model as a foundation for the
design of agricultural development policies became increasingly apparent as technical assistance
and rural development programs, based explicitly or implicitly on this model, failed to generate
either rapid modernization of traditional farms and communities or rapid growth in agricultural
output.

3.5.5 High - payoff input Model

The inadequacy of policies based on the conservation, urban industrial, impact, and diffusion
models led, in the 1960s, to a new perspective-the key to transforming a traditional agricultural
sector into a productive source of economic growth was investment designed to make modern,
high-payoff inputs available to farmers in poor countries. Peasants in traditional agricultural
systems were viewed as rational, efficient resource allocators. This iconoclastic view was

42
developed most vigorously by T.W Schultz in his controversial book transforming traditional
agriculture. He insisted that peasants in traditional societies remained poor because, in most poor
countries, there were only limited technical and economic opportunities to which they could
respond. The new, high-payoff inputs were classified according to three categories:

(i) The capacity of public and private sector research institutions to produce new technical
knowledge

(ii) The capacity of the industrial sector to develop, produces, and market new technical inputs

(iii) The capacity of farmers to acquire new knowledge and use new inputs effectively.

The enthusiasm with which the high-payoff input model has been accepted and translated into
economic doctrines has been due in part to the proliferation of studies reporting high rates of
return to public investment in agricultural research. It was also due to the success of efforts to
develop new, high-productivity grain verities suitable for the tropics. New high-yielding wheat
varieties were developed in Mexico beginning in the 1950s, and new high-yielding rice varieties
were developed in the Philippines in the 1960s. These varieties were highly responsive to
industrial inputs, such as fertilizer and other chemicals, and to more effective soil and water
management. The high returns associated with the adoption of the new varieties and the
associated technical inputs and management practices have led to rapid diffusion of the new
varieties among farmers in a number of countries in Asia, Africa, and Latin America.

3.5.6 Induced Innovation Model

The high-payoff input model remains incomplete as a theory of agricultural development.

Typically, education and research are public goods not traded through the marketplace.

The mechanism by which resources are allocated among education, research, and other public
and private sector economic activities was not fully incorporated into the model. It doesno
explain how economic conditions induce the development and adoptionof anefficient set of
technologiesfor a particular society. Nor does it attempt to specify the processes by which input
and product price relationships induce investment in research in a direction consistent with a
nation’s particular resource endowments.

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These limitations in the high-pay off input model led to effort s to develop a model of
agricultural development in which technical change is treated as endogenous to the development
process, rather than as an exogenous factor operating independently of other development
process. The induced innovation perspective was stimulated by historical evidence that different
countries had followed alternative paths of technical change in the processes of agricultural
development.

Chapter 4 -Strategies and Polices of Agricultural and Rural

Development
4.1 Introduction

The Rural Development Strategy is the framework for the implementation of the Rural
Development Policy, and will enhance the realization of the Poverty Reduction Strategy. The
Rural Development Strategy will focus on stimulating socio-economic growth of the rural
economy by building on the gains achieved at macro level. The continued strengthening of the
links between the micro and macro levels and strengthening the implementation of the Local
Government reforms are key instruments for the implementation the Rural Development
Strategy.

The Rural Development Strategy has linkages with agricultural strategies and policy initiatives
of which are complementary to one another. “Agricultural Development” mainly aims at
increasing agricultural products such as crops, livestock, fish and etc. Human being, land and
capital are simply regarded as production goods and means. On the other hand, “Rural
Development” mainly targets on people and institutions. Rural development includes agricultural
development activities; however it is one of the means of economic revitalization for active
farmers and targeted rural villages.

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4.2 The Dimensions of Rural Development Strategy

The realization of rural development in the context of thecountry’s development vision largely
depends on the pace of growth in the agricultural sector, the adoption of a positive mindset by
the rural society, and a re-focusing of the institutional framework on the rural areas. In this
context, attention should be towards attaining the following:

(i) High Quality Livelihood

For rural dwellers, high quality livelihood will mean having access to affordable basic needs.
This includes having access to sufficient and adequate food, preventive and curative health care;
shelter and clothing; education and training; and safe water. They also need access to irrigation,
energy, information, transportation and communication.

(ii) An Enabling and Peoples Empowering Environment

Any initiative towards realizing human development andreducing poverty in a more consistent
and sustainable manner should involve the people concerned. This implies that the stakeholders:
communities; individuals; households; firms; organization and associations, are best positioned
to know their social, political and economic problems and needs, as well as their environmental,
cultural and spiritual aspirations. The Rural Development Strategy provides an enabling
environment and effective institutional framework that puts people at the center of their
development. People should be empowered to guide the development process and influence it
towards the direction and speed they perceive it to be in tandem with their future development
aspirations.

(iii) Self-Reliance and Self- Sustenance

The role of community and individual initiatives is of paramount importance and is given due
recognition in thestrategy. This goes beyond providing and supporting enabling and facilitating
institutional structures and processes necessary to facilitate implementation. It also requires
deliberate efforts towards changing the people’s mindset. The Rural Development Strategy
provides a framework for stimulating private sector growth and development by streamlining
procedures and rationalizing taxes and fees connected with doing business in rural areas.

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(iv)Trade and International Competitiveness

Globalization has profoundly altered the direction and patterns of world production and trade.
The introduction of new technology especially in the fields of information, biotechnology,
material sciences and renewable energies has played an important role in shifting competitive
advantages across nations and regions. This in turn, has restructured international trade and
investment patterns sometimes in contrary with the traditional determining factors such as
availability of raw materials, proximity to markets, sources of cheap labour and climate.

The impact of these changes has taken various forms. Two are of much relevance to the Rural
Development Strategy. Firstly, technological innovations in developed countries have eroded
competitive advantage of commodities in international trade. Secondly, the new technologies
have increased technological options available for production, widening the alternatives
available to meet consumer needs and reduce the costs of moving goods and services across
countries. In some cases, this has been associated either with reduction in use of materials or
allowed use of alternative materials, therefore, reducing world demand for primary commodities.

For these global changes mean that thereis a need to transform and to diversify rural production
towards the prevailing patterns of demand in the world trade. The Rural Development Strategy
focuses on strengthening capacities to investigate and identify investment potentials in a more
liberalized and competitive economic environment. The RDS outlines legal, regulatory and
administrative measures necessary to stimulate growth and safeguard property rights.

4.3 Polices of agricultural and rural development

4.3.1 Agricultural price policy

Agricultural prices, on the one hand, determine the income of the farmers and on the other
affect the levels of living of the people engaged in the other sectors of the economy, as
agricultural commodities form part of wage goods. Changes in agricultural prices thus effect a
transfer of income between the agricultural and the non-agricultural sectors of the economy. The
views of economists differ as to whether the transfer of income takes place between the rural and
the urban sectors or between the low income urban consumer and the high agriculture producers.

46
However, it is recognized by all that agricultural prices do affect income distribution between the
different sectors of the economy.

The objectives of Price Policy may be stated as follows-

The objectives set for the farm price policies in different countries naturally have their origin in
these three functions. Apart from moderating price fluctuations, the objectives of Price Policy in
a way are, in most cases, only variants of:

(a) To raise or stabilize farm incomes,

(b) To increase production

(c) Combination of (a) and (b)

In most of the developed countries the objectives set for price policy are a combination of (a) and
(b) with slightly more stress on (a). In developing countries, on the other hand, the objectives set
for price policy lay wore emphasis on (b), that is, to increase production.

(i) Functions of Agricultural Prices - Agricultural prices have four functions namely:

(1) to distribute agricultural products

(2) To allocate resources

(3) To- distribute income

(4) To induce capital formation.

As allocator of resources, agricultural prices give signals to both producers and consumers
regarding the level of Production and consumption. Changes in the relative prices of the various
agricultural commodities affect the allocation of resources among agricultural commodities by
the consumers. If the price of a given commodity increases relatively to all other agricultural
commodities, then the producers would be allocating more resources, i.e., land and other inputs,
for the production of that commodity. To the extent substitution is possible; the consumer would
try to substitute high priced commodities by cheaper commodities.

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Agricultural prices, on the one hand, determine the income of the farmers and, on the other,
affect the levels of living of the people engaged in the other sectors of the economy, as
agricultural commodities from part of wage goods. Changes in agricultural prices thus affect a
transfer of income between the agricultural and the non –agricultural sectors of the economy.

