Public-Private Partnerships in irrigation: experiences, benefits and risks
Ninth International Dialogue on Water in Agriculture
Bonn, 01.06.2016 bis 02.06.2016
German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)
International Fund for Agricultural Development (IFAD)
This year, the Dialogue on Water has been jointly organized by the German Development Institute /Deutsches Institut für Entwicklungspolitik (DIE) and the International Fund for Agricultural Development (IFAD). Experts from North African, sub-Saharan and European countries met with practitioners of German development cooperation, international consultants, a representative of the World Bank Group, and the International Commission on Irrigation and Drainage, and researchers from the International Food Policy Research Institute (IFPRI), the University of Wageningen and DIE.
The initiative “One world without hunger” of the German Ministry for Economic Cooperation and Development brought agriculture back to centre stage in German development cooperation. However, water in agriculture plays yet a minor role - and this is even more evident for irrigation. One major argument made by the participants of the Dialogue on Water to re-engage in irrigation is the impact of climate change which will hit the agricultural sector – and food production – most. Water plays a key role in adapting to climate change: for the group of countries which are already land and water scarce, intensification and increasing efficiency of resource use is the way to go; countries with a significant potential for expanding the area under irrigation, namely countries in sub-Saharan Africa, would need to overcome under-investment in water infrastructure. According to FAO projections to 2030 (2014), the area to be irrigated can be expanded by 40 million hectares in the group of developing countries taking into account land and water availability and suitability. One approach to unlock the irrigation potential is Public-Private Partnership (PPP) projects.
A large part of the workshop was devoted to presentations of PPP projects in irrigation, both planned and operating, in Egypt, Morocco, Ghana, Malawi, Swaziland, Tanzania, Zambia, Spain, and India, in order to get insights, exchange experiences and come up with lessons learnt. Key observations on PPP arrangements and related benefits and risks include the following:
PPP projects in the irrigation are a factor structural rural transformation where irrigation is in the driver’s seat: they can accelerate the expansion of irrigated areas, improve irrigation services and reduce operation and maintenance subsidies for running the schemes. PPPs may help in overcoming under-investments, particularly in countries where additional water and land resources can be brought under irrigated farming; and PPPs may also improve irrigation scheme management. However, they are not the silver bullet since circumstances differ in terms of irrigation potential, regulatory capacity of public administrations, and of the farmers’ and policy makers’ willingness and ability to go for such arrangements. In cases where these preconditions are not favorable, the commercial interest of a private investor may prevail over the interest of smallholders. Therefore, one overall conclusion of the workshop was that investing in only in irrigation infrastructure is not promising in countries where fundamental preconditions are absent, such as elaborate agricultural support systems (access to input, credit, extension service, and building capacity of farmers and their organizations) that help in changing productions systems and that provide access to stable, reliable markets.
The PPP projects presented are highly diverse, with context-specific arrangements related to irrigation investment, management and with respect to agricultural support services. All PPPs presented include in one or the other way smallholders, but to a varying degree, different roles and organizational standing vis-à-vis large business firms: large-scale commercial farms with smallholders as out-growers; block farming where smallholders merge their plots, and members organize production through farmer-owned companies; hybrid business models which combine large plantations and smallholders where the latter hold equity in a larger entity; and independent farming units of varying size where irrigation services are provided by a private management unit to smallholders.
Some PPPs presented show that shared investments in water infrastructure have contributed to increased yields and farm incomes, and have provided other secondary benefits for rural communities. However, PPPs also entail high risks: for the private partner engaging in the investment and particularly for smallholders if they are involved in schemes together with large agro-enterprises or are marginalized by such investments. As a response to this, IFAD’s Public-Private-Producer Partnership concept suggests to consider smallholders as a particular group to have a stake and a say along with the private and the public sector, due to their exposure to risks. However, because of the diversity of PPPs and their different stages of realization it is yet only possible to roughly generalize findings on impacts – an issue which is worth to be studied.
In the interest of both, the farmers and the investor, PPPs need strong support from governments not only in the initial phase of negotiating investment sharing, but also in providing security of land titles, supporting financial viability by setting up adequate payment schemes, and by providing institutional support for establishing Water User Associations. On the other hand, governments are also asked to protect smallholders vis-à-vis large agribusiness firms, and water and land resources. Whether public institutions are able and have the capacity to fulfill the many regulatory functions in the PPP projects presented was a matter of debate.
The World Bank Group / PPIAF’s recently published toolkit “How to develop sustainable irrigation projects with private sector participation” was presented in the last session of the Dialogue on Water as a wrap-up of worldwide lessons learned, and considered by the participants as a useful tool to guide planning of irrigation PPPs.
Participants from IFAD, the International Commission on Irrigation and Drainage (ICID), IFPRI and DIE agreed on continuing joint activities and research on PPPs in irrigation.