Main Agricultural Price addressing by Policies

A - Support Price: The minimum support prices fixed by the Government are in the
nature of a long term guarantee to enable the producer to pursue his efforts with the assurance
that the prices of his produce would not be allowed to fall below the level fixed by the
government. The minimum support price should not discourage a progressive farmer from
augmenting his/her production through adoption of improved technology and should relieve
him/her of the fear that expanded production will result in a low price of the produces.

B. Procurement Price: Procurement price is the price at which the government procures grain
from producers. Normally, the procurement price is lower than the minimum price. The
procurement prices should be decided close to the time of harvest.

C - Incentive Prices: It is a price that is well above the risk of production and at this price the
farmer is expected not to spare any effort at increasing his production within the constraints of
his own and national resources. Thus, an incentive price is one that induces the farmer
to make capital investment for the improvement of farm organization, and expand the use of
inputs so as to move up to a higher point on his production possibility frontier and
optimize his farm income.

Agricultural Price Policy Instruments

All agricultural price policy instruments create transfers either to or from the producers or
consumers of the affected commodity and the government budget. Some price policies affect
only two of these three groups, whereas other instruments affect all three groups. In all instances,
at least one group loses and at least one other group benefits.

i. Taxes and subsidies on agricultural commodities result in transfers between the public budget
and producers and consumers. Taxes transfer resources to the government, whereas subsidies

48
transfer resources away from the government. For example, a direct production subsidy transfers
resources from the government budget to agricultural producers.

ii. International trade restrictions are taxes or quotas that limit either imports or exports. By
restricting trade, these price policy instruments change domestic price levels. Import restrictions
raise domestic prices above comparable world prices, whereas export restrictions lower domestic
prices beneath comparable world prices.

Direct controls are government regulations of prices, marketing margins, or cropping choices.
Typically, direct controls must be accompanied by trade restrictions or taxes/subsidies to be
effective; otherwise, “black markets” of illegal trade render the direct controls ineffective.
Occasionally, some governments have sufficient police power to enforce direct controls in the
absence of accompanying trade regulations. Direct controls of cropping choices can be enforced,
for example, if the government allocates irrigation water or purchased inputs.

4.3.2 Input policy

The policy provides a ready solution to otherwise difficult problems of developing input markets
and associated financial services to small farmers. The main economic objectives of Input policy
are:

1) Stimulate agricultural production.

2) Compensate for high costs of transport from port or factory to farms that raise costs of
inputs.

3) Improve soil quality and combat soil degradation (in the case of fertilizer).

4) Offset high costs of supplying inputs when markets have low volumes and economies
of scale in logistics cannot be achieved.

5) Make inputs affordable to farmers who cannot buy them, owing to poverty, lack of access to
credit, and inability to insure against crop losses.

6) Learning — to allow farmers to try novel inputs and become familiar with their advantages.

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4.3.3 Marketing policy

The marketing of agricultural products play a vital part in all our lives and engages a
wide variety of skills. The aim of this unit is to give the students a grasp of the "whys" of the
marketing policy.

Marketing had itsbeginning in agriculture. It developed only after man was able to produce
more food than he needed for himself and only after he had found a way of exchanging
the products of his labor for those of others. This transition from "production for consumption"
to production for exchange" comes about slowly. In fact, the marketing economy of today is still
a part of this transition stage.

Agricultural marketing is the study of all activity agencies, and policies involved in the
procurement of farm inputs by the farms and the movement of agricultural product from the
farms to the consumer.

Marketing Policy objectives

a) To promote competitiveness in agricultural markets

b) To create a strong linkage between primary producers and markets

c) To foster participation and success of smallholder farmers in the agricultural economy

d) To promote marketing in value-added agricultural products

e) To provide a common understanding and directives within government and its

institutions and the agricultural industry with regard to agricultural marketing policy and
the application and implementation of various policy instruments

f) To provide strategic policy direction that can form part of government’s plans of action and
that can be reviewed and monitored to measure progress

g) To provide broad direction on how agricultural marketing can contribute to the growth
objectives of the government

Policy interventions and instruments

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a.Competition and pricing policy

b. Agricultural tariff policy

c. Agricultural market access facilitation

d. Agricultural marketing information. This will include information on:

i. Product requirements, quantity, quality and presentation

ii. Market size

iii. Input and producer prices and trends

iv. Supply and demand trends

v. Marketing costs, including transport costs

e. Agricultural marketing infrastructure and agro-logistics

f. Commodity groups and agricultural marketing cooperatives

g. Agricultural marketing skills and capacity building

h. Agricultural marketing finance

4.3.4 Land tenure policy

Land issues are of crucial importance to economic and social development, growth, poverty
reduction, and governance. Access to land is the basis of economic and social life in both rural
and urban areas. Land tenure is a complex problem comprising political, economic, technical,
legal and institutional factors. Land tenure closely binds together issues of wealth, power and
meaning. Control over land forms a significant part of the identity and maintenance of rural
society. Land policies determine who has legal rights of access and/or ownership to certain
resources and under what conditions, and therefore how these productive assets are distributed
among diverse stakeholders. Land policies therefore express, implicitly or explicitly, the political
choices made concerning the distribution of power between the state, its citizens, and local
systems of authority. The multiple dimensions to land issues require a careful and well

51
implemented approach which places current land issues within the broader historical, political
economic and social context.

What is Land Tenure?

Land tenure should be defined broadly as the “system of access to and control over land and
related resources”. It defines the rules and rights which govern the appropriation, cultivation and
use of natural resources on a given space or piece of land. Strictly speaking, it is not land itself
that is owned, but rights and duties over it. Land rights are not limited to private ownership in
the strict sense, but can be a very diverse balance between individual rights and duties,
and collective regulations, at different levels (different levels of family organization,
communities, local governments or state), private or family ownership being one possible case.
The rights and duties that individuals or a family hold are themselves embedded in a set of rules
and norms, defined and enforced by authorities and institutions which may be those of rural
communities and/or of the state. No system of land tenure can work without a body with the
power and authority to define and enforce the rules, and provide arbitration in case of conflict.
Thus, a land tenure system is made up of rules, authorities, institutions and rights. Land
administration itself (maps, deeds, registers, and so on) is only one part of a land tenure system.

What is land policy?

Land policy is contained in texts issued by governments, and is further developed through
legislation, decrees, rules and regulations governing the operation of institutions established for
the purposes of land administration, the management of land rights, and land use planning.

Purpose of land policy

A land policy aims to achieve certain objectives relating to the security and distribution of land
rights, land use and land management, and access to land, including the forms of tenure under
which it is held. It defines the principles and rules governing property rights over land and the
natural resources it bears as well as the legal methods of access and use, and validation and

52
transfer of these rights. It details the conditions under which land use and development can take
place, its administration, i.e. how the rules and procedures are defined and put into practice, the
means by which these rights are ratified and administered, and how information about land
holdings is managed. It also specifies the structures in charge of implementing legislation, land
management and arbitration of conflicts.

The Importance of Land Policy

Rural landis an asset of the greatest importance in many parts of the world, both developing
and developed. In the former, a high proportion of income, employment and export earnings
stems from agricultural production and other land-basedactivities.

Poverty is also particularly marked in rural areas and control of land is a major issue for peasant
societies. In the absence of much economic diversification, access to land and natural resources
is of special importance for improving the livelihoods of poorer groups and providing greater
security. Land constitutes an asset and a source of wealth for families and individuals as well as
for communities, with strong links to cultural and spiritual values. Ownership and control over
land confer very significant political power, particularly where land is becoming scarcer and
hence more valuable. Land issues and conflicts are deeply embedded in the long-term social,
economic and political history of a country and must be understood in that context.

Land policy lies at the heart of economic and social life and environmental issues in all
countries. The distribution of property rights between people has a tremendous impact on both
equity and productivity. Inequitable land distribution, land tenure problems and weak land
administration can lead to severe injustice and conflict. Changes to legislation, the distribution of
property rights, and administrative structures are likely to have longterm consequences, positive
or negative, for political, economic and social development. Similarly land policy is also crucial
for environmental sustainability as it can create incentives for sustainable land-use and
environmental management.

Links between land and other major policy areas

Land tenure is at the heart of a number of rural development issues. Access to land is linked to
some basic economic and social human rights, such as the right to food. Land tenure has strong

53
linkages to poverty reduction and food security, economic development, public administration
and local government, private contract law, family and inheritance law and environmental law
(to mention but a few). Given the far reaching consequences of land policy reform, an explicitly
multi-disciplinary approach is required to ensure that the varied implications of reform program
are well understood and that the needs of different stakeholder groups, in particular the poor
and vulnerable, can be effectively accommodated.

Elements of land tenure policy

Depending on the context and objectives, a land policy reform program may include one or
several of the following elements:

 new tenure legislation and revision of codes, to recognize and regulate new types of
rights or forms of transfer (including women’s, small farmers’, pastoralists’, minority
groups or indigenous peoples’ land rights);
 land registration and titling of existing rights;
 regularization (updating formal records to take account of changes and informal
transactions) of existing land rights;
 land redistribution;
 the creation of new opportunities for land access;
 restitution of land rights alienated from the original owners or users;
 privatization of collective or state land;
 improvements to the efficiency and accountability of existing land administration
systems;
 establishment of (new) institutions and structures with responsibility for land acquisition,
administration and conflict resolution;
 setting up a land-based tax system;
 designing and enacting new land use and planning rules and procedures;

4.3.5 Food security policy

There have been some significant developments in food policy over the last decade,
including increased acknowledgement of the right to adequate food and the importance of

54
equitable and secure tenure. However, food security policy-making continues to focus in the
same three issues – agricultural productivity, trade and macro-economic policies –while
neglecting the central role of ecosystem management.

Food security policies strengthen both:

 the resilience of food-insecure populations to manage uncertainties and stresses such

as food price hikes and climate change; and
 the resilience of ecosystems to withstand shocks such as hazardous weather events
and stresses such as pollution, to maintain their support for the production of both wild
and farmed foods

The four dimensions of food security- Food security can be thought of as comprising four
dimensions:

Availability: the supply of sufficient quantities of food of appropriate quality, from both natural
and cultivated systems;

Access: the ability of individuals to obtain food through their own production, markets, or other
sources;

Utilization: the means by which individuals are able to gain energy and nutrition from food; and
Stability: when sufficient and adequate food is available, accessible and utilizable on a reliable,
sustainable basis.

Only when all four of these dimensions are fulfilled simultaneously can an individual,
household, community or nation achieve food security.

Gaps in food security policy-making

A multi-sectoral approach. Food security issues are too often dealt with in ‘policy silos’, with
the relevant institutions (agriculture, forestry, trade, environment, etc.) rarely collaborating to
ensure their policies consistently support food security. This can lead todisconnected, sometimes
contradictory policies and the neglect of intersectoral linkages and synergies (e.g. food-water-
energy and food-health-nutrition).

55
Integration of ecosystem factors;As this paper has discussed, ecosystem factors are still
missing from much of the thinking behind food security policymaking. This is resulting in ill-
informed, ineffective policies and contributing to ecosystem mismanagement and degradation,
which in turn undermines the food security objectives of these policies.

Chapter 5 Rural Development: Policies and Strategy of Ethiopia

5.1 Introduction

The agriculture-centered rural development policy has been adopted as a major strategy expected
to assist in the realization of the country's economic development objective. Nevertheless,
the rural development effort is not something that can be regarded as just one element in the
overall economic development package. It is more than just that. Rural development constitutes
the plan that underlies all other efforts towards economic development. The reason for
repeated mention of the nature of economic policy in Ethiopia being agriculture and rural-
centered is because this is the basis for implementing the overall economic development
objective and the guiding principle for our development efforts.

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5.2 Goals of the Rural Development Policy

The Federal Democratic Republic of Ethiopia underscores the basic goal with regard to rural
development as to build economy in which:

(i) To benefit a broad spectrum of the Ethiopian people,

(ii) Eliminate dependence on food aid and achieve food security

(iii) To bring Rapid economic growth

Rural and agricultural development policies in Ethiopia focus on:

- Strengthening the agricultural labor force

- Proper use of land

- preparing area compatible development package

- Working towards market - led agricultural development

- Improving on rural finance

- Towards promoting private sector participation in agricultural development

- Expansion of rural infrastructure

- Strengthening non-agricultural rural development activities

Ethiopia is a country often characterized by poverty and deprivation. Yet it is also a country
endowed with a wealth of productive land and natural resources. Nearly 32 million hectares of
viable agricultural land exists within the Ethiopia’s landmass of 1.1 million square kilometers.
Harnessing the potential of these resources could drastically improve the livelihoods of its
people.

But in reality, less than 11 million hectares of arable land comes under cultivation annually,
forcing smallholders to survive on increasingly marginal lands and natural resources. Ethiopian
agriculture remains characterized by small-scale subsistence production systems where crop and
livestock yields are very low. Still, agriculture remains the country’s most important enterprise,

57
employing more than 85 percent of the country’s citizens and accounting for more than 40
percent of total GDP and 90 percent of export earnings.

Government of Ethiopia (GoE) has set forth a comprehensive set of development objectives that
target economic growth and reduce poverty. Key elements of objectives are strategies designed
to promote a market-led transformation of the rural economy, and the decentralization of
political, economic, and administrative powers and functions.

Many of the objectives and strategies are described in the Government of Ethiopia’s Program
for Accelerated and Sustained Development to End Poverty (PASDEP, September 2006))
emphasize development led by agricultural sector growth, improved governance and
decentralization of delivery of services, and the reduction of vulnerability. Relative to the
previous poverty reduction strategy, PASDEP places much greater emphasis on
commercialization of agriculture, diversification of production and exports, and private sector
investment in order to move farmers beyond subsistence farming to small-scale market-oriented
agriculture. Under PASDEP, these objectives would be pursued through a range of policies and
instruments including:

 modernization of the research and extension systems through investment in higher

learning institutes, national and regional research, technical and vocational education and
training, and farmer training centers
 enhancing competition and increasing efficiency in agricultural input and output markets;
 strengthening the rural credit system; (iv) improving irrigation and water management;
 increasing land tenure security;
 creating a conducive investment climate for commercial agriculture
 Reducing the vulnerability of families living in regions prone to drought.

Key implementing agencies include the national and regional agricultural research system; post-
secondary agricultural education services; extension services at the regional and local levels; and
cooperatives and cooperative unions. Necessarily, implementation will also involve the growing
number of private sector and civil society actors in the agricultural sector.

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The following sections summarize Rural Development Policies, Strategies and instruments of the
Government of the Federal Democratic Republic of Ethiopia and are taken from the draft
translation. (November 2001, Addis Ababa)

5.2 Basic Directions of Agricultural Development

Rural development is not bounded to agricultural development alone. Apart from agriculture,
rural development includes many other activities. However, under the objective situations of
Ethiopia, it is undebatable that rural development movement should be centered on agricultural
development. Therefore, when we explain the rural development policies and strategies, we
have to focus on policies and strategies of agricultural development.

Since these major directions govern our agricultural development policies and strategies, they
should be explained clearly in order to have transparent agricultural development activities.

Human labor extensive utilization approach

It is possible to achieve rapid and sustainable economic growth in our country not through
extensive utilization of capital resources but through extensive utilization of human power.
This has more importance in the agricultural sector than in other sectors of the economy. Opting
for extensive utilization of human labor does not mean that we have to use excess human labor
in each plot of land and use backward technology. It is practically impossible to achieve
rapid and sustainable development through the use of excess unnecessary human labor in each
plot of land. Even in agriculture, it is impossible to ensure rapid and sustainable growth using
backward technology.

Opting for extensive utilization of work force does not imply using excess human labor on a
given plot of land; rather, it implies allocating optimal number of people at each plot and to be
able to fully utilize them. Choosing extensive utilization of human labor does not mean that we
have to use backward technology and farming methods; rather, we mean to say that we
have to use technology which does not substitute human labor for machine but extensively
utilizes human labor.

One of the major ways of implementing modern farming methods through extensive utilization
of human power is by motivating the human labor in agriculture through agricultural education

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and training. There is agricultural development that can be produced by using modern machinery
and few less trained people. This type of agricultural development is based on employing few
people on large amount of land; (extensive farming method). On the other hand, there is another
type of agricultural development which is based on capital-intensive technology, which produces
large amount of highly valuable agricultural outputsper unit of land (intensive farming method).
Our major direction of agricultural development is the one which extensively utilizes human
labor.

Both methods can ensure sustainable growth of agricultural productivity and technology.
However, technology and productivity grow towards very different directions. Extensive farming
method focuses on continuously improving the agricultural skills and motivation of the people.
Capital intensive farming method focuses on substituting human labor for sophisticated
machinery and on their extensive use and improvement. The method which uses labor
extensively requires skilled farmers who produce agricultural products that need attention and
follow up to make further improvements in terms ofquantity anddiversity. The method which
uses capital intensively focuses on agricultural products which need less attention and follow
up. The method which uses labor extensively focuses on an intensive use of a given plot of land
(via irrigation, diversification, etc) in order to increase production and productivity.

Extensive utilization of human labor, a development path we currently follow, does not imply
using backward technology and excess human power to produce agricultural outputs. It is
a direction in which optimal amount of work force will be employed to produce on each
plot of land. Extensive farming enables us to continuously develop our agricultural products and
technologies by employing agricultural technology that makes extensive utilization of human
resources possible. This method focuses on educating and training the agricultural labor and
enabling them to use modern agricultural technology and techniques. It is a direction, which fully
utilizesall alternatives to enhance agricultural productivity per plot of land through the
development of irrigation and highly valued agricultural outputs. It is trained human power–
centered productivity and technological development strategy. Our agricultural development
strategies and policies should be led towards this basic direction

Proper use of agricultural land

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Access to and use of land is one of the major issues of our agricultural development
movement. If we cannot use our land properly, it is impossible to ensure the required rate of
sustainable and rapid agricultural development. Ensuring access to agricultural land for anyone
who wants to base his or her life on agriculture is one basic issue of land use. Protection and
preservation of natural resources contribute a lot to increase agricultural productivity and achieve
sustainable development of the agricultural sector. We have to focus on full utilization of the
land to produce maximum possible outputs of different crops per unit area throughout the
year using irrigation. As land can be used for different purposes, it is important to determine
which land should be used for what purposes. It is known that in our country, there are
densely populated areas where per capita land holding is very small and scarcely populated
areas with abundant land. This should be taken into account in our land use strategy.

Compatible approach with different agro-ecological zones

There are various agro- ecological zones in Ethiopia which differ in terms of rainfall
amount, land type, altitude, and other indicators. In relation to this, there are major
nomadic areas in eastern and to some extent in southern lowlands. Large uncultivatedland
and some suitable areas for cultivation are available in western lowland where only few people
live in.

Thereare densely populated highland areas where land is very scarce. It is easy to imagine
that agricultural activities to be taken in these different agro-ecological zones will be very
different. It is difficult to achieve sustainable and rapid development by conducting identical
agricultural development activities in all areas. It is necessary to identify real development
opportunities of each agro-ecological zone and be able to fully utilize them. We should prepare
suitable and detailed development plan for each zone. By doing so, we can assure sustainable
and rapid development of our country through contributions of each zone.

Integrated Development Strategy

Every development requires integrated and coordinated activities. Agricultural development

movement also requires integrating various activities. Agriculture itself encompasses various
types of production and other activities. Integration is required not only between agricultural
activities and agricultural products themselves. Agricultural development is directly related to

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social development activities like education and health and infrastructure like roads. By missing
one of these, the other cannot develop rapidly and persistently. In addition to this, agricultural
development activity has direct and indirect relationship with such factors as trade and finance,
industry, and others.

5.3 Building Human Resource Capacity and Its Extensive Use

Economic development strategies and policies in general and agricultural development policies
and strategies in particular are based on building the production capacity of human resources.
Building the production capacity of our human resources needs interventions at different levels.

 Guaranteeing preparedness to work and self-initiation of human power.

 Improving the agricultural skill and profession.
 Protecting the health of the work force so asto ensure hardworking and effectiveness.
 Improving the generation, multiplication, and dissemination of technology.

Ensuring Hardworking and Preparedness for Work

Basically, these days citizens engaged in agriculture do not think of the existence of
alternative jobs and they basically practice traditional farming methods inherited from
their ancestors. They arefully prepared to be engaged in agriculture. The traditional farmer
possesses adequate interest to engage in agriculture. It is possible to assume that work
preparedness of the farmer is assured. However, if hardworking lacks, although
preparedness may be assured, human labor may not be utilized fully throughout the year because
of laziness; and this will not lead us to the expected level of agricultural development.
Although, the culture of hardworking differs from place to place and that there are harmful
customs and traditions, our farmers can be classified as hardworking.

The Ethiopian farmer does not avert physical jobs and is ready to earn his living through
hardworking. Eradicating the shortcoming in our work culture through persuasive and
democratic thinking contributes a lot to the efforts to develop the production capacity of labor
and to strengthen the culture of hardworking and preparedness. A way to motivate the traditional
farmer towards hardworking is to ensure continuous improvement of his standard of living. It is
very important to make the farmer the major beneficiary of the fruits of his labor and make

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him able to purchase necessary goods and services, and continually improve his standard of
living.

However, the major problem is within the youth and educated people. They engage
inagriculture with no less preparedness and self-initiation than uneducated farmers. In fact, these
young people, although they have not received tangible training in the agricultural profession,
tend to be more prepared for adopting new methods and techniques and perform better
than others, probably because of their general education. However, the majority of the youth
in schools has a different opinion in this regard. The rural as well as the urban youth at schools
do not exhibit interest in becoming a farmer or trained agricultural professional. Most students
consider agricultural jobs as indicators of poverty and backwardness. Most avert physical jobs
and do not want to be engaged in such fields as agriculture after being educated. One basic
reason for this is that the type of education given at schools does not teach to honor work in
general and agriculture in particular. The practical observation that people engaged in agriculture
are suffering from poverty and backwardnessproves to these youth that agriculture is prone to
poverty and backwardness.

If the youth is not made to admire agricultural professionand be engaged in it with interest,
sustainable agricultural growth will be unthinkable. From this perspective, we should be able
to eradicate root causes for the problems of the youth. Schools should teach students ethics,
the culture of hardworking and self-initiation; they have to prepare their students for agricultural
and other uneasy jobs. If our schools cannot produce such youngsters, we should not expect them
to do substantiverural and other development works. From these perspectives, our education
curriculum and methodology, especially those of elementary education, should be revised.

In general, we have to enhance our production capacity of our human labor and be able to
produce hardworking workers prepared to engage in agriculture. In terms of preparedness and
motivation, although it varies from place to place, there is no such acute problem on the existing
farming generation. Even though there are works to be done to improve the work culture and
preparedness of the farmer, the major focus in these regards should be the youth. It is imperative
to make schools able to produce productive, hardworking and motivated citizens, and ensure
that agricultural professionals earn not less than other professionals of comparable level.

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Improving the Capacity of Agricultural Profession

Most of the farmers in Ethiopia who currently engaged in agriculture are uneducated. The
agricultural knowledge and skills of this farmer are obtained from experiences inherited from
ancestors. However, this knowledge is valuable. By selecting best traditional agricultural
methods and disseminating them to be implemented by other farmers, we can assure production
growth. In addition to this, we can help the uneducated farmer to improve his agricultural skills
and production capacity through extension services based on demonstration fields. Farmers’
agricultural skills can be improved substantially through these instruments.

Therefore, the primary task with regard to improving the agricultural skill of farmers is tofocus
on improving the agricultural skills and production of the uneducated farmers.

Nevertheless, this work has its own limitations. Since the general educational capacity of the
uneducated farmer is weak, his capacity to understand and implement modern technology is
weak. It is difficult for him to follow and cope with ever-changing new technologies. Since
the farmer can learn only from demonstration fields and experience but not from written notes,
the chance of acquiring new technology is very limited. In short, he lacks the capacity to acquire
and implement rapid and sustainable technological growth and farming methods. Assuring such
development is possible based on educated generation only.

Therefore, in parallel to the efforts to be made to fully utilize the capacity of the
uneducated farmer, we have to work hard to substitute the present farming generation by an
educated one. An educated farming generation is the one that will obtain general
education and therefore will be able to read written notes and understand and implement new
agricultural technology in a scientific way. This requires accomplishing at least the present
elementary school education. However, this is not enough. The farmer should obtain agricultural
skill training.

The rapidly growing elementary education in our country facilitates the situation to
produce an educated farming generation. This year, not less than 57% of those at school age are
actually at school. The records in this regard prove that the 65% target in the fiveyear plan is
achievable. Although elementary education is expanding in cities as well, the major

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improvement recorded is in rural areas. Now, a situation has been created for the majority of the
rural youth to be able to obtain elementary education.

The current strategy is to select secondary school graduates and enroll them in a three year
agricultural training colleges. At least three graduates of these colleges (one in crops, one in
livestock, and the other one in natural resources and irrigation) will be assigned to each
rural kebele. These graduates will perform two major tasks simultaneously. First, they will
provide extension and consultancy services to all farmers, educated as well as uneducated, of the
kebele. In this regard, they are extension workers.

Secondly, they will train the educated rural youth at the kebele’s demonstration site. Here they
are teachers and trainers of agricultural skills. This way, by providing comprehensive agricultural
extension and advisory services and by providing educated farmers with better technology, we
can improve his agricultural production capacity. On the other hand, side-by-side we create an
educated and trained farming generation and enable him to receive a complete agricultural
extension and advisory services which commensurate to his level. We have to build the
production capacity of our people through education and training.

Maintenance of Farmers’ Health

It is unthinkable to bring about rapid and sustainable rural or urban economic development
in the absence of healthy and productive citizens. In order to improve thehealth situation of
farmers in our situation, we have to create a system that focuses on prevention of diseases and
provides basic health services. Although curative medicine is important, we like it or not, it
cannot be the major option in the situation of our country.

Preventing a disease enables to keep the health of citizens at low cost because it economizes
the high costs of medicaments, medical tools and professionals. In our country where there
is acute shortage of financial resources, it is practically impossible to provide a health system
focusing on curing the patient.

Such a service can never be provided to every citizen. As it was the case in the past, it leaves the
rural poor devoid of both the curative and preventive health services. From the perspective of
providing health care, the most important thing is to protect citizens from diseases and enable

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themearn their living. Ignoring this fact and focusing on curative medicine, in addition to its
direct cost, will lead to a great disadvantage. A sick person will be out of job until he gets cured.
Even after being cured, it may take long period to fully recover. It may also be impossible to
fully restore the farmer's health. It is obvious that this may have adverse impact on productive
activities of the person. In addition, more or less, there will be costs of medication. Taking
curative medicine, as a major option is equivalent to opting for an option which will constrain
our development efforts.

Therefore, there is no way other than implementing a health system focused on preventive
medicine and provision of basic health services.

Construction of health stations should be given priority compared to that of all other
health institutions; and the people and local government officials should coordinate efforts
in the construction of more health stations.

Professionals in health stations should be trained to clearly identify and implement

prevention works. They have to be persuaded to believe in this work. They have to get training
towards enabling them to effectively implement the work to train, agitate and convince
people in preventive medicine. Therefore, it should be known that it is detrimental for us
to focus on the training and production of this type of professionals for the implementation of the
health policy.

Generation, Multiplication and Diversification of Technology

Well-motivated, educate, well trained and creative farmers are important for agricultural
development. Unless farmers get access to productivity–boosting technologies, it is difficult to
achieve the intended level of economic development. Therefore, generation, multiplication and
diffusion of technology cannot be detached from an effort for developing the production
capacity of the people.

Ethiopia has diversified agro- ecological zones. It is not viable to use the same technology all
over the country. A technology implemented at one zone, for example in a zone with adequate
rainfall, may not work at others where there is shortage of rain; or if it does, it will not bring
about the expected results. Technology must be compatible with environmental conditions of

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each zone so as to bring about the maximum possible benefit to the zone in terms of agricultural
product. Therefore, we have to deliver technologies that fit the different agro-ecological zones
of the country and that can be improved continuously.

Assessing agricultural technologies around the world, selecting those that may fit to our
conditions, making the selected ones more compatible to our realities require high level of
professional and research capacity. The process of selecting technologies and arranging them
in packages is a key but only the beginning of the whole task. The technology must be
disseminated and reach to the agricultural products producer.

According to our plan, not less than three extension workers trained in medium—level colleges
will be assigned to each kebele. The Implementation of this plan has already started. Highly
qualified agricultural–extension professionals to support lead and coordinate the extension
workers at kebele levels. Moreover, there must be close linkage between the research and
extensionsystems. The extension services should be periodically reassessed and improved. It is
only by fulfilling all this that we can ensure dissemination of technologies.

Our system of technology multiplication should go along with the desired rapid
agricultural development and thus it must be able to quickly multiply the technology and supply
it to farmers frequently. If it takes years to multiply a technology, there cannot be rapid and
sustainable development at the required rate. The technology to be multiplied should be of
acceptable quality. It should also be of competitive and affordable to the farmer in its
price. This can be achieved if a system of technology multiplication is setup in which the
government, private investors and farmers are involved.

Generation of new technology should be continuous. The process of looking for a better
substitute should be started even before a new technology is disseminated. The production
and marketing problems of the farmer must be continuously investigated; solutions must be
sought on sustainable basis. That is why we say that a system should be setup in which
research works are based on the real problems of farmers, in which research and
extension systems are strongly linked to make easier identification of problems and
involving researchers on the one hand, and disseminating the findings quickly and
appropriately back to farmers on the other.

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5.4 Proper Use of Land

Using our land in such a way as to accelerate and sustain our development is the other pillar of
agricultural development.

Land Ownership

In Ethiopialand ownership is determined by the Constitution, put land under the control of the
state. Land is under the state ownership, the policy guarantees farmers a free access to land. The
government has a right to redistribute land whenever it is necessary. Land not used by the
farmers can be used for other purposes; it can be provided to private investors on long-
term lease. For any reason, if a farmer’s land should be taken by the government, the invested
capital and all improvements made on the land should be compensated. This is one way of
manifesting state ownership of land.

The policy stipulates that since land belongs to the government, it cannot be sold,
exchanged, or used as collateral. Therefore, a farmer cannot sell the piece of land given to him to
cultivate for his own benefit; he cannot consider the land as his own property and thus he cannot
use it as collateral to borrow money or capital from others.

On the other hand, although land belongs to the government, the farmer may use it freely forever
without any limit in time. He can transfer his rights on the land to his or her inheritors.
For any reason, if the government takes the land, the farmer will be fully compensated for
the invested capital and improvements made. In addition to this, the farmer may cultivate the
land himself or may rent it out to others. Farmers have the rights to use family labor or may hire
any amount of labor at any time.

Pursuing Appropriate Land-Use Policy

There should be a proper use of land no matter who owns it, government or private. It is very
important to ensure that each meter of land is used in such a way as to make it
contribute to the development of our country to the maximum degree. If land, suitable for
housing and urban development is used for grazing, forest and grazing land is used for
cultivation, cultivable land is used for housing or grazing, then we will not get the
development we can and should get from our land; as a result our overall development will

68
inevitably be obstructed and sluggish. Therefore, it is important to create a favorable situation to
design and apply the policy that enable solve problems in this regard.

To achieve maximum economic advantage from each hectare of land by designing and
implementing appropriate land-use policy, we have to do both things in coordination as quickly
as possible. Preparing technological packages and making farmers implement them in order to
obtain maximum tangible advantages from land. From the perspective of land-use, this should be
a major task that enables to attain higher level. We should design comprehensive land-use policy,
support it with implementation rules and regulation and form an institution that implements this
policy.

Improving Water Use

Without water, agriculture is unthinkable. It is only when agricultural products get sufficient
water at the right time that agriculture could be effective. If the supply of water is higheror less
than the required amount or if it is not available at the right time, production could significantly
decrease or even be zero. Therefore, in order to ensure rapid and sustainable agricultural
development, there should be reliable supply of water and water management system. If people
engaged in agriculture get sufficient amount of water supply throughout the year, it is possible to
harvest higher yield with a smaller size of land and keep labor busy on production throughout the
year. This is what should be set as a goal.

Based on the efforts regarding the use of Nile Basin, a common 20 years indicative Water
Resource Development Plan has been prepared and Ethiopia, the Sudan and Egypt have agreed
on it. As far as Ethiopia is concerned, the plan includes wide range of natural resources
conservation, construction of dam over the Nile River and its tributaries which will generate
electrical power beyond the country's consumption and therefore to be sold to neighboring
countries, and building irrigation dams of high importance.

Ethiopia can build dams over its rivers and tributaries, and can develop large irrigation farms.
This could be done with motivating private investors, by alleviating financial problems
and other constraints. Government could create funds for investors who are interested to engage
in large scale irrigation agriculture. Not less than the financial shortage, a major limitation to
develop the water resource is shortage of trained human power on that field. The shortage is not

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only with highly trained university graduates, but also with professionals and technicians at
various levels. This problem has hindered Ethiopia from designing and implementing a proper
plan for the use of water resource. If we do not reliably solve this problem, water development
activities cannot be conducted at the required level of what we could have done using our own
capacity or loan, aid and private investor contribution. Therefore, training people at all levels on
this profession should be given priority to any other task in order to develop our water resource.

Arba Minch Water Technology Institution has been strengthened and enlarged to train
high and medium level professionals. This activity will and should be highly strengthenedand
continue in the future. The newly started training of high quality professionals at junior colleges
and other vocational schools is given due attention to water resource development. Of the
professionals to be assigned at each kebele, one would be trained on Natural Resource
Conservation, Water Resource Development and Irrigation. This will improve the water resource
development jobs at the kebele and farmers' plots be supported by professionals.

By periodically improving and strengthening the capacityof implementing the policies and laws
of water resource utilization; by giving serious attention to the task of producing required
professionals for this activity; by using labor–intensive approaches; and by encouraging private
investors to participate in the water development sector, it is possible to develop water resource
and improve its utilization.

5.5 Continuously Improving Agricultural Marketing System

Efficient and cost–effective marketing system, increases sales volume and fetches high price or
the farmers’ income. Establishing efficient marketing system enables to maintain the quality and
competitiveness and improving the system continuously contributes a lot for rapid and
sustainable agricultural development. This can be achieved by:

 Establishing a System of Labeling Standards

 Improving the provision of market information
 Expanding and Strengthening Cooperatives
 Improving and strengthening the private investors' participation in the Agricultural
Marketing System

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5.6 Improving the Finance System of the Rural

Rural financial system, which provides sufficient loan service to the farmers, is of
paramount importance to strengthen agricultural investment and to accelerate growth. The
existence of strong financial system is necessary not only for agricultural investment but also to
strengthen the agricultural marketing system.

We have to give special attention and encourage institutions that participate in this sector
because strengthening the rural finical system is non-substitutable option to agricultural
development as well as to use the income earned from agricultural development to the industrial
development and to bring rapid and sustainable growth in general.

Banks and Rural Financial System

When we think of rural development, we are talking about transition of the framer froman
economic system of subsistence production to an economic system in which he produces
for the market. In such an economy, the utility of money is high. There should be circulation of
large amount of money in the rural area to purchase raw materials and farm implements required
to the production; and after production, to transport and sell to the market; and to purchase
required consumer goods and others.

Mobilization of saving that will contribute to the strengthening of our national saving
should be done in the rural area as well. In this regard, financial institutions play special role.
Among the financial institutions that contribute a lot to speed up the rural and
agricultural development are big banks established in towns with high financial capacity, rural
banks and cooperatives. We list the role they play, according to their priority, as follows.

Major banks established in cities could not provide financial services to the farmers who are
based on fragmented land in agriculture. If they involve in providing individual loans to the
farmers, they may face loss due to high administrative costs in gathering and
strengthening the farmers’ savings and in providing other bank services. Therefore, not only in
our country, but also in other countries, banks do not involve in providing bank servicesto
farmers at meaningful level. Only when there is an institution that enables banks to

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easily solve administrative problems, can banks provide services to farmers indirectly
through the institution.

The cooperatives could be mentioned as first among those institutions which play
intermediary role between banks and farmers. Banks may lend money to cooperatives for the
activities they perform like various sales, purchase and investment activities. It ispossible
that cooperatives borrow from banks and lend it to farmers. In addition to these services,
cooperatives deposit savings in the banks and ensure the other bank services are provided.

Creating a strong relationship between banks and cooperatives has great contribution to create
strong financial system in the rural areas and to make the financial system of the country as a
whole be strongly integrated and interrelated. However, this activity could be implemented
successfully if and only if the relationship is based on clear system and principles of trade
relations. Banks have to provide loan to cooperatives, like with any other customer, after
ensuring feasibility, loan returning capacity and strength of the borrower’s financial
administration system. It does not give any advantage to the banks and the cooperatives to
lend money to the cooperatives violating the rules of loan provision; it would rather lead
both to failure. Therefore, this should be seriously avoided. In similar way, cooperatives
should not take loan without ensuring the strength of their financial system and the ability of
returning loan with interest on time by getting better income from it. Loans from banks and, even
loans from government banks, must be settled; loans are not subsidy or money without any
owner.

Rural Banks

Rural banks are those which provide small loans of less than five thousand Birr for a
year. Many organizations, after fulfilling the required criteria, are registered as rural banks
and are functioning. In some regions, these banks have setup structures thatenabled them
to serve all farmers of the region; each of them is providing loan and general banking
services for hundreds of thousands of farmers every year.

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The loan they provide follows the group loan system. Although, the larger part of the loan is for
purchase of agricultural inputs, it is not limited on this only. Loan services are provided in other
fields as well. They are playing a great role in strengthening saving culture of the farmers and in
collecting the savings.

However, these institutions are not free from different problems. Since the rules and regulation
do not allow them to lend for more than one year more than and five thousand birr, it has
limited the scope of their services. The National Bank should reassess and evaluate the rules and
correct them in order to create a situation in which they can extend their scope. In addition, the
institutions should make strong efforts to expand the scope of their services with regard to
providing complete and comprehensive bank services. Rural banks should provide loan to
cooperatives with reliable capacity.

Cooperatives

Cooperatives, in addition to their decisive role in improving rural marketing system, have great
contribution in strengthening rural financial system. They serve as a chain connecting the main
banks, rural banks and the farmers. They can also establish their own bank.

Strengthening the cooperatives has great meaning in expandingrural financial system, because
without these cooperatives, the other institutions cannot perform their jobs at the required level
and because the uncovered service creates a gap which may seriously weaken the rural financial
system.

However, cooperatives can accomplish this key activity when they can build and correct their
financial system and capacity. Cooperatives that do not have correct financial system will be
exposed to lose and corruption; such cooperatives, cannot play any constructive role other
than declining by at the same time dragging back other institutions.

5.7 Encouraging Private Investors to Participate in Agricultural

Development Sector

It is believed that private investors have a major role in the sector of agricultural development.
Currently, it is the farmer who plays the major role in the sector of agricultural development.

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However, even today when the farmer is and should be playing the decisive role the private
investors will have great contribution to the activities of agricultural development. As our
agricultural development goes rapidly, the role of the investors will also increase. We focus here
on the role of foreign investors, the role of agricultural training with regard to creating private
investors and the importance of production relation between investors and farmers.

Attracting Foreign Investors to the Agricultural Sector

It is known that investors can involve in agriculture in two general approaches. The first
approach is establishing large-modern farm in areas where there are large uncultivated plots of
land and relating this with irrigation or agro-processing industries depending on the situation.
Such kind of agricultural investment requires large amount of finance and high capital capacity.
Another alternative is producing high–price products (like, fruits, flower, etc.) on a limited
amount of land. Such types of activities do not require this much high capital capacity. Rather,
they require agricultural professional efficiency and ability of penetrating the market.

Supporting and encouraging local investors to participate in these sectors is an issue that should
be given priority with regard to strengthening private investment. Especially on large–scale rain–
fed farms and medium– scale farms which produce high–price products which do not require
large amount of capital, they can and should participate more than they do now. However, it is
known that the capacity of local investors in terms of capital is very limited. If we depend only
on their capital capacity, it will be impossible to ensure rapid growth that could be brought in the
agricultural development sector. The experience they have in some agricultural professions
and knowledgeof international market are minimal. Therefore, while ensuring the great
contribution local investors can do in this sector on the one hand, we have to do a lot to attract
foreign investors to the agricultural development on the other.

To attract private investment to the agricultural sector, improving infrastructure and labor supply
up to renting land by coordinating farmers and making conditions conducive for the development
of private investment. Keeping these activities as they are, additional efforts should be made to
attract foreign investors. Through contacting popular companies in this sector, we have to act in
consultation with them on things which should be done to let them invest in our country. It
is a necessary and prior task to pave the general conditions to attract foreign investors. But, this

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alone is not enough. By identifying carefully companies and investors which are assumed to
participate in investment through careful study, we have to perform a task which can objectively
attract investment, in collaboration and consultation with them. The Federal and regional
governments have to act by supporting each other in coordination to implement this system
successfully.

Agricultural profession training and participation of private Investors

To develop modern agriculture, agricultural professionals are necessary at different levels.

Agricultural training programs being conducted currently are focused on improving the
production capacity of the farmers. To create a capacity which will help it to enhance agricultural
development a concerted effort is being made by the government to train a researcher who can
improve the technology level of the farmer, an extension agent who will work on training the
farmer and transforming technology, a veterinarians and cooperative professionals. Moreover,
preparation is also being made to create modern farmers by improving the agricultural training of
the literate farmer.

Only creating people who have the interest and professional capacity to create their own
agricultural development institutions is not enough. After training, they should be able to get a
land to work on. Even though, some are able to raise capital from their own sources, others do
not have this capacity. Regional governments must prepare a quick system where this kind
of people canget agricultural land. This should be taken as one key element in the Micro and
Small Enterprises Expansion Program and the students should be able to benefit from it. The
training institutions themselves can help their students who want to be involved in this kind of
business by planning and finishing other preparations to organize the businesses. They could
even make conditions conducive to such students by contacting with government and other
related institutions.

The Relationship between the Investor’s and the Farmer’s Agricultural Production

What and how the farmer should produce in the agricultural production sector and what and how
the investor should produce in the agricultural production sector has been put. The direction the
government thinks to be advantageous has been discussed in detail. When the directions are kept
this way, it may seem as if the farmer and private investors, when engaged in production activity,

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would do it separately rather than integrating agricultural activity itself between the two.
Keeping the strong relationship that exists during marketing and agro processing as it is, of
course, there might not often be strong integrations between the two.

The country's research institutions can and must play a great role in creating and strengthening
the necessary relationship between the farmer and the investor. The input from the farmer must
be of standard quality and reasonable price for the local investor who is involved in both
production and commerce for him to be able to penetrate foreign market.

The farmer can supply such high quality product at reasonable price, if the research
institutions continuously supply him high yielding varieties and help him improve productivity
by improving his farming system.Therefore, when we work on strengthening the relationship
between the farmer and the investor, it should be by making research institutions properly play
their role regarding improving the relationship.

Even though the relationship is only between the two independent parties, that is the farmer and
the investor, the government can play a major role in a way that will not violet the major
principle. It can and should make the two parties meet by looking for interested investors and
coordinating farmers. It can advise to make the contracts keep the benefit of both; it can prepare
model contracts for this purpose. It must clarify for both parties the obligation each one of them
has according to the contract and strengthen their readiness to implement the contract.

5.8 Expanding Rural Infrastructure

To accelerate agricultural development or ensure general rural development, the existence of

comprehensive and efficient social and economic infrastructure is indispensable. In a situation
where there is no comprehensive and effective education, training and health service, there
cannot be rapid and sustainable agricultural as well as general rural development.

Expanding Educational and Health Services

As the development strategy Ethiopia is based on building the production capacity of the people
and since education and training and also health services play key role in terms of building the
production capacity of the people. Expanding these services is among the major works to be
done by the government to accelerate rural development and how these should be accomplished

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has been presented in detail previously. It was also explained that these services are established
in selected centers in each kebele and are made to gather in these centers.

Citizen's rights are protected and should be protected equally to the educated as well as the
uneducated person. However, the capacity of the uneducated person to widely and efficiently use
these rights is limited. This is why many consider elementary education as citizen's right and
responsibility. It is from this perspective that the government should make all citizens learn at
least elementary education as soon as possible. Although relating this education with rapid
development of our country is important, no matter what its impact on development may be,
it should be believed that elementary education is citizen's right and a basic arm which enables
to appropriately use citizens’ rights and therefore should be expanded rapidly.

Knowing that elementary as well as higher level of education have a mission of producing good
and productive citizens, it should be designed to have a content that will enable to do so.

Moreover, education is a vital tool to liberate a person's mind, to expand the scope of knowledge
and thinking. Therefore, expansion of education, like access to sufficient food, cloth and good
housing …etc, can be taken as an indicator of better life and positive result of development. In
addition to its all other advantages, education can be taken as an independent mission obtained
from development. The government strives to expand education and to make elementary
education accessible toevery citizen based on the above–mentioned missions.

The health service can also be viewed in a similar way. Keeping aside the impact of
creating a healthy and productive citizen on development, having complete health is a
mission in its own right. Like living in a better house and getting enough food, complete health is
one of the objectives and goals to be achieved in the process of development. It is by taking all
these into consideration that the government focuses on basic health service provision and
prevention in order to distribute the health service in a right way and making citizens acquire
complete health to a degree possible.

Strengthening Rural Roads and Transportation Services

It is impossible to think about market–led agricultural development where efficient roads and
transportation services are not available. It is possible to provide various services in the rural area

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only where there are efficient roads and transportation services. Therefore, expanding road and
transportation services is one of the key measures to be taken to ensure rapid and sustainable
rural development. When expansion of rural roads and transportation is discussed, there is one
basic thing that should not be forgotten. At the end of the day, the value of rural roads is in
connecting our rural villages with the country's economic and political centers and the
international market.

Rural roads are useful, if they are part of a nation-wide network. In the absence of major roads,
expansion of rural roads cannot ensure rapid and sustainable rural development. It is based on
this that the Federal Government focuses on the construction of major roads.

When the Federal Government expands main roads, it does not mean that it has to build equal–
length roads in each region, rather it is based on connecting the whole country in an efficient
transportation network. It is because of this that efficient road network construction at any region
serves the interest of people of all regions.

Maintenance is another problem of rural road construction. As roads do not get maintenance
after construction, they will be out of use within a short period of time. Unless there is
a system of follow-up and maintenance of rural roads, there will be destruction soon after
construction and this does not ensure development. To alleviate this problem, the issue of
ownership should be addressed.The owner of rural roads should be the people of the surrounding
area. In addition to the wide labor participation in construction of roads, the people should take
the ownership of roads and responsibility of protecting and maintaining them. Efforts should be
excreted in order to make people understand and believe in this system and apply it practically. It
is necessary to make kebele administrators take responsibility in implementing and coordinating
this task and they should maintain a well-known road maintenance and protection system.

Connecting our kebeles (kebele centers) with district centers and main roads to accelerate our
rural agricultural development, constructing low–standard roads that are constructed by using
labor and are appropriate to the traffic load, is not enough alone. A capacity which will
be able to design and supervise the construction of these roads and provide technical support,
training, and follow up services to the people to enable it discharge its responsibility of
maintaining and protecting reads should be built in each district.

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Improving the Provision of Potable Water

One of the major issues to expand health service based on preventive method and to
produce healthy and productive citizens is to make rural people get sufficient and clean potable
water.

Expanding this service means in addition to attaining happy life and improved growth through
ensuring improved health, substantially reducing medical expenses. Moreover, provision of clean
water contributes a lot to preserve individual and home sanitation and to expand various
institutions that provide different services; generally, it contributes a lot to the growth of the area.
Since fetching potable water and carrying it to home is considered to be mainly women's work,
provision of potable water at places that are near to the residential areas decrease the women's
workload to some extent. Ensuring the provision of potable water means getting the above–
mentioned utilities and, as there is a serious problem of potable water in rural areas of our
country, providing people with clean potable water as soon as possible is one of the major works
of the government.

Expanding Other Infrastructure Services Step-By-Step

The task expanding of telecommunication and electricity services in rural areas should be
fulfilled as soon as possible. Of course, as it is being done now the primary task is to make
district centers and towns get telecommunication and electricity services. This work should be
accelerated to a degree possible. Next to that, kebelecenters should get this service as soon as
possible. In the long run, since these centers will become centers of development of the kebele
and they will be changed small towns, and from the perspectives of expansion of necessary
services in the area and the growth of the nonagricultural economic sectors, kebele centers
should get these services sufficiently. From the perspective of short and medium–term period,
these centers are where educational, health administration, agricultural training and extension,
cooperatives, etc institutions will be established. Many professionals working in these
institutions will settle there. To motivate the professionals and to enable them accomplish their
work successfully, these services should be fulfilled. Therefore, this issue should be considered
as one that needs tangible and rapid solution; not as a cloud in the sky.

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The very rapid expansion of telecommunication technology in our world makes the expansion
of telecommunication in the rural area easier;and it does not take much expense as before.
Therefore, it is necessary to accomplish theongoing distribution oftelecommunication service to
the district centers and towns rapidly and transfer to the next activity. The next key step is to
make these services available at the kebele centers.

When telecommunication service expansion activities are performed using the suitable situation
which is created through this process, we have to improve and build the information gathering
system. With respect to this, to improve a system of gathering information and to create suitable
situation to transfer basic information from bottom to top and from top to bottom and to make
effort to serve as a basis for development plan.

Side by side with the general expansion of telecommunication, it is necessary to make effort to
make information technology contribute a lot to the rapid rural development.

After organizations that are able to work in collaboration with the telecommunication
corporation as cooperatives are identified, a tangible and time-bounded plan should be prepared
to study the alternatives that enable to make the service available quickly and at low price.

With respect to electricity service, although some technologies are being created to make
electricity services available at rural areas (e.g. solar energy, wind electric power generators,…
etc), there is no doubt that making this service available is more difficult than that of
telecommunication service. Rather, it is inevitable that non-availability of this service hinders the
expansion of telecommunication service.

Electric power corporation should implement its plan to expand it service starting from cities and
district centers. In addition to this work, when there are rural areas that can get the service easily,
efforts should be exerted to make them get it. This also requires a plan to reach the service to
main kebele centers at least in the long–run. But, from the short and medium– term perspectives,
to expand the electric power supply, special alternatives should be assessed. One of the
alternatives is to motivate and encourage private investors to invest their capital in purchasing
diesel generators to give the service to users in a way that can guarantee profits. And another
alternative is toestablish institutions which produce electric power from solar energy and wind in
collaboration with the local administration, non- governmental organizations, etc. Side–by–side,

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through improving the traditional power source usage, we have to improve our rural power
provision system.

Improving the traditional power utilization side–by–side, we have to do close integration with
forest development activity to protect the exiting forests from destruction. It requires great effort
to expand this service through assessment of these and other alternatives and by choosing the
better options and using them in an integrated way, if needed. It needs great effort to expand it.

An issue which should be mentioned here is to strengthen kebele centers and to train,
assign and motivate professionals who work in these centers. Currently, most of the farmer
is living in scattered situation. He has to resettle in a way that promotes rural development.
Beforehand, selecting places in each kebelewhich can serve as nucleus and making them centers
will facilitate the process. Rapid rural development requires establishment of institutions which
need many professionals in each kebele. Institutions like elementary schools, health stations,
extension and agricultural training centers; etcshould be established. Because of this, it is
inevitable that not less than ten professionals will be assigned to each kebele and through time
their number will increase.

Instead of scattering these professionals and institutions in different villages, it is useful to bring
them together in the selected kebelecenters. Therefore, such types of growth, administrative and
service centers should be chosen at each kebele and gradually develop into small towns; this
process should be viewed as a basic direction of rural development. It is possible to fulfill this
noble objective of rural development if the above-mentioned professionals are committed to
serve their people and to develop their country being in rural kebeles.

Even though the main and decisive thing is to make the professionals have strong belief in the
job, it is necessary to find additional incentive based on this. The first obstacle will be
availability of shelter for the professionals. The people and the local administration, in
coordination, should focus on the issue and make efforts to construct houses. The priority of
getting educational opportunity which is given by the government should be given to the
professionals who work in kebele. For the service they render in rural areas, they should get
other additional incentives.

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5.9 Strengtheningnon-Agricultural Rural Development Movement

It is the agricultural development which opens up the door for other sector in the rural areas. As
agricultural development accelerates, income of the people increases. When the farmer is
miserable in handto mouth life condition, it is impossible to expand rapid development in
non- agricultural sectors in the rural areas. That is why we say agricultural development is the
base for expansion of other sectors in the rural areas.

Even though the infrastructure services we stated earlier are built for the sake of supporting and
serving agricultural development, side–by–side, they can also serve other sectors. First, they can
also create employment opportunity to small number of employees. These two are the initials for
non-agricultural development. It is starting from these and exhaustively using the opportunities
createdthat the non-agriculturaldevelopment can be accelerated. The infrastructure services are
not only instruments of development but they should also be considered as parts and parcel of
non - agricultural development.

The Importance of Non - Agricultural Development

The non-agricultural development sectors will be a major part of rural development in the
process of our development activity. Rather, we can say our rural development activity has
become successful once and for all when, through rapid agricultural development, agriculture
ceases to be the main economic sector both in rural and urban areas. When it is said that we
should take agriculture as the center of rural development, it does not mean that ensuring
agricultural development is the final goal by itself, it is because it is the only way which will
quickly and sustainably lead us to a rural development stage where agriculture ceases to be the
main sector. It is because, more than anybody else, it gives focus to the non-agricultural sectors
that it follows a rural development direction which has agriculture at its center which develops
then reliably.

Education and health services, trade and market services, financial serviceetc are nonagricultural
sectors. Expanding these sectors in the rural area means strengthening the non - agricultural
sector, increasing the number of human power who supports his life based on them and earns a
relatively better income. Therefore, the development of these sectors means the increment of the
income of the rural people and improvement of their life.

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Using Opportunities Created By Agricultural Development Exhaustively

There are infrastructure and other services that must be available for agricultural development.
The services detailed earlier have a human power who they will employwith a better income. As
the services get widened through the agricultural development process, it is believed that the
number of people getting employed in these sectors will increase. It is necessary to exhaustively
use the opportunity this process will create. One of the alternatives to implement this is selecting
kebelecenters and developing these considering them as centers of development of the kebeles.

When the services of agricultural development come from one center and are made to
concentrate on one center, it means at these centers people who have better education and
profession and better income will gather. Keeping this as it is, the better opportunity of using that
can be gained when they are gathered at a place, service–giving and trade institutions that can
serve this power will be created. As the people who work for these institutions will earn a better
income, they will get more job opportunities. This way, the non-agricultural sectors can grow at
a better faster rate when the first gathering creates more job opportunities and gatherings and
thekebele center become centers of development.

It has been stated that elementary schools will spread all around the rural areas. It is also clear
that most of the rural youth who completed elementary school should be engaged in agricultural
activities. However there will be youth who will proceed to high school and be engaged in other
activities. There will also be youth who complete elementary school and get trained in non
-agricultural sectors and be engaged without passing to secondary schools.

Rather, it is clear that the number of those who get engaged in non - agricultural sector will
increase through time. This opportunity can be used to spread the non - agricultural sector in the
rural area. Over and above, training and employing carpenters, junior mechanics, book keepers,
etc, in different rural organizations and institutions, they can also be made to have their own
small businesses which are engaged in fulfilling the farmers' ever–increasing need for goods and
services. To help this, they should also get credit service on top of the training.

The other thing which will be given attention in terms of exhaustively usingthe opportunities
which will be created by agricultural development is to participate in activitiesof increasing the
production value of the farmer.Packing and preparing the products in such a way that they

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become suitable for transportation and selling can be included here. There will also be agro -
processing that can be done by small institutions.

It is cooperatives that should play the major role here. When these are done by cooperatives
or private inventors, they will inevitably create-job opportunities in the nonagricultural sector. It
is by using these kinds of systems that the non-agricultural sectors can be strengthened and
spread from the outlet and play a decisive role through time.

Strengthening Rural - Towns Ties

It is not only in the rural area that agricultural development contributes to the spread of
nonagricultural sectors. Rather, the main contribution is to the development of these sectors in
the town. The main agro - processing is done in the town not in the rural. It is the towns which
can be centers of market, finance and transport services. The town should be organized in
such a way that they can highly serve and feed rural and agricultural development. Likewise, the
towns should be organized in such a way that they can grow faster by getting higher benefit from
rural development and get fed from it.

Urbanization system should be led by plan which can let this happen. Town should be spread by
making, serving the rural development and benefiting from it, their center.

They should be given ranks in accordance to the service they can render to rural development
and the benefit they can derive out of this and they should act based on a plan to enable them
fulfill what is said. If towns effectively do this, they will keep on creating job opportunities for
the constantly increasing rural youth. The rural youth can do non-agricultural activities in towns.

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References

Text Books (there are no specific text book for this course. So these are books which are used
often in the course):

1. Katar Singh (1999), Rural Development: Principles, Policies and Management, 2nd Ed. Saga
Publications, New Delhi

2. Frank Ellis (1992) agricultural policies in developing countries, Cambridge University Press,
Cambridge

3. Yujiro Hayami, (1997) Development economics: From poverty to wealth of nations,

Clarendon Press, Oxford

4 .Hendrik Van Den Berg (2001), Economic Growth and Development, McGraw – Hill Higher
Education

5. Michael Todaro (2000), Economic Development, Addison-Wesley, Amsterdam

6. Meier, Gerald (1995), Leading issues in Economic development, Sixth edition, Oxford
University press Oxford - New York

Additional readings

All development books are your additional reference but the following books will be very use
full in specific chapters

1. GopalLal Jain (1997), Rural Development, Mangal Deep Publications Jaipur India.

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2, Tom Tietenberg (2003), Environmental and natural resource economics, 6Th ed., Pearson
Education Inc.

3, Joseph E. Stiglitz (2001) “information and change in paradigm in economics”, Nobel prize
lecture, December 8, 2001

4. AddisalemBelema (2003), Economic development and democracy in Ethiopia, Dissertation in

Erasmus University, Rotterdam

5. Todaro, Chaelp (2000), Economic Development, fifth edition, Pearson education Limited
Edinburgh Gate, Harlow –England

6. Hayami, Yujiro (1997), Development Economics, Oxford University press, Oxford -New
York

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